<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 1, 1999
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MCK COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3661 06-1555163
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
313 WASHINGTON STREET
NEWTON, MASSACHUSETTS 02458
(617) 454-6100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
STEVEN J. BENSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MCK COMMUNICATIONS, INC.
313 WASHINGTON STREET
NEWTON, MASSACHUSETTS 02458
(617) 454-6100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN J. EGAN III, P.C. MICHAEL A. CONZA, ESQ.
JOHN B. STEELE, ESQ. TESTA, HURWITZ & THIBEAULT LLP
MCDERMOTT, WILL & EMERY 125 HIGH STREET
28 STATE STREET BOSTON, MASSACHUSETTS 02110
BOSTON, MASSACHUSETTS 02109-1775 (617) 248-7000
(617) 535-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
- ------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 1 to the Registration Statement on Form S-1 is being
filed for the purpose of filing certain exhibits.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
- ----------------- -------
<S> <C>
SEC Registration Fee........................................ $17,214
NASD Filing Fee............................................. 6,692
Nasdaq National Market Listing Fee.......................... *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Printing Expenses........................................... *
Blue Sky Qualification Fees and Expenses.................... 15,000
Transfer Agent's Fee........................................ *
Miscellaneous............................................... *
-------
Total....................................................... *
</TABLE>
- ---------------
* To be completed by amendment.
The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq National
Market fees, are in each case estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our amended and restated certificate of incorporation provides
that no director of MCK Communications be personally liable to MCK
Communications, its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to MCK Communications or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) in respect of unlawful dividend payments or stock
redemptions or repurchases, or (4) for any transaction from which the director
derived an improper personal benefit. In addition, the first amended and
restated certificate of incorporation provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Article V of our amended and restated by-laws provides for indemnification
by MCK Communications of its officers and certain non-officer employees under
certain circumstances against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement, reasonably incurred in connection with the
defense or settlement of any threatened, pending or completed legal proceeding
in which any such person is involved by reason of the fact that such person is
or was an officer or employee of the registrant if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of MCK Communications, and, with respect to criminal actions
or proceedings, if such person had no reasonable cause to believe his or her
conduct was unlawful.
Under Section 7 of the underwriting agreement to be filed as Exhibit 1.1
hereto, the underwriters have agreed to indemnify, under certain conditions, MCK
Communications, its directors, certain officers and persons who control MCK
Communications within the meaning of the Securities Act against certain
liabilities.
II-1
<PAGE> 3
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of shares of capital stock issued by the Registrant during the past three years.
Further included is the consideration, if any, received by the Registrant for
such shares, and information relating to the section of the Securities Act or
rule of the Securities and Exchange Commission under which exemption from
registration was claimed.
1. An aggregate of shares of Series A preferred stock (which
are subject to redemption, and will be redeemed, upon the completion of
this initial public offering) were issued in a private placement in July
1998 to investment funds associated with Summit Partners. The
consideration received for such shares was $ .
2. An aggregate of shares of Series C preferred stock (which
are subject to redemption, and will be redeemed, upon the completion of
this initial public offering) was issued in a private placement in July
1998 to investment funds associated with Lazard Freres, and certain
other purchasers, pursuant to a Stock Purchase Agreement. The
consideration received for such shares was $ .
3. An aggregate of shares of Series D preferred stock (which
are convertible into shares of common stock) was issued
in a private placement in July 1998 to investment funds associated with
Lazard Freres, and certain other purchasers, pursuant to a Stock
Purchase Agreement. The consideration received for such shares was $
.
4. From January 1998 to August 1999, an aggregate of shares
of common stock was sold to certain directors and key executives of MCK
Communications pursuant to Stock Restriction Agreements and a Stock
Purchase Agreement for prices ranging from $ to $ per
share. The aggregate consideration received for such shares was $ .
5. From June 1996 to July 1999, MCK Communications granted stock options to
purchase an aggregate of shares of common stock to
directors, employees and consultants with exercise prices ranging from
$ to $ per share pursuant to MCK Communications 1996 Stock
Option Plan. As of July 31, 1999, shares of common stock have
been issued upon exercise of options.
6. Prior to August 1996, we sold several series of preferred stock to
investment funds associated with Summit Partners and certain entities
associated with Wilson, Sonsini, Goodrich and Rosati, P.C. For
additional information regarding the sale of preferred stock to the
Summit Group, see "Certain Transactions with Related Parties."
No underwriters were used in connection with these sales and issuances. The
sales and issuances of these securities were exempt from registration under the
Securities Act pursuant to Rule 701 promulgated thereunder on the basis that
these securities were offered and sold either pursuant to a written compensatory
benefit plan or pursuant to written contracts relating to compensation, as
provided by Rule 701, or pursuant to Section 4(2) of the Securities Act on the
basis that the transactions did not involve a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
**2.1 Stock and Note Purchase Agreement, dated as of June 27,
1996, by and among MCK Communications, Inc., MCK
Telecommunications, Inc., Cal Manz, Manz Developments, Inc.
and the Investors named therein (excluding schedules, which
the Registrant agrees to furnish supplementally to the
Commission upon request).
</TABLE>
II-2
<PAGE> 4
<TABLE>
<C> <S>
**2.2 Stock Purchase Agreement, dated as of July 16, 1998, by and among MCK Communications, Inc. and the
Purchasers named therein (excluding schedules, which the Registrant agrees to furnish supplementally to
the Commission upon request).
**3.1 Certificate of Incorporation of the Registrant.
*3.2 Form of First Amended and Restated Certificate of Incorporation of the Registrant (to be filed prior to
the effectiveness of the offering).
*3.3 Form of Second Amended and Restated Certificate of Incorporation of the Registrant (to be filed
following the consummation of this offering).
**3.4 By-laws of the Registrant.
*3.5 Form of First Amended and Restated By-laws of the Registrant (to be effective upon consummation of the
offering).
*4.1 Specimen certificate for shares of common stock, $.001 par value, of the Registrant.
*5.1 Opinion of McDermott, Will & Emery as to the validity of the securities being offered.
**10.1 Amended and Restated Stockholders' Agreement, dated July 16, 1998, between the Registrant and the
Stockholders named therein.
**10.2 Amended and Restated Registration Rights Agreement, dated July 16, 1998, between the Registrant and the
Stockholders named therein.
**10.3 Amended and Restated 1996 Stock Option Plan of the Registrant.
**10.4 1999 Stock Option and Grant Plan of the Registrant.
**10.5 Class A Subordinated Promissory Note issued by MCK Communications, Inc. to WS Investment Company 96A in
the amount of $8,750 dated June 27, 1996.
**10.6 Class A Subordinated Promissory Note issued by MCK Communications, Inc. to Trustee, WSGR Retirement Plan
FBO Jeffery D. Saper in the amount of $16,250 dated June 27, 1996.
**10.7 Class A Subordinated Promissory Note issued by MCK Communications, Inc. to Summit Subordinated Debt
Fund, L.P. in the amount of $4,875,500 dated June 27, 1996.
**10.8 Class A Subordinated Promissory Note issued by MCK Communications, Inc. to Summit Investors III in the
amount of $99,500 dated June 27, 1996.
**10.9 Form of Stock Restriction Agreement for sale of restricted stock to executive officers.
**10.10 Form of Promissory Note for purchase of restricted stock by executive officers.
**10.11 Form of Pledge Agreement.
**10.12 Form of Bonus Agreement.
10.13 Lease Agreement between Manz Developments, Inc. and MCK Telecommunications, Inc. dated January 1, 1996.
10.14 Office Lease between MCK Communications, Inc. and 313 Washington Street, LLC dated June 2, 1997, as
amended April 22, 1998 and June 30, 1998.
10.15 Agreement between MCK Communications, Inc. and Lucent Technologies, Inc. effective as of April 30, 1999.
10.16 Master Support Agreement between MCK Communications, Inc. and Vital Networks, Inc. dated June 28, 1999.
10.17 Amended and Restated Loan and Security Agreement between MCK Communications, Inc. and BankBoston, N.A.
dated July 1, 1999.
**16.1 Letter regarding change in certifying accountants
*23.1 Consent of McDermott, Will & Emery (included in Exhibit 5.1 hereto).
**23.2 Consent of Ernst & Young LLP.
**23.3 Consent of PricewaterhouseCoopers LLP
</TABLE>
II-3
<PAGE> 5
<TABLE>
**24.1 Powers of Attorney (included on page II-5).
<C> <S>
**27.1 Financial Data Schedule.
</TABLE>
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* To be filed by amendment to this Registration Statement.
** Previously Filed.
(b) Consolidated Financial Statement Schedules
All schedules have been omitted because they are not required or because
the required information is given in the Consolidated Financial Statements or
Notes to those statements.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Newton, Commonwealth of Massachusetts, on September 1, 1999.
MCK COMMUNICATIONS, INC.
By: /s/ PAUL K. ZURLO
------------------------------------
Paul K. Zurlo
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* President, Chief Executive September 1, 1999
- --------------------------------------------------- Officer and Director
Steven J. Benson (Principal Executive Officer)
/s/ PAUL K. ZURLO Chief Financial Officer September 1, 1999
- --------------------------------------------------- (Principal Financial Officer
Paul K. Zurlo and Principal Accounting
Officer)
* Director September 1, 1999
- ---------------------------------------------------
Calvin K. Manz
* Director September 1, 1999
- ---------------------------------------------------
John B. Landry
* Director September 1, 1999
- ---------------------------------------------------
Gregory M. Avis
* Director September 1, 1999
- ---------------------------------------------------
Michael H. Balmuth
* Director September 1, 1999
- ---------------------------------------------------
Paul Severino
By: /s/ PAUL K. ZURLO
----------------------------------------------
Attorney-in-fact
</TABLE>
II-5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
**2.1 Stock and Note Purchase Agreement, dated as of June 27,
1996, by and among MCK Communications, Inc., MCK
Telecommunications, Inc., Cal Manz, Manz Developments, Inc.
and the Investors named therein (excluding schedules, which
the Registrant agrees to furnish supplementally to the
Commission upon request).
**2.2 Stock Purchase Agreement, dated as of July 16, 1998, by and
among MCK Communications, Inc. and the Purchasers named
therein (excluding schedules, which the Registrant agrees to
furnish supplementally to the Commission upon request).
**3.1 Certificate of Incorporation of the Registrant.
*3.2 Form of First Amended and Restated Certificate of
Incorporation of the Registrant (to be filed prior to
effectiveness of the offering).
*3.3 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant (to be filed following the
consummation of this offering).
**3.4 By-laws of the Registrant.
*3.5 Form of First Amended and Restated By-laws of the Registrant
(to be effective upon consummation of the offering).
*4.1 Specimen certificate for shares of common stock, $.001 par
value, of the Registrant.
*5.1 Opinion of McDermott, Will & Emery as to the validity of the
securities being offered.
**10.1 Amended and Restated Stockholders' Agreement, dated July 16,
1998, between the Registrant and the Stockholders named
therein.
**10.2 Amended and Restated Registration Rights Agreement, dated
July 16, 1998, between the Registrant and the Stockholders
named therein.
**10.3 Amended and Restated 1996 Stock Option Plan of the
Registrant.
**10.4 1999 Stock Option and Grant Plan of the Registrant.
**10.5 Class A Subordinated Promissory Note issued by MCK
Communications, Inc. to WS Investment Company 96A in the
amount of $8,750 dated June 27, 1996.
**10.6 Class A Subordinated Promissory Note issued by MCK
Communications, Inc. to Trustee, WSGR Retirement Plan FBO
Jeffery D. Saper in the amount of $16,250 dated June 27,
1996.
**10.7 Class A Subordinated Promissory Note issued by MCK
Communications, Inc. to Summit Subordinated Debt Fund, L.P.
in the amount of $4,875,500 dated June 27, 1996.
**10.8 Class A Subordinated Promissory Note issued by MCK
Communications, Inc. to Summit Investors III in the amount
of $99,500 dated June 27, 1996.
**10.9 Form of Stock Restriction Agreement for sale of restricted
stock to executive officers.
**10.10 Form of Promissory Note for purchase of restricted stock by
executive officers.
**10.11 Form of Pledge Agreement.
**10.12 Form of Bonus Agreement.
10.13 Lease Agreement between Manz Developments, Inc. and MCK
Telecommunications, Inc. dated January 1, 1996.
10.14 Office Lease between MCK Communications, Inc. and 313
Washington Street, LLC dated June 2, 1997, as amended April
22, 1998 and June 30, 1998.
10.15 Agreement between MCK Communications, Inc. and Lucent
Technologies, Inc. effective as of April 30, 1999.
10.16 Master Support Agreement between MCK Communications, Inc.
and Vital Networks, Inc. dated June 28, 1999.
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.17 Amended and Restated Loan and Security Agreement between MCK
Communications, Inc. and BankBoston, N.A. dated July 1,
1999.
**16.1 Letter regarding change in certifying accountants
*23.1 Consent of McDermott, Will & Emery (included in Exhibit 5.1
hereto).
**23.2 Consent of Ernst & Young LLP.
**23.3 Consent of PricewaterhouseCoopers LLP
**24.1 Powers of Attorney (included on page II-5).
**27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment to this Registration Statement.
** Previously Filed.
<PAGE> 1
EXHIBIT 10.13
THIS LEASE AGREEMENT made effective as of the lst day of January, 1996.
BETWEEN:
MANZ DEVELOPMENTS INC.,
a body corporate having an office in the
City of Calgary in the Province of Alberta
(hereinafter called "the Lessor")
OF THE FIRST PART
- and -
MCK TELECOMMUNICATIONS INC.,
a body corporate having an office in the
City of Calgary in the Province of Alberta
(hereinafter called "the Lessee")
OF THE SECOND PART
WHEREAS the Lessor is, or is entitled to be, the registered owner of
those lands together with the appurtenances, buildings and improvement located
thereon and any replacements thereof or additions thereto, all as more
particular set out in Schedule "A" attached hereto (the "Lands");
AND WHEREAS the Lessor has agreed to lease the Lands to the Lessee in
consideration of the rents and obligations herein reserved;
1. WITNESSETH that in consideration of the rents, covenants and agreements
hereinafter reserved and contained on the part of the Lessee to be paid,
observed and performed, the Lessor has demised and leased and by these presents
doth demise and lease unto the Lessee, and the Lessee hereby leases and accepts
from the Lessor, the Lands.
2. TERM: TO HAVE AND TO HOLD the Lands for a term of FIVE (5) years to
commence on JANUARY 1, 1996 and to end on DECEMBER 31, 2000.
3. RENT: YIELDING AND PAYING THEREFOR unto the Lessor as rent the annual
sum of $144,000.00 of lawful money of Canada to be payable in equal consecutive
monthly installments of $12,000.00 each in advance on the first day of each
month during the said term.
4. THE LESSEE COVENANTS AND AGREES WITH THE LESSOR as follows:
(a) To pay rent at the times and in the amounts herein provided;
(b) The Lessee will in each and every year during the said term pay to the
appropriate taxing authority when due a sum equal in amount to the
aggregate of all municipal taxes (including local improvement rates),
rates, duties and assessments (herein sometimes referred to as "the
taxes") that may be specifically charged, levied, rated or assessed
against the said Lands or any part thereof and/or all or any building
on the Lands used by, owned by or brought thereon by the Lessee. The
Lessee shall provide the Lessor, the with evidence of the payment of
the taxes within 30 days after the date when the taxes are due. It is
hereby agreed and understood that the taxes shall not include large
corporation tax or capital tax or any other tax that is not
specifically charged, levied, rated or assessed against the Lands;
(c) The Lessee will in each and every year during the said term pay,
satisfy and discharge directly all charges for water, electric current,
gas and other public utilities and service supplied at any time to the
Lands;
(d) The Lessee will during each and every year of the said term indemnify
and keep indemnified the Lessor from and against payment of all loss,
costs, charges and
<PAGE> 2
-2-
expenses occasioned by, or arising from any and every tax, rate,
charge, assessment and license fee, including business taxes assessed
against the Lessee or the tenants and subtenants of the Lessee,
provided the same shall be a charge on the Lands;
(e) It is hereby agreed and understood that if and so often as the Lessee
shall neglect or omit to pay, satisfy and discharge directly any of the
said taxes, rates, charges, assessments and/or license fees and/or the
amount equal to the aggregate thereof, the Lessor may pay the same and
may thereupon charge the same to the Lessee who hereby covenants to pay
the same to the Lessor forthwith, and the Lessee hereby agrees that any
and a of such amounts so paid by the Lessor and unpaid by the Lessee
shall be recoverable by the Lessor as if the same were and in the same
manner as rent reserved and in arrears under the terms of this lease;
(f) The Lessee will at all times during the term hereof at its own expense:
(i) carry out repairs, normal maintenance and painting of the
Lands and of all buildings, improvements, equipment situate
therein or thereon (both inside and outside and structural or
otherwise) and will repair, replace, rebuild and reconstruct
the Lands or any part thereof, and without limiting the
generality of the foregoing will repair replace, rebuild and
reconstruct the buildings, structures, erections, roofs,
foundations and appurtenances, water, sewer and gas
connections, wiring, pipes and mains and all other fixtures,
machinery, facilities and equipment belonging to or connected
with the Lands or any part thereof or used in their
operations, even though such be of what is commonly known as a
repair, replacement, rebuilding or reconstruction of a capital
nature;
(ii) keep, operate and maintain the Lands and every part thereof
and every appurtenance thereto in a clean and sanitary
condition;
(iii) comply with and conform to every applicable statute, law,
by-law, regulation and ordinance from time to time in forced
and affecting the use or occupation of the Lands or any part
thereof, and in the event of the default of the Lessee under
the provisions of this subclause (iii), the Lessor may himself
comply with any such requirements as aforesaid and the Lessee
shall forthwith pay all costs and expenses incurred by the
Lessor in this regard and the Lessee hereby agrees that all of
such costs and expenses shall be recoverable by the Lessor as
if the same were and in the same manner as rent reserved and
in arrears under this lease;
(iv) keep the sidewalks adjoining the Lands and any outdoor parking
areas comprising part of the Lands reasonably clean and free
of snow and ice;
(v) promptly comply with the requirements of every applicable
statute, law and ordinance, and with every applicable lawful
regulation or order with respect to the removal of any
encroachment, or to the condition, equipment, maintenance, use
or occupation of the Lands and every part thereof including
the making of any alteration or addition in or to any
structure, upon, connected with or appurtenant to the Lands or
any part thereof, whether or not such alteration be structural
or be required on account of any particular use to which the
Lands or any part thereof may be put, and whether or not such
requirement regulation or order be of a kind now existing or
within the contemplation of the parties hereto; and in the
event of the default of the Lessee under the provisions of
this subclause (v), the Lessor may himself comply with any
such requirements as aforesaid and the Lessee shall forthwith
pay all costs and expenses incurred by the Lessor in this
regard and the Lessee hereby agrees that all of such costs and
expenses shall be recoverable by the Lessor as if the same
were and in the same manner as rent reserved and in arrears.
under this lease; and
<PAGE> 3
-3-
(vi) comply with all applicable regulations, orders and
requirements of the Canadian Fire Underwriter's Association,
or anybody having similar functions, or of any liability or
fire insurance company by which the Lessor or Lessee may be
insured; and in the event of the default of the Lessee under
the provisions of this subclause (vi), the Lessor may himself
comply with any such regulations, orders and requirements as
aforesaid and the Lessee shall forthwith pay all costs and
expenses incurred by the Lessor in this regard and the Lessee
hereby agrees that all of such costs and expenses shall be
recoverable by the Lessor as if the same were and in the same
manner as rent reserved and in arrears under this lease;
(g) The Lessee will comply with all reasonable requirements of the Lessor
with regard to the care, maintenance and repair of the Lands;
(h) That in the event of any substantial damage to the Lands by any cause
the Lessee will give notice in writing to the Lessor of such damage
forthwith upon such damage becoming known to the Lessee;
(i) That it shall not carry on or permit to be carried on upon the Lands
any business or activity which shall be deemed on reasonable grounds to
be a nuisance; and
(j) That, subject to the right of renewal or the right to purchase the
Lands as herein provided, at the expiry of the term hereof it will quit
the Lands and deliver the same up to the Lessor and that it will leave
the said Lands in good repair, reasonable wear and tear only excepted.
Notwithstanding the provisions of this clause 4, it is the intention of
the parties that the Lessee shall not be required to repair reasonable wear and
tear except to repair such wear and tear as is necessary to maintain the
building on the Lands suitable as a first class building.
5. INSPECTION: The parties agree that the Lessor shall be entitled to
inspect and view the state of repair of the Lands upon appointment with the
Lessee only PROVIDED HOWEVER that the Lessor shall not be entitled to inspect or
view anything on the Lands that the Lessee deems, in its sole unfettered
discretion, to be of a secret or confidential nature.
6. INSURANCE: During the whole of the said term, the Lessee will purchase
and keep in force, unless otherwise agreed, throughout the term:
(a) fire insurance with extended coverage endorsement covering all
leasehold improvements made to or installed on the Lands by or on
behalf of the Lessee in an amount equal to the full replacement value;
(b) fire insurance with extended coverage endorsement covering all the
contents of the Lands whether owned by the Lessee or for which the
Lessee is responsible in an amount at least equal to the actual cash
value;
(c) comprehensive general liability insurance naming the Lessor and Lessee
as insured in an amount of not less than $2,000,000.00 per occurrence
(including without limitation, Lessee's fire, legal liability and
contractual liability to cover the responsibilities assumed hereunder)
with a cross-liability clause; and
(d) such other coverage in such amounts and on terms as may be reasonably
required by the Lessor;
provided that all contracts of insurance required under this clause 6 shall be
with a company or companies ordinarily engaged in the business of insuring
against such risks and approved of in writing by the Lessor.
<PAGE> 4
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The Lessee will cause each of its policies to contain an undertaking by
the insurer(s) to notify the Lessor at least thirty (30) days prior to
cancellation or any other change material to the Lessor's interests. The
liability policy will include the Lessor as an additional named insured with a
cross-liability clause.
The Lessor and Lessee will each cause any insurance policy obtained by
it pursuant to this lease to contain a waiver of subrogation clause in favour of
the Lessor or Lessee, as the case may be.
7. INDEMNIFICATION: The Lessee shall indemnify and save harmless the
Lessor from any and all liabilities, damages, costs, claims, suits or actions
growing out of:
(a) any breach, violation or non-performance of any covenant, condition or
agreement in this lease set forth and contained on the part of the
Lessee, to be fulfilled, kept, observed and performed;
(b) any damage to property occasioned by the use and occupation of the
Lands; and
(c) any injury to person or persons, including death resulting at any time
therefrom, occurring in or about the Lands, and/or on the sidewalks
adjacent to same.
8. ASSIGNMENTS: The Lessee covenants and agrees with the Lessor that it
will not assign this lease or sublet the whole or any part of the premises
hereby demised without leave of the Lessor, but such leave shall not be
arbitrarily withheld.
9. SUBORDINATION: This lease and everything herein contained shall be
subordinate to any mortgage or mortgages, the proceeds of which are used to
construct any building now or hereafter erected on the Lands hereby demised, or
to any renewal, replacement or substitution mortgages covering such mortgages.
10. THE LESSOR COVENANTS with the Lessee:
(a) that if the Lessee duly and regularly pays the rent and complies with
its obligations under this lease, the Lessee will be entitled to (and
shall and may) peaceably possess and enjoy the Lands during the term
without any interruption or disturbance from the Lessor or any person
or persons claiming by, through or under the Lessor; and
(b) that at the commencement of the term the building service systems will
be in good electrical, mechanical and operating condition reasonably
acceptable to the Lessee.
11. THE LESSOR hereby absolutely and unconditionally forever assigns,
transfers and sets over unto the Lessee all of the Lessor's right, title and
interest in and to all warranties, guarantees, indemnities or covenants made or
given arising from the construction of the buildings on the Lands including all
of the right, title and interest of the Lessor in and to any name commonly or
generally used to identify the Lands or buildings or any derivation or variation
thereof and to represent itself as carrying on the business in continuation of
and in succession to the Lessor with full power and authority to demand,
collect, sue for breach of any said warranty, guarantee, indemnity or covenant
or for specific performance of any said warranty, guarantee, indemnity or
covenant in the name of the Lessor.
12. IT IS HEREBY UNDERSTOOD AND AGREED that upon the, determination of this
lease or any renewal thereof by affluxion of time, and the Lessee remaining in
possession of the Lands with the consent of the Lessor and without any further
written agreement, a tenancy from year to year shall not be created by
implication of law but the Lessee shall be deemed to be a monthly tenant only at
a rental payable in advance at the rate of one-twelfth of the annual rental
provided for herein and otherwise upon and subject to the same terms and
conditions as contained herein.
13. ANY CONDONING, excusing or overlooking by the Lessor of any default,
breach or non-observance by the Lessee at any time or times in respect of any
covenant, proviso, or
<PAGE> 5
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condition herein contained shall not operate as a waiver of the Lessor's rights
hereunder in respect of any subsequent default, breach or non-observance, nor so
as to defeat or affect in any way the rights of the Lessor hereunder in respect
of any such subsequent default, breach or non-observance.
14. UPON THE TERMINATION of this lease the Lessor shall pay to the Lessee
the value of any unexpired insurance upon the Lands and the parties shall adjust
between themselves all items of taxes, water rates and other matters of a
similar nature to the intent and purpose that the Lessee shall bear the burden
thereof until the termination of the lease or of any holding over thereunder and
not afterwards.
15. ANY NOTICE, request or demand herein provided or permitted to be given
hereunder shall be sufficiently given if personally served or mailed by
registered mail as follows:
(i) to the Lessor: MANZ DEVELOPMENTS INC.
113 Edgeview Road N.W.
Calgary, Alberta
T3A 4T9
(ii) to the Lessee: MCK TELECOMMUNICATIONS INC.
130 Bowness Centre N.W.
Calgary, Alberta
T3B 5M5
Attention: President
Any notice mailed as aforesaid shall for the purposes of this lease be presumed
to have been given three (3) business days following the day on which such
notice is mailed as aforesaid. Any party may at any time give notice in writing
to the others of any change of address, and after the giving of such notice the
address therein specified will be deemed to be the address of such party for the
purpose of giving notices hereunder.
16. THE LESSEE assumes the sole responsibility for the condition,
operation, maintenance and management of the Lands, and the Lessor shall have no
liability for damage to the property of the Lessee or of any sublessees,
licensees or any person on the Lands which is or may at any time be on the Lands
on any account, or for any reason whatsoever.
17. EXCEPT as to the payments herein specifically provided to be paid by
the Lessor, the Lessor shall not be required to make any payment in respect of
the Lands; the intention of the provisions of Us lease being that all expenses
incurred in respect of the Lands shall be borne by the Lessee, except only as to
those expenses specifically provided herein to be borne by the Lessor, and the
payments called for in any mortgages outstanding against the lands.
18. IF the Lessee shall fail to pay when due the rent, or any other amount
constituting rent, or any part thereof, required to be paid by the Lessee, or if
the term hereby granted or any of the goods and chattels of the Lessee shall be
at any time seized or taken in execution, attachment, or distress by any
creditor of the Lessee or if a writ of execution shall be issued against the
goods or chattels of the Lessee and remain in the hands of the Sheriff
unsatisfied for five (5) days, or if the Lessee shall commit an act of
bankruptcy or shall make any assignment for the benefit of creditors, or
becoming bankrupt or insolvent shall take the benefit of any Act that may be in
force for bankrupt or insolvent debtors, or if any proceedings shall be taken or
process issued against it under any Bankruptcy Act or the Winding Up Act, or if
the Lessee shall attempt to abandon the Lands or shall out of the ordinary
course of business, sell or dispose of or attempt to sell or dispose of or
remove or attempt to remove from the Lands any of its goods or chattels or
execute a bill of sale or chattel mortgage in respect of any of its goods and
chattels so that there would not, in the event of or as a result of such sale,
disposal, removal, bill of sale or chattel mortgage be in the opinion of the
Lessor, goods on the premises liable to distress, sufficient to satisfy the
amount of the rent then accruing due and overdue and the rent for the three (3)
months ensuing, then the current month's rent, together with the rent for the
three (3) months then next ensuing, shall immediately become due and payable and
the said term shall at the option of the Lessor forthwith become forfeited and
determined.
<PAGE> 6
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19. IF THE LESSEE shall be in default of any of his covenants hereunder the
Lessor may give unto the Lessee notice in writing stating the said default with
sufficient reasonable particularity and requiring that the said default be
remedied. If the said default is not remedied by the Lessee within thirty (3 0)
days after the receipt of such notice, or such longer period as may be
reasonably necessary bearing in mind the nature of the default the Lessor may
enter into and upon the said Lands or any part thereof in the name of the whole
and have again, repossess and enjoy the same as of his former estate, and the
said lease shall be terminated. Provided however, that if the default is in the
payment of rent and/or any of the charges recoverable by the Lessor as if the
same were rent reserved and in arrears under the terms hereof and such default
shall continue for a period of ten (10) days after written notice of such
default shall have been given, the Lessor's rights hereunder shall accrue as
above set forth.
20. THE LESSEE hereby irrevocably waives and renounces the benefit of any
present or future legislation of the Province of Alberta taking away or
diminishing the Lessor's rights of distress and agrees with the Lessor that
notwithstanding any such enactment all goods and chattels the property of the
Lessee from time to time on the Lands shall be subject to distress for rent.
21. IF THE Lands shall be damages or destroyed by reason of any of the
risks covered by the insurance set out in clause 6 hereof, the Lessor shall make
available to the Lessee the net proceeds of the said insurance for the purpose
of repairing, replacing, rebuilding or reconstructing the Lands; provided that
the Lessor may withhold such amounts for such time as may be necessary to
protect him as owner of the Lands in relation to any mechanics' lien or charge
under any similar law applicable to the Lands; and provided further that in
settling the amount of any loss under any policy of insurance the Lessor shall
consult with the Lessee and shall permit the Lessee to make such representations
to the insurer in relation to the amount of the loss as may appear expedient and
proper to the end that the maximum amount property collectible in relation to
any loss may be collected.
22. PROVIDED that if the Lessee fully performs all the covenants and
provisions hereof it may at the expiration of the term hereof remove its
fixtures and equipment so long as the Lands are left in the same condition as
that in which they were received by the Lessee.
23. IF THE LESSEE shall have promptly paid all rent to the Lessor when due
hereunder, and shall have observed and performed the Lessee's covenants herein,
the Lessee shall have the right at the expiration of the term of this lease to
extend the term for one period of five (5) years provided that the Lessee
provide written notice to the Lessor at least Six (6) months prior to the expiry
of the term. Any such renewal shall be upon the same conditions herein set
forth, except the right to renew, and except as to the rent payable during the
renewal term. Annual rent for the renewal term will be based upon fair market
basic rent for equivalent, developed space located in the City of Calgary at the
time of renewal, provided however that in any event, the annual shall not be
less than the rent which the Lessee was obliged to pay during the last year of
the Term. The time for determining annual rent for the renewal term will be the
four month period immediately preceding the expiry of the Term. If the Lessor
and Lessee are unable to agree on such rent at least 30 days prior to the expiry
of the Term, either of them may refer the determination of such annual rent to
arbitration under the Arbitration Act (Alberta). The arbitrator's determination
will be conclusive and binding on the Lessor and Lessee. The arbitration costs
will be awarded in the arbitrator's discretion. Until the arbitrator has
determined such annual rent, the Lessee will continue to pay monthly
installments of rent i the same amount it was paying prior to the expiry of the
Term. Forthwith after the arbitrator's determination, the Lessee will pay to the
Lessor the difference, if any, between the rent installments which it has then
paid to date and the rent installments due pursuant to such determination.
24. WHEREVER there is any reference to the Lessor or to the Lessee such
reference (unless the context otherwise requires) shall be deemed to extend to
and include ant it is hereby expressly agreed that the same shall extend to and
include the respective assigns and successors of the Lessor and the Lessee. The
singular shall include the plural and the masculine shall include the feminine
or neuter as the case may be.
25. IF ANY PROVISION of this lease is illegal or invalid or unenforceable
at law it will be deemed to be severed from this lease and the remaining
provisions will nevertheless continue to be in full force and effect.
<PAGE> 7
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26. TIME will be of the essence of this Lease.
27. NOTHING herein contained will at any time create or be construed as
creating a joint venture, partnership or relationship between the parties other
than that of lessor and lessee.
28. THIS LEASE shall be governed by and construed in accordance with the
laws of the Province of Alberta and the federal laws of Canada applicable
therein.
IN WITNESS WHEREOF the parties have hereunto caused their corporate
seals to be affixed as of the day and year first above written.
MANZ DEVELOPMENTS INC.
Per: /s/ Cal Manz
------------------------------------
Per:
------------------------------------
MCK TELECOMMUNICATIONS INC.
Per: /s/ Cal Manz
------------------------------------
Per:
------------------------------------
<PAGE> 8
SCHEDULE "A"
LANDS
Plan 2074BB
Block 9
Lots 34, 35 and 36
Excepting thereout all Mines and Minerals.
<PAGE> 1
EXHIBIT 10.14
office
LEASE DATED June , 1997
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section:
LANDLORD: 313 Washington Street, LLC, a Massachusetts limited liability company
MANAGING AGENT: The Grossman Companies, Inc.
1266 Furnace Brook Parkway
Quincy, MA 02269-0110
LANDLORD'S ADDRESS: c/o The Grossman Companies, Inc.
1266 Furnace Brook Parkway
Quincy, MA 02269-0110
LANDLORD'S REPRESENTATIVE: The Grossman Companies, Inc.
TENANT: MCK Telecommunications, Inc., a corporation organized and existing
under the laws of Alberta, Canada.
TENANT'S ADDRESS: 313 Washington Street
Newton, MA 02158
BUILDING ADDRESS: 313 Washington Street
Newton, MA 02158
ANTICIPATED TERM COMMENCEMENT DATE: Sixty 960) days following the execution of
this Lease.
RENTABLE FLOOR AREA OF TENANT'S SPACE: 6968 Square Feet
RENTABLE FLOOR AREA OF THE BUILDING: 76,473 Square Feet
RENTABLE FLOOR AREA OF THE OFFICE AREAS: 66,139 Square Feet
TENANT'S SHARE OF BUILDING OPERATION
COSTS AND REAL ESTATE TAXES: 9.11%
<PAGE> 2
TENANT'S SHARE OF OFFICE OPERATION COSTS: 10.54%
BASE REAL ESTATE TAXES: Real Estate Taxes incurred on account of calendar 1997.
BASE BUILDING OPERATIONS COSTS: Building Operation Costs incurred on account of
calendar 1997.
BASE OFFICE OPERATION COSTS: Office Operation Costs incurred on account of
calendar 1997.
TERM: 60 calendar months (plus, if the Commencement Date is a day other than
the first day of a calendar month, the partial month beginning on the
Commencement Date and ending on the last day of the calendar month in which the
Commencement Date occurs).
EXPIRATION DATE: The last day of the 60th full calendar month following the
Commencement Date.
OPTION TO EXTEND: One period of 60 months.
ANNUAL RENT: a) For the period commencing on the Commencement Date and ending
on the last day of the 12th full calendar month during the Term
(inclusive) - $160,264.00 per annum (i.e. $13,355.33 per month,
and proportionately at such rate for any partial calendar month).
b) For the 13th - 24th full calendar months during the Term -
$163,748.00 per annum (i.e. $13,645.67 per month).
c) For the 25th - 36th full calendar months during the Term -
$167,232.00 per annum (i.e. $13,936.00 per month).
d) For the 37th - 44th full calendar months during the Term -
$174,200.00 per annum (i.e. $14,516.67 per month).
e) For the 49th - 60th full calendar months during the Term -
$177,684.00 per annum (i.e. $14,807.00 per month).
MONTHLY RENT: 1/12 of the annual Rent.
ADDITIONAL RENT: Any and all monies which Landlord is authorized to collect
from Tenant hereunder which are not included in Annual Rent.
Additional Rent includes charges under Sections 2.6 and 2.9,
as well as any other monetary liability of Tenant which may
arise hereunder from time to time.
2
<PAGE> 3
SECURITY DEPOSIT: $80,132.00 (See also Sections 8.1 and 8.20 below.)
GUARANTOR(S): MCK Communications, Inc., a Nevada corporation.
PERMITTED USES: General office use.
BROKER(S): The Grossman Companies, Inc.; and Spaulding & Slye.
PUBLIC LIABILITY INSURANCE:
BODILY INJURY: $1,000,000 Per Occurrence
PROPERTY DAMAGE: $500,000 Per Occurrence
TENANT'S CONSTRUCTION REPRESENTATIVE: Paul Zurlo
LANDLORD'S CONSTRUCTION REPRESENTATIVE: Ted Arend
1.2 EXHIBITS: The following Exhibits are incorporated as a part of this Lease:
EXHIBIT A -- Plan Showing Outline and Location of the Premises
EXHIBIT B -- Tenant's Floor Plans
EXHIBIT C -- Landlord's Services
EXHIBIT D -- Additional Provisions
EXHIBIT E -- Landlord's Building Standard Improvements
EXHIBIT F -- Plans Showing Outline and Location of the Temporary Premises
EXHIBIT G -- HVAC System Operational Standards
1.3 TABLE OF ARTICLES AND SECTIONS:
ARTICLE I -- Reference Data
1.1 Subjects Referred To................................................
1.2 Exhibits............................................................
1.3 Table of Articles And Sections .....................................
ARTICLE II -- Premises, Term and Rent
3
<PAGE> 4
2.1 The Premises........................................................
2.2 Rights To Use Common Facilities.....................................
2.3 Landlord's Reservations.............................................
2.4 Term................................................................
2.5 Monthly Rent Payments...............................................
2.6 Adjustment For Operating Expenses...................................
2.7 Electricity Expenses................................................
2.8 Accounting Periods..................................................
2.9 Late Payment/Dishonored Checks......................................
ARTICLE III -- Construction
3.1 Initial Condition Of The Premises...................................
3.2 Landlord's Work.....................................................
3.3 Alterations and Additions...........................................
3.4 General Provisions Applicable To Construction.......................
ARTICLE IV -- Landlord's Covenants; Interruptions and Delays
4.1 Landlord's Covenants................................................
4.1.1 Services Furnished By Landlord..............................
4.1.2 Additional Services Available To Tenant.....................
4.1.3 Roof, Exterior Wall, Floor Stab And Common Facility Repairs.
4.1.4 Quiet Enjoyment.............................................
4.2 Interruption And Delays In Services And Repairs, Etc................
ARTICLE V -- Tenant's Covenants
4
<PAGE> 5
5.1 Payments............................................................
5.2 Repair And Yield Up.................................................
5.3 Use ...........................................................
5.4 Obstructions; Items Visible From Exterior; Rules And Regulations....
5.5 Safety Appliances; Licenses; Compliance with Law....................
5.6 Assignment, Sublease................................................
5.7 Indemnity; Insurance................................................
5.8 Personal Property At Tenant's Risk; Tenant's Casualty Insurance.....
5.9 Right Of Entry......................................................
5.10 Floor Load; Prevention Of Vibration And Noise.......................
5.11 Security
5.12 Personal Property Taxes.............................................
5.13 Tenant Holdover.....................................................
5.14 Hazardous Materials.................................................
ARTICLE VI -- Casualty and Taking
6.1 Fire Or Casualty....................................................
6.2 Eminent Domain......................................................
ARTICLE VII -- Default
7.1 Events Of Default...................................................
7.2 Damages.............................................................
ARTICLE VIII -- Miscellaneous.............................................
8.1 Security Deposit....................................................
5
<PAGE> 6
8.2 Notice Of Lease; Consent Or Approval; Notices, Bind And Inure;
Landlord's Estate...................................................
8.3 Landlord's Failure To Enforce.......................................
8.4 Acceptance Of Partial Payments Of Rent; Delivery Of Keys............
8.5 Cumulative Remedies.................................................
8.6 Partial Invalidity..................................................
8.7 Self-Help...........................................................
8.8 Tenant's Estoppel Certificate.......................................
8.9 Waiver Of Subrogation...............................................
8.10 All Agreements Contained............................................
8.11 Brokerage...........................................................
8.12 Submission Not An Option............................................
8.13 Relocation..........................................................
8.14 Costs Of Enforcement................................................
8.15 Exhibit D - Additional Provisions...................................
ARTICLE IX -- Rights of Parties Holding Prior Interests
9.1 Lease Subordinate...................................................
9.2 Modification, Termination Or Cancellation; Advance Payments Of
Rent................................................................
9.3 Rights Of Holder Of Mortgage To Notice Of Defaults By Landlord And
To Cure Same........................................................
9.4 Implementation of Article IX........................................
6
<PAGE> 7
ARTICLE II
PREMISES, TERM AND RENT
2.1 THE PREMISES: Landlord hereby leases to Tenant, and Tenant hereby hires
from Landlord, Tenant's Space in the Building (as shown on Exhibit A, annexed),
excluding exterior faces of exterior walls, the common emergency stairways and
stairwells, elevators and elevator wells, fan rooms, electric and telephone
closets, janitor closets, the central atrium (if any) and pipes, ducts,
conduits, wires and appurtenant Fixtures serving exclusively or in common other
parts of the Building, and, if Tenant's Space includes less than the entire
rentable area of any floor, excluding the common corridors, elevator lobby and
toilets located on such floor. Tenant's Space, subject to such exclusions, is
hereinafter referred to as the "Premises". The term "Building" means, the
building erected on the Lot, and the term "Lot" means all, and also any part of,
the land owned by Landlord on which the Building is located, plus any additions
thereto resulting from the change of any abutting street line. The term
"Property" means, collectively, the Building and the Lot. Tenant acknowledges
that Tenant has had the opportunity to confirm all floor area measurements set
forth herein, and that all rentable floor areas specified in Section 1.1 shall
be deemed conclusively to be accurate for all purposes, subject only to any
actual change in the physical configuration of the Building or the Premises (or
any part of either) occurring following the date hereof.
The floor area of the Building, the floor area of the Office Areas and the
floor area of the Premises have been determined by application of the "BOMA"
standard. A further statement of the rentable floor area of the Premises and the
useable floor area of the Premises is set forth on Exhibit A.
2.2 RIGHTS TO USE COMMON FACILITIES: Tenant shall have, as appurtenant to
the Premises, rights to use in common with others (subject to reasonable rules
and regulations from time to time made by Landlord of which Tenant is given
notice): (a) the common lobbies, corridors, stairways and elevators of the
Building, and the pipes, ducts, conduits, wires and appurtenant meters and
equipment serving the Premises in common with others, (b) common walkways
necessary for access to the Building, (c) if the Premises include less than the
entire rentable floor area of any floor, the common toilets, corridors and
elevator lobby of such floor, and (d) the parking areas serving the Building ---
all to the extent and in the location designated by Landlord from time to time.
2.3 LANDLORD'S RESERVATIONS: Landlord reserves the right from time to time,
without unreasonable interference with Tenant's use: (a) to install, use,
maintain, repair, replace and relocate, for service to the Premises and other
parts of the Building (or either), pipes, ducts, conduits, wires and appurtenant
Fixtures, wherever located in the Premises or the Building, and (b) to alter or
relocate any other common facility (including parking areas), provided that
substitutions are substantially equivalent to, or better than, the item which is
to be replaced.
2.4 TERM: Tenant shall have and hold the Premises for a period commencing
on that date (the "Commencement Date") which is the earlier of (a) that date on
which the Premises are ready for occupancy as provided in Section 3.2 and (b)
that date on which Tenant commences occupancy of any portion of the Premises for
the Permitted Uses, and continuing until the Expiration Date unless
7
<PAGE> 8
sooner terminated as provided in this Lease. Promptly upon the occurrence of the
Commencement Date, Landlord and Tenant shall execute a written instrument,
confirming the exact date of the Commencement Date.
2.5 MONTHLY RENT PAYMENTS: Tenant agrees to pay rent to Landlord, without
demand or any offset or reduction whatever (except as made in accordance with
the express provisions of this Lease), equal to the Annual Rent, in equal
installments of the Monthly Rent in advance for each calendar month included in
the Term (except as provided in the next succeeding sentence hereof); and, for
any portion of a calendar month at the beginning or end of the Term, at the
proportionate rate payable for such portion. Subject to the next succeeding
sentence hereof, each payment of Monthly Rent on account of any calendar month
during the Term shall be due and payable on the 25th day of tile immediately
preceding month. If the Commencement Date is other than the first day of a
calendar month, then the payment of Monthly Rent due on the Commencement Date
shall be the Monthly Rent allocable to tile period beginning on the Commencement
Date and ending on the last day of tile first full calendar month of the Term;
and, in such event, Tenant's next payment on account of Monthly Rent (on account
of the second (2nd) full calendar month during the Term) shall be due and
payable on the twenty-fifth (25th) day of the first full calendar month of the
Term. (See also Section 8.18, below.)
2.6 ADJUSTMENT FOR OPERATING EXPENSES: For the purpose of this Section 2.6,
tile following terms shall have the following meanings:
A. Real Estate Taxes - real estate taxes levied against the Property,
including betterment assessments, so-called rent taxes and other
governmental charges, which may be charged, assessed or imposed upon
the Property, and reasonable expenses of any proceedings for abatement
of taxes. There shall be excluded from Real Estate Taxes income taxes,
excess profits taxes, excise taxes, franchise taxes and estate,
succession, inheritance and transfer taxes.
B. Building Operation Costs - ail costs and expenses incurred by Landlord
in connection with the maintenance and operation of the Property,
except for any Office Operation Costs (as defined below). Building
Operation Costs shall include without limitation, all costs and
expenses incurred by Landlord (a) in making repairs or replacements to
tile Building and its parking areas and other appurtenances, (b) in
carrying fire, casualty, rent and liability insurance upon and with
respect to the Property (including, Without limitation, insurance
carried under so-called "blanket" and/or "umbrella" policies, provided
however, that only such portion of the premiums for the so-called
"blanket" "umbrella" policies as is reasonably and equitably allocable
to the Property shall be included in Building Operation Costs), (c) in
providing trash pick-up service for the Building, and lighting,
plowing, cleaning, maintaining and beautifying the exterior of the
Building and the land and parking areas appurtenant to the Building and
tile landscaping and gardening (if any) thereof, (d) in paying wages,
unemployment taxes and benefits of personnel engaged in the management
and operation of the Building (appropriately pro-rated where a person's
duties are not limited solely to the Building),
8
<PAGE> 9
(e) in paying for water and sewerage charges imposed by the entity
providing such services, (f) in paying for all other utilities provided
to any portion of the Property other than the Office Areas, (g) in
causing the Building (other than the Office Areas) to comply with all
applicable building codes, regulations and other statutes (except as
expressly provided in Section 5.5, below), and (h) a management fee of
the product of 5% of the gross receipts from operation of the Property
and a fraction whose numerator is Building Operation Costs (exclusive
of this management fee) for the calendar year and whose denominator is
the sum of Building Operation Costs and Office Operation Costs (both
exclusive of a management fee) for the calendar year. (If, because the
Building is not completely occupied, Building Operation Costs are less
than the costs which would have arisen if the Building had been
completely occupied, Building Operation Costs will be deemed to be the
costs which (in Landlord's reasonable judgment) would have arisen if
the Building had been completely occupied.) (See also Section 2.6 A,
below.)
C. Office Operation Costs - all costs and expenses incurred by Landlord in
operating and maintaining the office areas of the Building (the "Office
Areas"), to the extent that such services are not intended to be
provided to the occupants of the Building as a whole. Office Operation
Costs shall include, without limitation, all costs and expenses
incurred by Landlord (a) in providing cleaning and cleaning supplies to
the Office Areas, (b) in providing HVAC and elevator service to the
Office Areas (including maintenance and replacement of relevant
facilities and equipment, when necessary), (c) in providing utilities
services to tile Office Areas (other than water and sewerage services),
(d) in causing the Office Areas to comply with all applicable building
codes, regulations and other statutes (except as expressly provided in
Section 5.5, below), and (e) a management fee of 5% of gross receipts
from the operation of the Property reduced by the management fee
described in clause (h) of subparagraph B. (If because the Office Areas
are not completely occupied, Office Operation Costs are less than the
costs which would have arisen if the Office Areas had been completely
occupied, Office Operation Costs will be deemed to be the costs which
(in Landlord's reasonable judgment) would have arisen if the Office
Areas had been completely occupied.) (See also Section 2.6 A. below.)
D. Real Estate Tax Excess - for any calendar year occurring partially or
wholly during tile Term, the amount, if any, by which Real Estate Taxes
exceed the Base Real Estate Taxes specified in Section 1.1.
E. Building Operation Cost Excess - for any calendar year occurring
partially or wholly during the Term, the amount, if any, by which
Building Operation Costs exceed the Base Building Operation Costs
specified in Section 1.1.
F. Office Operation Cost Excess - for any calendar year occurring
partially or wholly during the Term, the amount, if any, by which
Office Operation Costs exceed the Base Office Operation Costs specified
in Section 1.1.
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G. Tenant's Excess Obligation - for any calendar year occurring wholly
during the Term, the sum of (i) the Real Estate Tax Excess, multiplied
by Tenant's Share of Real Estate Taxes (as specified in Section 1.1),
(ii) the Building Operation Cost Excess, multiplied by Tenant's Share
of Building Operation Costs (as specified in Section 1.1) and (iii) the
Office Operation Cost Excess, multiplied by Tenant's Share of Office
Operation Costs (as specified in Section 1.1). For the partial calendar
years at the beginning and end of the Term, Tenant's Excess Obligation
shall be equal to Tenant's Excess Obligation as determined pursuant to
the immediately preceding sentence, multiplied by a fraction whose
numerator is the number of days in the partial calendar year which is
included in the Term and whose denominator is 365.
Tenant shall pay to Landlord Tenant's Excess Obligation for each calendar
year (or partial calendar year) during the Term. Tenant shall pay to Landlord,
monthly, on the days on which Monthly Rent is due and payable, a sum equal to
that reasonably estimated by Landlord for such purpose, such payments to
represent payments on account of Tenant's obligations under this Section 2.6.
From time to time, Landlord shall have the right to adjust the amount of
Tenant's monthly payments. Following the end of each calendar year, Landlord
shall determine the exact amount of Tenant's Excess Obligation with respect to
the calendar year then ended, and, within twenty-one (21 days following Tenant's
receipt of notice of such determination, appropriate adjustments shall be made
(either by additional payment by Tenant or refund by Landlord), so that the
amount of such adjustment when aggregated with the amount of Tenant's monthly
payments during the preceding calendar year will equal Tenant's Excess
Obligation for such calendar year.
Tenant shall have the right, within ninety (90) days following Tenant's
receipt of the notice of determination referred to in the immediately preceding
paragraph, to request further information concerning the matters in such notice
o f determination. Tenant's request shall set forth with reasonable specificity
the exact areas of Tenant's inquiry. If Tenant shall so request, then Landlord
shall either allow Tenant to review Landlord's books and records or supply
photocopies of Landlord's records, so as to permit Tenant to confirm the
accuracy of Landlord's notice of determination. Nothing set forth in this
paragraph shall constitute a justification for Tenant's failure to pay Tenant's
Excess Obligation in a timely manner, as set forth above. Instead, Tenant shall
pay Tenant's Excess Obligation, as originally computed by Landlord, in a timely
manner: and as a result of Tenant's subsequent examination of Landlord's
records, it shall be determined that Landlord's notice of determination was in
error, such error shall be corrected by reimbursement to Tenant or additional
payment to Landlord (as appropriate).
Landlord agrees that, in maintaining and operating the Property, Landlord
shall act in a prudent and businesslike manner, in a good faith effort to
maintain the condition and reputation of the Building without incurring expenses
in excess of those then being incurred by prudent owners of similar properties
in the Metropolitan Boston Area.
2.6 A CAPITAL EXPENSES: As used herein, a "capital expense" shall mean a
cost or expense incurred by Landlord in operating and maintaining the Building
which, under generally accepted accounting principles, is deemed to be a capital
expense. A capital expense shall not be included in
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Building Operation Costs or Office Operation Costs unless (i) such capital
expense is incurred in order to cause the Building to comply with applicable
governmental statutes, regulations and the like (subject, however, to the
provisions of Section 5.5, below), or (ii) in Landlord's reasonable judgment,
such expense will result in lower Building Operation Costs or Office Operation
Costs than the Building Operation Costs or Office Operation Costs which would
have been incurred, either currently or in the future if such expenses had not
been incurred. (For example, capital expenses incurred for the benefit of
specific tenants of the Building (but not the Building as a whole) shall not be
included in Building Operation Costs or Office Operation Costs, nor shall
capital expenses incurred in connection with the activities described in Section
8.18, below; but capital expenses incurred in replacing mechanical systems in
the Building shall be included in Building Operation Costs or Office Operation
Costs, if, in Landlord's reasonable judgment, they will result in long-term
savings, even if they will not result in immediate savings.) With respect to any
capital expense which is to be included in Building Operation Costs or Office
Operation Costs, the amount which is to be included in any calendar year during
the Term shall be computed by amortizing such capital expense (with interest
thereon computed at the rate of 1% above the "prime rate" in effect as of the
date on which such capital expense is incurred) over the reasonably anticipated
useful life of the repair or replacement item giving rise to such expense.
2.7 ELECTRICITY EXPENSES: Unless otherwise expressly provided in this
Lease, Tenant shall pay, directly to the supplier thereof, ail charges for
electricity supplied to the Premises.
If Tenant requires electricity in excess of the amount of electricity
ordinarily supplied to similar premises by landlords in the metropolitan Boston
Area, Landlord, at the sole cost and expense of Tenant, will furnish and install
such additional wires, conduits, feeders, switchboards and appurtenances as
Landlord may deem to be necessary in order to supply such additional
electricity; provided, however, that Landlord shall have no obligation to
furnish any such excess electricity unless the same shall be permitted by
applicable laws and insurance regulations, and shall not cause or threaten
permanent damage or injury to the Building or the Premises or cause or create a
dangerous or hazardous condition or entail excessive or unreasonable alterations
or repairs, or permanently interfere with or disturb other tenants or occupants
of the Building.
2.8 ACCOUNTING PERIODS: Landlord shall have the right from time to time to
change the periods of accounting under Section 2.6 to any annual period other
than a calendar year, and upon any such change all items referred to in Section
2.6 shall be appropriately apportioned.
2.9 LATE PAYMENT/DISHONORED CHECKS: In the event (i) any payment of rent
(Annual or Additional) is not paid within five (5) business days of the due
date, or (ii) a check received by Landlord from Tenant shall be dishonored, then
because actual damages for a late payment or for a 9 dishonored check are
extremely difficult to fix or ascertain, but recognizing that damage and injury
result therefrom, Tenant agrees to pay $ 100.00 as liquidated damages for each
late payment and $50.00 as liquidated damages for each time a check is
dishonored. (The grace period herein provided is strictly related to the
liquidated damages for a late payment and shall in no way modify or stay
Tenant's obligation to pay rent when it is due, nor shall the same preclude
Landlord from pursuing its remedies under Article V11 hereof, or as otherwise
allowed by law.) In the event that two (2) or more
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of Tenant's checks are dishonored, Landlord shall have the right, in addition to
all other rights under this Lease, to demand all future payments by certified
check or money order. Furthermore if any payment of rent (Annual or Additional)
shall not be paid when due, the same shall bear interest from the date when the
same was due until the date paid at the lesser of (a) eighteen percent (18%) per
annum and (b) the highest lawful rate of interest which Landlord may charge to
Tenant without violating any applicable law. Such interest shall constitute
Additional Rent hereunder.
ARTICLE III
CONSTRUCTION
3.1 INITIAL CONDITION OF THE PREMISES: Except as expressly provided herein,
Landlord shall deliver (and Tenant shall accept) possession of the Premises in a
totally "as is" condition. Accordingly, Tenant expressly acknowledges and agrees
that (i) Landlord has made no representation or warranty concerning the current
condition of the Premises or its fitness for use for any particular purpose and
(ii) except as expressly provided herein, Landlord shall have no obligation to
alter, renovate or improve the Premises in any respect.
3.2 LANDLORD'S WORK:
A. As used herein, "Tenant's Floor Plans" shall mean the plans for the
Premises specified on (or annexed hereto as) Exhibit B, annexed: -Tenant's
Plans" shall mean architectural plans and working drawings for the
preparation of the Premises, based upon Tenant's Floor Plans and
incorporating Landlord's building standard materials and improvements (as
set forth on Exhibit E, annexed), and -Landlord's Work" shall mean (i) the
work shown on Tenant's Plans and (ii) such work (if any) as may be
necessary to cause the plumbing, electrical and other mechanical systems
serving the Premises to be in good working, order (including, without
limitation, such work (if any) as may be necessary to cause the HVAC system
serving the Premises to operate in accordance with the standards set forth
on Exhibit G, annexed). Following the execution of this Lease, Landlord
shall prepare Tenant's Plans, and shall submit the same to Tenant for
Tenant's approval. Within three (3) business days after Tenant's receipt of
Tenant's Plans, Tenant shall either approve Tenant's Plans or notify
Landlord of any respect(s) in which Tenant requires that Tenant's Plans be
modified. (Tenant's failure to respond prior to the expiration of such
three (3) day period shall be deemed to constitute approval of Tenant's
Plans as submitted by Landlord.) Promptly following Tenant's approval of
Tenant's Plans (which approval shall not be unreasonably withheld or
delayed), Landlord shall undertake Landlord's Work. Except as otherwise
provided in this Lease, all of Landlord's Work shall be completed at
Landlord's sole cost and expense.
B. The Premises shall be deemed to be ready for occupancy when (i) the work
described in Tenant's Plans has been completed except for items of work
which can be completed after occupancy has been taken without causing
substantial interference with Tenant's use of the Premises (i.e. so-called
"punch-list items") and (ii) Landlord has obtained a certificate of
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occupancy (or other similar certificate), permitting the Premises to be
lawfully occupied for the Permitted Uses. Landlord shall complete as soon
as conditions practicably permit all punch-list items, and Tenant shall not
use the Premises in such manner as will increase the cost of completion.
Landlord shall communicate reasonably with Tenant as Landlord's Work
approaches substantial completion; and Tenant shall have the right to bring
its furniture and other personal property into the Premises prior to
substantial completion of Landlord's Work, so long as such action by Tenant
does not materially interfere with the prosecution of Landlord's Work.
C. The work required of Landlord pursuant to this Article III shall be deemed
approved by Tenant on the Commencement Date except for items which are then
uncompleted or do not conform to Tenant's Plans and as to which, in either
case, Tenant shall have given notice to Landlord prior to such date.
D. Landlord agrees to use due diligence to cause the Premises to be ready for
occupancy on or before the Anticipated Term Commencement Date. However, if
Landlord shall be unable to cause the Premises to be ready for occupancy on
or before the Anticipated Term Commencement Date, then Landlord shall not
be subject to any liability for such failure, nor shall such failure affect
the validity of this Lease. Furthermore, if, as a result of (i) any request
by Tenant that Tenant's Plans be changed or (ii) any other action by
Tenant, Landlord's Work is delayed, then, at Landlord's option, the
Premises shall be deemed to have been ready for occupancy on that date on
which, in Landlord's reasonable judgment, the Premises would have been
ready for occupancy in the absence of such request or action.
E. As used herein, "Tenant's Construction Representative" and "Landlord's
Construction Representative" shall mean, respectively, the individuals
specified in Section 1.1, above. To the extent reasonably practicable, all
communications between Landlord and Tenant concerning Landlord's Work shall
be conducted through Landlord's Construction Representative and Tenant's
Construction Representative. Without limitation, any change orders or other
directions made by Tenant with respect to Landlord's Work shall be binding
upon Tenant if (but only it) the same are made by Tenant's Construction
Representative and agreed to by Landlord's Construction Representative 3.3
Alterations And Additions: This Section 3.3 shall apply both before and
during the Term:
3.3 ALTERATIONS AND ADDITIONS: This Section 3.3 shall apply both before and
during the Term: Tenant shall not make any structural alterations or additions
to the Premises. Tenant shall not make any other alterations or additions to the
Premises except in accordance with plans and specifications therefor first
approved by Landlord. Landlord agrees that such approval shall not be
unreasonably withheld or delayed, Landlord shall not be deemed unreasonable for
withholding approval of any alterations or additions which (a) involve or might
affect any structural or exterior element of the Building, any area or element
outside of the Premises, or any facility serving any area of the Building
outside the Premises, or (b) will delay completion of the Premises or
improvements in any other portion of the Building, or (c) will require unusual
expense to readapt the Premises to normal office use on Lease termination or
increase the cost of construction or of insurance or taxes on the Building
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or of the services called for by Section 4.1 (unless Tenant first gives
assurance acceptable to Landlord for payment of such increased cost and that
such readaptation will be made prior to such termination without expense to
Landlord). All alterations and additions shall be part of the Building unless
and until Landlord shall specify the same for removal pursuant to Section 5.2.
All of Tenant's alterations and additions and installation of furnishings shall
be coordinated with any work being performed by or for Landlord and in such
manner as to maintain harmonious labor relations and not to damage the Building
or Lot or interfere with Building construction or operation and, except for
installation of furnishings, shall be performed by Landlord's general contractor
or by contractors or workmen first approved by Landlord. Except for work by
Landlord's general contractor, Tenant, before its work `IS started, shall:
secure all licenses and permits necessary therefor; deliver to Landlord a
statement of the names of all its contractors and subcontractors and the
estimated cost of all labor and material to be furnished by them and security
satisfactory to Landlord protecting Landlord against liens arising out of the
furnishing of such labor and material; and cause each contractor to carry
workmen's compensation insurance in statutory amounts covering all the
contractor's and subcontractor's employees and comprehensive public liability
insurance with such limits as Landlord may reasonably require, but in no event
less than $2,000,000 per occurrence, and property damage insurance with limits
of not less than $500,000 (all such insurance to be written in companies
approved by Landlord and insuring Landlord and Tenant as well as the
contractors), and to deliver to Landlord certificates of all such insurance,
Tenant agrees to pay promptly when due tile entire cost of any work- done oil
tile Premises by Tenant, its agents , employees, or independent contractors, and
not to cause or permit any liens for labor or materials performed or furnished
in connection therewith to attach to the Premises and immediately to discharge
any such liens which may attach. Tenant shall pay 100% of any increase in Real
Estate Taxes which shall result from any alteration, addition or improvement to
the Premises made by Tenant.
3.4 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION: All construction work
required or permitted by this Lease shall be done in a good and workmanlike
manner with new first class materials and in compliance with all applicable laws
and all lawful ordinances, regulations and orders of governmental authorities
and insurers of the Building. Each party may inspect tile work of the other at
reasonable times and shall promptly give notice of observed defects.
ARTICLE IV
LANDLORD'S COVENANTS; INTERRUPTIONS AND DELAYS
4.1 LANDLORD'S COVENANTS: Landlord covenants:
4.1.1 SERVICES FURNISHED BY LANDLORD: To furnish the services,
utilities, facilities, and supplies set forth in Exhibit C,
equal in quality to those customarily provided by landlords in
similar quality buildings in the greater Boston area:
4.1.2 ADDITIONAL SERVICES AVAILABLE TO TENANT: To the extent
feasible, to furnish, at Tenant's expense, reasonable
additional Building operation services which are
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usual and customary in similar office buildings in the greater
Boston area, upon reasonable advance request of Tenant, at
rates from time to time established by Landlord (For example,
upon not less than 24 hours advance notice from Tenant to the
building manager or other person designated by Landlord,
Landlord shall provide off-hours HVAC service to the Premises.
Landlord's current charge for such off-hours HVAC service is
$20.00 per hour, but Landlord shall have the right to adjust
such charge from time to time.);
4.1.3 ROOF, EXTERIOR WALL, FLOOR STAB AND COMMON FACILITY REPAIRS:
Except as otherwise provided in Article VI, to make such
repairs to the roof, exterior walls, floor slabs, parking
facilities and other common areas and facilities as may be
necessary to keep them in serviceable condition; and
4.1.4 QUIET ENJOYMENT: That Tenant, on paying the rent and
performing its obligations in this Lease, shall peacefully and
quietly have, hold and enjoy the Premises without hindrance or
molestation by anyone claiming by, through or under Landlord,
subject to all the terms and provisions hereof.
4.2 INTERRUPTION AND DELAYS IN SERVICES AND REPAIRS, ETC.: Landlord shall
not be liable to Tenant for any compensation or reduction of rent by reason of
inconvenience or annoyance or for loss of business arising from the necessity of
Landlord or its agents entering the Premises for any of the purposes in this
Lease authorized, or for repairing the Premises or any portion of the Building,
however the necessity may occur. If Landlord is prevented or delayed from making
any repairs, alterations or improvements, or furnishing any services or
performing any other covenant or duty to be performed on Landlord's part, then,
except as expressly provided in the next succeeding paragraph hereof, Landlord
shall not be liable to Tenant therefor, nor, except as expressly provided in the
next succeeding paragraph hereof, shall Tenant be entitled to any abatement or
reduction of rent by reason thereof, nor shall the same give rise to a claim in
Tenant's favor that such failure constitutes actual or constructive, total or
partial, eviction from the Premises.
If Landlord is prevented or delayed from making any repairs, alterations or
improvements, or furnishing any services or performing any other covenant or
duty to be performed by Landlord, and if (i) such condition materially
interferes with Tenant's use and enjoyment of the Premises and (ii) such
material interference continues until the Abatement Date (as defined below),
then, beginning with the Abatement Date and continuing until such condition has
been remedied to the extent necessary to avoid material interference with
Tenant's use and enjoyment of the Premises. Tenant shall receive a reduction or
abatement of its obligations under Sections 2.5 and 2.6, above, consistent with
the extent of interference with Tenant's use and enjoyment of the Premises.
Furthermore, if such material interference continues until the Termination Date
(as defined below), then Tenant shall have the right to terminate this Lease, by
notice to Landlord not later than the date on which
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such condition has been remedied to the extent necessary to prevent material
interference with Tenant's use and enjoyment of the Premises. As used herein,
the "Abatement Date" shall mean: (x) with respect to a condition reasonably
within Landlord's control - the 11th business day following the date on which
the condition first materially interferes with Tenant's use and enjoyment of the
Premises; and (y) with respect to a condition not reasonably within Landlord's
control - the 21st business day following the date on which such condition first
materially interferes with Tenant's use and enjoyment of the Premises. As used
herein, the "Termination Date" shall mean: (x) with respect to a condition
reasonably within Landlord's control - the 180th business day following the date
on which the condition first materially interferes with Tenant's use and
enjoyment of the Premises; and (y) with respect to a condition not reasonably
within Landlord's control - the 270th business day following the date on which
such condition first materially interferes with Tenant's use and enjoyment of
the Premises.
Landlord reserves the right to stop any service or utility system, when
necessary by reason of accident or emergency, or until necessary repairs have
been completed: provided, however, that in each instance of stoppage, Landlord
shall exercise reasonable diligence to eliminate the cause thereof. Except in
case of emergency repairs, Landlord will give Tenant reasonable advance notice
of any contemplated stoppage and will use reasonable efforts to avoid
unnecessary inconvenience to Tenant by reason thereof. Landlord also reserves
the right to institute (and, thereafter, Tenant shall comply with) such
policies, programs and measures as may be necessary, required or expedient (in
the reasonable judgment of Landlord) for the conservation or preservation of
energy or energy services or as may be necessary or required to comply with
applicable codes, rules, regulations or standards.
ARTICLE V
TENANT'S COVENANTS
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
5.1 PAYMENTS: To pay when due all Annual Rent and Additional Rent and all
charges for additional services rendered pursuant to Section 4.1.2.
5.2 REPAIR AND YIELD UP: Except as otherwise provided in Article VI and
Section 4.1.3. to keep the Premises in good order, repair and condition,
reasonable wear and tear only excepted, and all glass in windows and doors of
the Premises whole and in good condition with glass of the same quality as that
injured or broken, damage by fire only excepted, and, at the expiration or
termination of this Lease, peaceably to yield up the Premises and all
alterations and additions thereto in good order, repair and condition,
reasonable wear and tear excepted, first removing all goods and effects of
Tenant and, to the extent specified by Landlord by notice to Tenant given at
least ten (10) days before such expiration or termination, all alterations and
additions made by Tenant and all partitions, and repairing any damage caused by
such removal and restoring the Premises and leaving them clean and neat.
(However, nothing set forth in this Lease shall be deemed to require Tenant to
remove Landlord's Work at the expiration or termination of this Lease.)
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5.3 USE: Continuously from the commencement of the Term, to use and occupy
the Premises for the Permitted Uses, and not to injure or deface the Premises,
Building or Lot, nor to permit in the Premises any auction sale, vending
machine, or inflammable fluids or chemicals, or nuisance, or the emission from
the Premises of any objectionable noise or odor, nor to use or devote the
Premises or any part thereof for any purpose other than the Permitted Uses, nor
any use thereof which is inconsistent with the maintenance of the Building as a
mixed use building of the first class in the quality of its maintenance, use and
occupancy, or which is improper, offensive, contrary to law or ordinance or
liable to invalidate or increase the premiums for any insurance on the Building
or its contents or liable to render necessary any alteration or addition to the
Building. (Without limitation, if Tenant engages in any activity which increases
the premiums for any insurance maintained, by Landlord or any occupant of the
Building, on the Building or its contents (or any portion of either), then
Tenant shall promptly reimburse Landlord for any such increase.)
5.4 OBSTRUCTIONS; ITEMS VISIBLE FROM EXTERIOR; RULES AND REGULATIONS: Not
to obstruct in any manner any portion of the Building not hereby leased or any
portion thereof or of the Lot used by Tenant in common with others; not without
prior consent of Landlord to permit the painting or placing of any signs on
doors or any signs, curtains, blinds, shades, awnings, aerials or flagpoles, or
the like, visible form outside the Premises; and to comply with all reasonable
rules and regulations now or hereafter made by Landlord, of which Tenant has
been given notice, for the care and use of the Building and Lot and their
facilities and approaches. Landlord shall not be liable to Tenant for the
failure of other occupants of the Building to conform to such rules and
regulations.
5.5 SAFETY APPLIANCES; LICENSES; COMPLIANCE WITH LAW: To keep the Premises
equipped with all safety appliances required by law or ordinance or any other
regulation of any public authority and to procure all licenses and permits so
required because of Tenant's use of the Premises and, if requested by Landlord,
to do any work in the Premises required to permit Tenant lawfully to engage ill
such use, it being understood that the foregoing provisions shall not be
construed to broaden in any way Tenant's Permitted Uses.
Notwithstanding anything to the contrary set forth in this Lease, Landlord
(and not Tenant) shall I be solely responsible for correcting any violation of
any building code, law or regulation applicable to the Property, to the extent
that such violation exists as of the Commencement Date. All costs incurred by
Landlord in remedying any such violation shall be borne by Landlord, and no part
thereof shall be included in Tenant's Excess Obligation. By its execution of
this Lease, Landlord represents and warrants that, except for the front entrance
to the Building, as of the date hereof, the Building complies with the Americans
with Disabilities Act in all material respects.
5.6 ASSIGNMENT, SUBLEASE: Tenant shall not assign this Lease or sublet (or
otherwise permit anyone else to occupy) the whole or any part of the Premises
without Landlord's prior written consent (the granting of which consent shall be
governed by the next succeeding paragraph hereof). (For the purposes of the
immediately preceding sentence, an assignment shall be deemed to include,
without limitation, the creation of any security in Tenant's leasehold interest
hereunder, as well as the sale or other transfer of a controlling interest in
the business entity constituting Tenant.) Without intending to
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limit Landlord's right to withhold such consent as governed by (the next
succeeding paragraph hereof) it is agreed that if Tenant requests Landlord's
consent to assign this Lease or sublet any or all of the floor area within the
Premises, Landlord shall have the option, exercisable by notice to Tenant given
within twenty (20) days after receipt of such request, to terminate this Lease
as of a date specified in such notice, which date shall be not less than thirty
(30) nor more than sixty (60) days after the date of such notice (provided,
however, that, if such sublease applies only to a portion of the Premises, then
Landlord shall have the option to terminate this Lease only if the rentable area
of the portion of the Premises which is the subject of such sublease, when
aggregated with the rentable area of all portions of the Premises previously
subleased by Tenant, will exceed 50% of the rentable floor area of the Premises.
Notwithstanding such consent, Tenant shall remain primarily liable to Landlord
for the payment of all rent and for the full performance of the covenants and
conditions of this Lease. ff. as a result of any assignment or sublease, Tenant
is entitled to receive from the assignee or sublessee rental and other charges
which (on a per square foot basis) exceed the rental and other charges payable
by Tenant hereunder, then, promptly upon receipt of such rental or other charges
from the assignee or sublessee, Tenant shall pay to Landlord 75% of any such
excess; provided, however, that Tenant shall have the right to use such excess
first to reimburse itself for all reasonable out-of-pocket expenses (e.g.
reasonable legal costs and brokerage commissions) incurred by Tenant in
connection with such assignment or sublease. In the event that Tenant shall
request Landlord's consent to any proposed assignment or sublease, Tenant shall
promptly reimburse Landlord for all legal fees and other costs and expenses
incurred by Landlord in considering such request, whether or not Landlord
consents to the proposed assignment or sublease.
Landlord shall not unreasonably withhold or delay its consent to any
assignment or sublease as to which Landlord's consent is requested by Tenant. In
connection with any proposed assignment or sublease. Tenant shall supply to
Landlord such materials as Landlord may reasonably require in order to reach an
informed decision. Such information may include, without limitation, the
business terms of' tile proposed assignment or sublease and information
concerning the Financial condition, reputation and business experience of the
proposed assignee or subtenant. Without limitation, it shall not be unreasonable
for Landlord to withhold its consent to a proposed assignee or subtenant which
(i) is not of reasonably satisfactory financial condition or (ii) is an existing
tenant of the Building, or (iii) is already engaged in negotiations with
Landlord for the occupancy of premises in the Building.
5.7 INDEMNITY; INSURANCE: To the maximum extent this agreement may be made
effective according to law, Tenant agrees to indemnify and save harmless
Landlord from and against all claims of whatever nature arising from any act,
omission or negligence of Tenant or Tenant's contractors, licensees, agents,
servants or employees or arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person, occurring after the
commencement of construction work by Tenant, and until the end of the Term and
thereafter, so long as Tenant is in occupancy of any part of the Premises, in or
about the Premises, or arising from any death, accident, injury or damage
occurring outside of the Premises but within the Building, or on the Lot, where
such accident, damage or injury results or is claimed to have resulted from any
act or omission on the part of Tenant or Tenant's agents or employees or
independent contractors or invitees or suppliers. This indemnity shall, to the
maximum extent this agreement may be made effective according to law,
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also extend to all loss, costs, penalties, damage and claims of whatever nature
asserted against Landlord arising out of the use or occupancy of, or passage or
travel over or upon, the Property by Tenant or by any person claiming by,
through or under Tenant (including, without limitation, all employees, agents,
contractors and customers of Tenant), or arising out of any delivery to or
service supplied to the Premises, or on account of or based on anything
whatsoever done on the Premises, except if the same was caused by the
negligence, fault or misconduct of Landlord or its servants or employees. This
indemnity and hold harmless agreement shall include indemnity against all costs,
expenses and liabilities incurred in or in connection with any such claim or
proceeding brought thereon, and the defense thereof with counsel approved by
Landlord.
Tenant shall maintain, with respect to the Premises and the Property,
comprehensive public liability insurance in amounts not less than the amounts
specified in Section 1.1. Said insurance shall be issued by responsible
insurance companies authorized to do business in the Commonwealth of
Massachusetts and having a "Best's" rating of A or higher, and shall insure as
named insured Landlord. Landlord's Representative (as initially specified in
Section 1.1, but subject to change from time to time by notice from Landlord to
Tenant), and Tenant. Tenant shall deposit with Landlord certificates for such
insurance at or prior to the commencement of the Term, and thereafter at least
twenty (20) days prior to the expiration of any such policies. All such
insurance certificates shall provide that such policies (as well as any other
insurance required to be maintained by Tenant under this Lease) shall not be
canceled or modified without at least ten (10) days prior written notice to
Landlord. If said insurance shall be written on a so-called "aggregate
liability" basis, each time that a claim is paid thereunder, Tenant shall review
its coverage and, if necessary, increase the amount of its coverage so that the
remaining aggregate limits shall be not less than the limits required herein to
be carried by Tenant. Tenant also agrees that, upon Landlord's request from time
to time, Tenant shall increase the limits of the public liability insurance
described above to such limits as are customarily carried with respect to
premises similar to the Premises within the municipality in which the Building
is situated.
5.8 PERSONAL PROPERTY AT TENANT'S RISK; TENANT'S CASUALTY INSURANCE: That
all of the furnishings, fixtures, equipment, effects and property of every kind,
nature and description of Tenant and of all persons claiming by, through or
under Tenant which, during the continuance of this Lease or any occupancy of the
Premises by Tenant or anyone claiming under Tenant, may be on the Premises or
elsewhere in the Building or on the Lot, shall be at the sole risk and hazard of
Tenant, and if the whole or any part thereof shall be destroyed or damaged by
fire, water or otherwise, or by the leakage or bursting of water pipes, steam
pipes, or other pipes, by theft or from any other cause, no part of said loss or
damage is to be charged to or borne by Landlord, except that Landlord shall in
no event be indemnified or held harmless or exonerated from any liability to
Tenant or to any other person, for any injury, loss, damage or liability to the
extent such indemnity, hold harmless or exoneration is prohibited by law.
Tenant shall maintain casualty insurance, in form and substance (and issued
by an insurer) reasonably satisfactory to Landlord, insuring Tenant's furniture,
trade fixtures and personal property, in an amount not less than the full
replacement value thereof Certificates of such insurance shall be
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delivered to Landlord in the manner required with respect to Tenant's liability
insurance coverage, as provided in the second paragraph of Section 5.7.
5.9 RIGHT OF ENTRY: To permit Landlord and its agents: to examine the
Premises at reasonable times and, if Landlord shall so elect, to make any
repairs or replacements as Landlord, in the exercise of its reasonable business
judgment, may deem necessary; to remove, at Tenant's expense, any alterations,
additions, signs, curtains, blinds, shades, awnings, aerials, flagpoles, or the
like not consented to in writing; and to show the Premises to prospective
tenants during the Five (5) months preceding expiration of the Term and to
prospective purchasers and mortgagees at all reasonable times. Except in the
case of emergency, Landlord shall exercise its right of access under this
Section 5.9 only upon not less than 48 hours advance notice to Tenant. Such
notice may be given orally or in writing, to any person who Landlord reasonably
believes is authorized to receive such notice.
5.10 FLOOR LOAD; PREVENTION OF VIBRATION AND NOISE: Not to place a load
upon the Premises exceeding a rate of 50 pounds of live load per square foot;
and not to place or move any safe, vault or other heavy equipment in, about or
out of the Premises except in such manner and at such time as Landlord shall in
each instance authorize. Tenant's business machines and mechanical equipment
which cause vibration or noise that may be transmitted to the Building structure
or to any other space in tile Building shall be so installed, maintained and
used by Tenant as to eliminate such vibration or noise.
5.11 SECURITY: To comply with ail such reasonable measures as Landlord may
deem advisable for the security of the Building and its occupants, including,
without limitation, the evacuation of the Building for cause or suspected cause
or for drill purposes, the temporary denial of access to tile Building and tile
closing of the Building after regular working hours on regular working days and
on Sundays and legal holidays, subject, however to Tenant's right to admittance
when the Building is closed after regular working hours under such reasonable
regulations as Landlord may prescribe from time to time (which may include, by
way of example but not of limitation, that persons entering or leaving the
Building, whether or not during regular working hours, identify themselves to a
watchman by registration or otherwise and that said persons establish their
right to enter or leave the Building).
5.12 PERSONAL PROPERTY TAXES: To pay promptly when due all taxes which may
be imposed upon personal property (including without limitation, fixtures and
equipment) in the Premises to whomever assessed.
5.13 TENANT HOLDOVER: To provide Landlord with advance notice whenever
Tenant reasonably anticipates that it will retain possession of the Premises or
any part thereof after the expiration or termination of this Lease: and to pay
to Landlord two (2) times the greater of (i) the then fair market rent as
conclusively determined by Landlord and (ii) the total of the Annual Rent and
other changes under Article 11 then applicable, for each month or portion
thereof Tenant shall retain possession of the Premises or any part thereof after
the expiration or termination of this Lease, whether by lapse of time or
otherwise, and also to pay all damages sustained by Landlord on account thereof
(provided, however, that, during the first fifteen (15) days of any such holding
over, such damages shall not
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include losses resulting, from the loss of any prospective tenant of the
Premises, but may include other losses (including, without limitation,
reasonable costs incurred by Landlord in providing, and moving Tenant to,
temporary alternative space in order to avoid the loss of a prospective tenant
of the Premises). The provisions of this Section shall not operate as a waiver
by Landlord of the right of reentry provided in this Lease. At the option of
Landlord exercised by a notice given to Tenant while such holding over
continues, such holding over shall constitute an extension of the Term of this
Lease for a period of one year.
5.14 HAZARDOUS MATERIALS: Tenant shall not use any portion of the Premises
for the use, generation, treatment, storage or disposal of "oil", "hazardous
material", Hazardous wastes", or "hazardous substances" (collectively, the
"Materials"), as such terms are defined under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., as amended,
the Resource Conversation and Recovery Act of 1976, 42 U.S.C. ss.6901 et seq.,
as amended, and the regulations promulgated thereunder, and all applicable state
and local laws, rules and regulations (now or hereafter in effect), including,
without limitation, Massachusetts General Laws, Chapters 21C and 21E (the
"Superfund and Hazardous Waste Laws"), without the express written prior consent
of Landlord and, if required, its mortgagees, and then only to the extent that
the presence of the Materials is (i) property licensed and approved by all
appropriate governmental officials and in accordance with all applicable laws
and regulations and (ii) in compliance with any terms and conditions stated in
said prior written approvals by the Landlord or its mortgagees. Tenant shall
promptly provide Landlord with copies of all notices received by it, including,
without limitation, any notice of violations notice of responsibility or demand
for action from any federal, state or local authority or official in connection
with the presence of Materials in or about the Premises, Building or Lot. In the
event of any presence or release of Materials upon the Premises, Building or
Lot, or upon adjacent lands, caused by Tenant or its agents or representatives
or those claiming under Tenant, as defined in the Superfund and Hazardous Waste
Laws, Tenant shall promptly remedy the problem in accordance with all applicable
laws and requirements and shall indemnify, defend and hold Landlord harmless
from and against all loss, costs, liability and damage, including attorneys'
fees and the cost of litigation arising from the presence or release of such
Materials. Nothing herein shall be deemed to prohibit the lawful use of
customary cleaning materials and office supplies, provided the same are stored
and used in a lawful manner.
ARTICLE VI
CASUALTY AND TAKING
6.1 FIRE OR CASUALTY:
1. If, after the commencement of the Term and prior to the expiration
or earlier termination hereof, the Premises shall be partially damaged (as
distinguished from "substantially damaged", as that term is hereinafter defined)
by fire or casualty, Landlord shall promptly proceed to restore so much of the
Premises as was originally constructed by Landlord to substantially the
condition which that portion of the Premises originally constructed by Landlord
was in at the time of
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such damage, but Landlord shall not be responsible for delay which may result
from any cause beyond the reasonable control of Landlord.
2. If, after the commencement of the Term and prior to the expiration
or earlier termination hereof, the Premises shall be substantially damaged (as
that term is hereinafter defined) by Fire or casualty, the risk of which is
covered by Landlord's insurance, Landlord, promptly after such damage and the
determination of the net amount of insurance proceeds available to Landlord
(that is, the amount of insurance proceeds paid by Landlord's insurer on account
of such fire or casualty, after deducting therefrom (i) costs incurred by
Landlord in obtaining such payment and (ii) the amount of such proceeds retained
by any mortgagee in satisfaction of any outstanding mortgage debt), shall expend
so much as may be necessary of such net amount to restore, to the extent
originally constructed by Landlord (consistent, however, with zoning laws and
building codes then in existence), so much of the Premises as was originally
constructed by Landlord to substantially the condition which such portion of the
Premises was in at the time of such damage, except as hereinafter provided, but
Landlord shall not be responsible for delay which may result from any cause
beyond the reasonable control of Landlord. Should the net amount of insurance
proceeds available to Landlord be insufficient to cover the cost of restoring
the Premises, in the reasonable estimate of Landlord, Landlord may, but shall
have no obligation to, supply the amount of insufficiency and restore the
Premises with all reasonable diligence, or Landlord may terminate this Lease by
giving notice to Tenant within a reasonable time after Landlord has determined
the estimated net amount of insurance proceeds available to Landlord and the
estimated cost of such restoration.
3. Promptly following the substantial completion of Landlord's
restoration work, as provided above. Tenant shall restore its trade fixtures,
inventory and other items of personal property, so as to assure that business
operations from tile entire Premises shall be reinstated at the earliest
possible date.
4. The term "substantial damage" and "substantially damaged" as used
herein shall refer to damage of such a character that the same cannot, in
ordinary course, reasonably be expected to be repaired within sixty (60) days
from the time that such work would commence.
5. If, however, the Building shall be substantially damaged or
destroyed by fire or casualty, or if, as the result of a risk not covered by the
forms of hazard insurance then customarily carried on like improvements in the
locality in which the Premises are located (the parties agreeing that, as of the
date of execution hereof, such form of insurance coverage is commonly known as
Fire with Extended Coverage Endorsement No. 4 and Vandalism and Malicious
Mischief coverage), tile Premises are substantially damaged, Landlord shall
promptly restore, to the extent originally constructed by Landlord (consistent,
however, with zoning laws and building codes then in existence), so much of the
Building or the Premises as were originally constructed by Landlord to
substantially the condition thereof at the time of such damage, unless Landlord,
promptly after such loss, gives notice to Tenant of Landlord's election to
terminate this Lease. If Landlord shall give such notice, then this Lease shall
terminate as of the date of such notice with the same force and effect as if
such date were the date originally established as the expiration date hereof.
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6. If the Premises shall be substantially damaged by fire or casualty
within the last twelve (12) months of the Term, either party shall have the
right, by giving notice to the other not later than sixty (60) days after such
damage, to terminate this Lease, whereupon this Lease shall terminate as of the
date of such notice with the same force and effect as if such date were the date
originally established as the expiration date hereof.
7. If the Premises shall be damaged by fire or casualty, the Annual
Rent payable by Tenant under this Lease shall abate or be reduced
proportionately for the period in which, by reason of such damage, there is
substantial interference with the operation of Tenant's business in the
Premises, having regard to the extent to which Tenant may be required to
discontinue Tenant's business in the Premises, but such abatement or reduction
shall end upon completion by Landlord of the work which Landlord is required to
do under this Section 6.1 in restoration of the Premises.
6.2 EMINENT DOMAIN:
1. If the Premises, or such portion thereof as (in Landlord's
reasonable judgment) to render the continued operation of the balance uneconomic
(if reconstructed to the maximum extent practicable in the circumstances), shall
be taken by condemnation or right of eminent domain, Landlord shall have the
right to terminate this Lease by notice to Tenant of its desire to do so,
provided that such notice is given not later than thirty (30) days after Tenant
has been deprived of possession. Further, if so much of the Building or the Lot
shall be so taken that continued operation of the Building would be uneconomic.
Landlord shall have the right to terminate this Lease by giving notice to Tenant
of Landlord's desire so to do not later than thirty (30) days after the
effective date of such taking.
Should any part of the Premises be so taken or condemned and such taking or
condemnation occurs after the commencement of the Term, and should this Lease be
not terminated in accordance with the foregoing provisions. Landlord agrees,
promptly after such taking or condemnation and tile determination of Landlord's
award on account thereof, to expend so much as may be necessary of tile net
amount which may be awarded to Landlord in such condemnation proceedings (that
is, the amount of proceeds of any award received by Landlord in such
condemnation proceedings and allocable to damage which is to be restored, after
deducting therefrom (i) costs incurred, by Landlord in obtaining such award and
(ii) the amount of such proceeds retained by any mortgagee in satisfaction of
any outstanding mortgage debt) in restoring the Premises, to the extent
originally constructed by Landlord, to an architectural unit as nearly like
their condition prior to such taking as shall be practicable. Should the net
amount so awarded to Landlord be insufficient to cover the cost of restoring the
Premises, in the reasonable estimate of Landlord. Landlord may, but shall have
no obligation to, supply the amount of such insufficiency and restore the
Premises to such an architectural unit, with all reasonable diligence, or
Landlord may terminate this Lease by giving notice to Tenant within a reasonable
time after Landlord has determined the estimated net amount which may be awarded
to Landlord and the estimated cost of such restoration.
2. Promptly following the substantial completion of Landlord's
restoration work, as provided above, Tenant shall restore its trade fixtures,
inventory and other items of personal property,
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so as to assure that business operations from the entire Premises shall be
reinstituted at the earliest possible date.
3. Landlord shall have and hereby reserves and excepts, and Tenant
hereby grants and assigns to Landlord, all rights to recover for damages to the
Lot, the Premises, the Building and the leasehold interest hereby created, and
to compensation accrued or hereafter to accrue by reason of such taking, damage
or destruction, as aforesaid; and, by way of confirming the foregoing, Tenant
hereby grants and assigns, and covenants with Landlord to grant and assign to
Landlord, all rights to such damages or compensation. Nothing contained herein
shall be construed to prevent Tenant from prosecuting in any condemnation
proceedings a claim for the value of any of Tenant's usual trade fixtures
installed in the Premises by Tenant at Tenant's expense and for relocation
expenses, provided that such action shall not affect the amount of compensation
otherwise recoverable by Landlord from the taking authority.
4. In the event of any such taking of the Premises, the Annual Rent, or
a fair and just proportion thereof, according to the nature and extent of the
damage sustained, shall be suspended or abated, as Landlord, in its reasonable
Judgment, may deem to be appropriate and equitable in the j circumstance.
Furthermore, following any taking, Tenant's obligations under Section 2.6 shall
be adjusted appropriately, in order to take account of any reduction in the
gross square footage of floor area in the Premises and/or the remainder of the
Building.
ARTICLE VII
DEFAULT
7.1 EVENTS OF DEFAULT: If any default by Tenant continues after notice. In
case of Annual Rent or Additional Rent for more than seven (7) days, or in any
other case for more than thirty (30) days and such additional time, if any, as
is reasonably necessary to cure tile default if tile default is of' such a
nature that `it cannot reasonably be cured in thirty (30) days (provided,
however, that such additional time shall be available to Tenant only if Tenant
commences the remedy of tile relevant default within thirty (30) days after
notice from Landlord, and thereafter prosecutes such remedy diligently to
completion); or if Tenant or any guarantor of any of Tenant's obligations under
this Lease makes any assignment for the benefit of creditors, or files a
petition under any provision or chapter of any bankruptcy or insolvency law, or
if such petition filed against Tenant or such guarantor is not dismissed within
sixty (60) days, or if a receiver or similar officer becomes entitled to
Tenant's leasehold is hereunder and such leasehold is not returned to Tenant
within sixty (60) days, or If such leasehold is taken on execution or other
process of law in any action against Tenant --- then, in any such case, whether
or not the Term shall have begun, Landlord may immediately, or at any time while
such default exists, terminate this Lease by notice to Tenant, and this Lease
shall come to an end on the date specified therein as fully and completely as if
such date were the date herein originally fixed for the expiration of the Term,
and Tenant will then quit and surrender the Premises to Landlord, but Tenant
shall remain liable as hereinafter provided.
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7.2 DAMAGES: In the event that this Lease is terminated under any of the
provisions contained in Section 7.1 or is otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included the Annual Rent and all
Additional Rent, and the value of all other consideration agreed to be paid or
performed by Tenant for said residue, Tenant further covenants as an additional
and cumulative obligation after any such ending to pay punctually to Landlord
all the sums and perform all the obligations which Tenant covenants in this
Lease to pay and to perform in the same manner and to the same extent and at the
same time as if this Lease had not been terminated in calculating the amounts to
be paid by Tenant under the next foregoing covenant, Tenant shall be credited
with any amount paid to Landlord as compensation as in this Section 7.2
provided, and also with the net proceeds of any rent obtained by Landlord by
reletting the Premises, after deducting ail Landlord's expenses in connection
with such reletting, including, without limitation, all repossession costs,
brokerage commissions, fees for legal services and expenses of preparing the
Premises for such reletting, it being agreed by Tenant that Landlord may (i)
relet the Premises or any part or parts thereof, for a term or terms which may,
at Landlord's option, be equal to or less than or exceed the period which would
otherwise have constituted the balance of the Term and may grant such
concessions and free rent as Landlord, in its sole judgement, considers
advisable or necessary to relet the same, and (ii) make such alterations,
repairs and decorations in the Premises as Landlord, in its sole judgement,
considers advisable or necessary to relet the same, and no action of Landlord in
accordance with the foregoing or failure to relet or to collect rent under
reletting shall operate or be construed to release or reduce Tenant's liability
as aforesaid.
In lieu of any other damages or indemnity and in lieu of full recovery by
Landlord of all sums payable under all the foregoing provisions of this Section
7.2, Landlord may, by written notice to Tenant, at any time after this Lease is
terminated under any of the provisions contained in Section 7.1 or is otherwise
terminated for breach of any obligation of Tenant and before such full recovery,
elect to recover, and Tenant shall thereupon pay, as liquidated damages, an
amount equal to the aggregate of 9 the Annual Rent and Additional Rent accrued
under Sections 2.5, 2.6 and 2.7 in the 12 months ended next prior to such
termination, plus the amount of Annual Rent and Additional Rent of any kind
accrued and unpaid at the time of termination, plus expenses due under Section
8.14, and less the amount of any recovery by Landlord under the foregoing
provisions of this Section 7.2 up to the time of payment of such liquidated
damages.
Notwithstanding anything in this Lease to the contrary, Landlord should
take all reasonable steps to mitigate its damages in the event of a default
hereunder by Tenant. Nothing contained in tills Lease shall limit or prejudice
the right of Landlord to prove for and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
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ARTICLE VIII
MISCELLANEOUS
8.1 SECURITY DEPOSIT: Landlord acknowledges that it has received from
Tenant the security deposit set forth in Section 1.1, said sum to serve as
security for the payment of rents and the performance and observance of the
agreements and conditions in this Lease contained on the part of Tenant to be
performed and observed. In the event of any default or defaults in such payment,
performance or observance, Landlord may apply said sum or any part thereof
toward curing of any such default or defaults and to compensating Landlord for
any loss or damage arising from any such default or defaults. Upon the yielding
up of the Premises at the expiration or other termination of the Term. said sum
(or so much thereof as may remain after application in satisfaction of any
existing defaults or liabilities of Tenant hereunder) shall be returned to
Tenant. It is understood and agreed that Landlord shall always have the right to
apply said sum, or any part thereof, as aforesaid in the event of' any such
default or defaults, without prejudice to any other remedy or remedies which
Landlord may have. or Landlord may pursue any other such remedy or remedies in
lieu of (and in addition to) applying said sum or art thereof. No interest shall
be payable on said sum or any part thereof. If Landlord shall apply said sum or
any part thereof as aforesaid, Tenant shall upon demand pay to Landlord the
amount so applied by Landlord, to restore the security to Its original amount.
Whenever the holder of Landlord's interest in this Lease, whether it be the
Landlord named in this Lease or any transferee of said Landlord, immediate or
remote, shall transfer its interest In this Lease, such holder shall be released
from any and all liability to Tenant with respect to said sum or its application
or return, it being understood that Tenant shall thereafter look only to such
transferee with respect to said sum its application and return. However, the
holder of any mortgage upon property which includes the Premises shall never be
responsible to Tenant for said sum or its application or return unless said sum
shall actually have been received in hand by such holder. (See also Section
8.20, below.)
8.2 NOTICE OF LEASE; CONSENT OR APPROVAL; NOTICES, BIND AND INURE;
LANDLORD'S ESTATE: The titles of the Articles and Sections herein are for
convenience only and are not to be considered in construing this Lease, Tenant
agrees not to record this Lease, but upon request of either party, both parties
shall execute and deliver a notice of this Lease, in form appropriate for
recording or registration, and if this Lease is terminated before the Term
expires, an Instrument in such form acknowledging the date of termination.
Except as expressly provided in Section 5.9, above, whenever any notice,
approval, consent, request or election is given or made pursuant to this Lease,
it shall be in writing. Communications and payments shall be addressed if to
Landlord at Landlord's Address or at such other address as may have been
specified by prior notice to Tenant, and if to Tenant at Tenant's Address or at
such other address as may have been specified by prior notice to Landlord. Any
communication so addressed shall be deemed duly served if mailed by registered
or certified mail, return receipt requested or by reputable overnight delivery
service, and shall be deemed to be effective when tendered to the intended
recipient for delivery, If Landlord by notice to Tenant at any time designates
some other person to receive payments or notices, all payments or notices
thereafter by Tenant shall be paid or given to the agent designated until notice
to the contrary is received by Tenant from Landlord. The
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obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the original Landlord named herein and each
successive owner of the Premises shall be liable only for obligations accruing
during the period of its ownership. If Landlord shall at any time be an
individual, joint venture, tenancy in common, firm or partnership (general or
limited), a trust or trustees of a trust, it is specifically understood and
agreed that there shall be no personal liability of the Landlord or any joint
venturer, tenant, partner, trustee, shareholder, beneficiary or holder of a
beneficial interest under any of the provisions hereof or arising out of the use
or occupation of the Premises by Tenant. In the event of a breach or default by
Landlord of any of its obligations under this Lease, Tenant shall look solely to
the then equity of the Landlord in the Property for the satisfaction of Tenant's
remedies, and it is expressly understood and agreed that Landlord's liability
under the terms, covenants, conditions, warranties and obligations of this Lease
shall in no event exceed the loss of such equity interest. In no event shall
Landlord be liable to Tenant for any indirect or consequential damages sustained
by Tenant, from whatever cause.
8.3 LANDLORD'S FAILURE TO ENFORCE: The failure of Landlord to seek redress
for violation of or to insist upon strict performance of, any covenant or
condition of this Lease or any of the rules and regulations referred to in
Section 5.4, whether heretofore or hereafter adopted by Landlord, shall not be
deemed a waiver of such violation nor prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation, nor shall the failure of Landlord to enforce any of said
rules and regulations against any other tenant of the Building be deemed a
waiver of any such rules and regulations The receipt by Landlord of Annual Rent
or Additional Rent with knowledge of the breach of any covenant of this Lease
shall not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver be in writing signed
by Landlord. No consent or waiver, express or implied by Landlord to or of any
breach of any agreement or duty shall be construed as a waiver or consent to or
of any other breach of the same or any other agreement or duty.
8.4 ACCEPTANCE OF PARTIAL PAYMENTS OF RENT; DELIVERY OF KEYS: No acceptance
by Landlord of a lesser sum than the Annual Rent and Additional Rent then due
shall be deemed to be other than on account of the earliest installment of such
rent due, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such installment or pursue any other remedy in
this Lease provided. The delivery of keys to any employee of Landlord or to
Landlord's agent or any employee thereof shall not operate as a termination of
this Lease or a surrender of the Premises.
8.5 CUMULATIVE REMEDIES: The specific remedies to which Landlord may resort
under the terms of this Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which it may be lawfully
entitled in case of any breach or threatened breach by Tenant of any provisions
of this Lease. In addition to the other remedies provided in this Lease,
Landlord shall be entitled to the restraint by injunction of the violation or
attempted or threatened violation of any of
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the covenants, conditions or provisions of this Lease or to a decree compelling
specific performance of any such covenants, conditions or provisions.
8.6 PARTIAL INVALIDITY: If any term of this Lease, or the application
thereof to any person or circumstances, shall to any extent be invalid or
unenforceable, the remainder of this Lease. or the application of such term to
persons or circumstances other than those to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
8.7 SELF-HELP: If Tenant shall at any time default in the performance of
any obligation under this Lease, Landlord shall have the right, but shall not be
obligated, to enter upon the Premises and (whether or not such entry is
necessary) to perform such obligation notwithstanding the fact that no for such
substituted performance by Landlord is made in this Lease with respect to
specific provisions such default. In performing such obligation, Landlord may
make any payment of money or perform any other act. All sums so paid by Landlord
(together with interest at the rate specified in Section 2.9 and all necessary
incidental costs and expenses in connection with the performance of any such act
by Landlord) shall be payable to Landlord immediately on demand. Landlord may
exercise the foregoing rights without waiving any other of its rights or
releasing Tenant form any of its obligations under this Lease.
8.8 TENANT'S ESTOPPEL CERTIFICATE: Tenant agrees from time to time, upon
not less than twenty (20) days prior written request by Landlord (but subject to
the provisions of the next succeeding paragraph hereof), to execute, acknowledge
and deliver to Landlord a statement, in writing certificate, that tills Lease is
unmodified and in full force and effect and that Tenant has no defenses, offsets
or counterclaims against its obligations to pay the Annual Rent and Additional
Rent and to perform Its other covenants under this Lease and that there are no
uncured defaults of Landlord or Tenant under this Lease (or, if there have been
any modifications, that the same are In full force and effect as modified and
stating the modifications and, if there are any defenses, offsets, counterclaims
or defaults settling them forth in reasonable detail), and the dates to which
the Annual Rent and Additional Rent have been paid, and any other information
reasonably requested. Any such statement delivered pursuant to this Section 8.8
may be relied upon by any prospective purchaser or mortgagee of the Promises or
any prospective assignee of any mortgagee of the Premises.
With respect to requests for Estoppel Certificates, as provided above,
Landlord agrees that (i) Landlord shall make such requests only in connection
with the proposed sale or refinancing of the Property, or for other reasonable
business purposes, and (ii) with respect to the third and each succeeding
request during any period of 12 consecutive calendar months. Landlord shall
reimburse Tenant for all reasonable out-of-pocket costs and expenses incurred by
Tenant in responding to such request.
8.9 WAIVER OF SUBROGATION: Any casualty insurance carried by either party
with respect to the Premises or property therein or occurrences thereon shall,
if it can be so written without additional premium or with any additional
premium which the other party agrees to pay, include a clause or
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endorsement denying to the insurer rights of subrogation against the other party
to the extent rights have been waived by the insured prior to occurrence of
injury or loss. Each party, notwithstanding any provisions of this Lease to the
contrary, hereby waives any rights of recovery against the other for injury or
loss due to hazards covered by such insurance to the extent of the
indemnification received thereunder.
8.10 ALL AGREEMENTS CONTAINED: This Lease contains all of the agreements of
the parties with respect to the subject matter thereof and supersedes all prior
dealings between them with respect to such subject matter.
8.11 BROKERAGE: Each party hereto warrants to the other party hereto that
the warranting party has had no dealings with any broker or agent in connection
with this Lease other than the Broker(s) (if any) listed in Section 1.1 and the
warranting party covenants to defend with counsel approved by the other party,
hold harmless and indemnify the other party from and against any and all cost,
expense or liability for any compensation, commissions and charges claimed by
any other broker or agent with respect to the warranting party's dealings in
connection with this Lease or the negotiation thereof.
8.12 SUBMISSION NOT AN OPTION: The submission of this Lease or a summary of
some or all of its provisions for examination does not constitute a reservation
of or option of the Premises or an offer to lease.
8.13 RELOCATION: Landlord shall have the right, from time to time (but, in
any event, on not more than one occasion during any period of 36 consecutive
calendar months), to relocate Tenant to premises in the Building of
substantially similar size and utility to the Premises. Such right shall be
exercised by notice to Tenant, specifying a date for such relocation not sooner
than thirty (30) days from tile date or such notice (provided, however, that
such relocation date may be extended by Landlord from time to time in order to
accommodate Landlord's construction schedule or Landlord's other reasonable
business purposes). If Landlord shall exercise such right, Landlord shall (i)
improve tile Substitute premises with a Finish substantially identical to the
finish existing in the Premises as of tile date of relocation, (ii) effect such
relocation in a manner (and at a time of day) so as not to interfere
unreasonably with Tenant's ongoing business activities and (iii) reimburse
Tenant for all reasonable costs and expenses incurred by Tenant in connection
with such relocation (including, without limitation, reasonable costs and
expenses incurred by Tenant in installing wiring for data and telecommunications
in the substitute premises).
8.14 COSTS OF ENFORCEMENT: If either party hereto engages in judicial or
quasi-judicial proceedings or otherwise retains counsel, as a result of any
default by the other party hereto or other dispute hereunder, the non-prevailing
party shall reimburse the prevailing party for all reasonable costs, counsel,
and other fees incurred by the prevailing party in connection therewith. The
parties shall request that the trier of fact, in its decision, determine which
is the prevailing party.
8.15 ADDITIONAL PROVISIONS: The additional provisions set forth on Exhibit
D, annexed, are incorporated in this Lease by reference as if fully set forth
herein.
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<PAGE> 30
ARTICLE IX
RIGHTS OF PARTIES HOLDING PRIOR INTERESTS
9.1 LEASE SUBORDINATE: This Lease shall be subject and subordinate to any
mortgage now or hereafter on the Lot or Building or both (which are separately
and together hereinafter in this Article IX referred to as the "mortgaged
premises"), and to each advance made or hereafter to be made under any mortgage,
and to all renewals, modifications, consolidations, replacements and extensions
thereof' and all substitutions therefor. Such subordination shall be conditioned
upon Tenant's receipt of a "nondisturbance agreement" from the holder of the
mortgage to which this Lease is to be subordinated, to the effect that,
notwithstanding any foreclosure of such mortgage (or any similar action)
pursuant to which the holder of such mortgage (or its successor in title)
succeeds to the interest of Landlord hereunder, Tenant shall be permitted to
continue to exercise its rights hereunder, and such holder (or its successor)
shall not terminate this Lease except under the conditions which would have
permitted Landlord to terminate this Lease if Landlord had continued to hold the
landlord's interest hereunder. In confirmation of such subordination (but
subject to delivery of a "non-disturbance agreement' as provided above), Tenant
shall execute and deliver promptly any reasonable certificate that Landlord or
any mortgagee may request. In the event that any mortgagee or its respective
successor in title shall succeed to the interest of Landlord, then, at the
option of such mortgagee or successor, this Lease shall nevertheless continue in
full force and effect and Tenant shall and does hereby agree to attorn to such
mortgagee or successor and to recognize such mortgagee or successor as its
Landlord.
9.2 MODIFICATION, TERMINATION OR CANCELLATION; ADVANCE PAYMENTS OF RENT: No
assignment of this Lease and no agreement to make or accept any surrender,
termination or cancellation of this Lease and no agreement to modify this Lease
so as to reduce the rent, change the Term or otherwise materially change the
rights of Landlord hereunder, or to relieve Tenant of any obligations or
liability hereunder, shall be valid unless consented to by Landlord's mortgagees
of record, if any No Annual Rent or regularly scheduled periodic Additional Rent
shall be paid more than ten (10) days prior to the due date thereof. Payments
made in violation of this provision shall (except to the extent that such
payments are actually received by a mortgagee) be a nullity as against any
mortgagee and Tenant shall be liable for tile amount of such payments to such
mortgagee.
9.3 RIGHTS OF HOLDER OF MORTGAGE TO NOTICE OF DEFAULTS BY LANDLORD AND TO
CURE SAME: No act or failure to act on the part of Landlord which would entitle
Tenant, under the terms of this Lease, or by law, to be relieved of Tenant's
obligations hereunder or to terminate this Lease, shall result in a release or
termination of such obligations or a termination of this Lease unless (i) Tenant
shall have first given written notice of Landlord's act or failure to act to
Landlord's mortgagees of record it any, specifying the act or failure to act on
the part of Landlord which could or would give basis to Tenant's rights, and
(ii) such mortgagees, after receipt of such notice, have failed or refused to
correct or cure tile condition complained of within a reasonable time
thereafter: but nothing contained in this Section 9.3 shall be deemed to impose
any obligation on any such mortgagee(s) to correct or cure and condition.
"Reasonable time", as used herein, means and includes a reasonable time to
obtain
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possession of the mortgaged premises if the mortgagee elects to do so and a
reasonable time to correct or cure the condition if such condition is determined
to exist.
9.4 IMPLEMENTATION OF ARTICLE IX: Tenant agrees on request of Landlord to
execute and deliver from time to time any agreement which may reasonably be
deemed necessary to implement the provisions of this Article IX.
EXECUTED as a sealed instrument in any number of counterparts (each of
which shall be deemed to be an original instrument for all purposes), on the day
and year first above written.
LANDLORD: 313 Washington Street, LLC
By: /s/ Louis J. Grossman
---------------------------
Its Manager
TENANT: MCK Telecommunications, Inc.
By: /s/ Paul K. Zurlo
------------------------------
Its
hereunto duly authorized
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<PAGE> 32
EXHIBIT A
[Plan showing an outline and location of the premises.]
<PAGE> 33
[Plan showing an outline and location of the premises.]
<PAGE> 34
JOHN M. SHESKEY + Associates, Inc.
14 Franklin Street
Quincy MA 02169
617 770 2010
June 20, 1997
Mr. Louis Grossman
The Grossman Companies, Inc.
1266 Furnace Brook Parkway
Quincy, MA 02169
RE: 313 Washington St., Newton, MA
Dear Louis:
As Project Architect for the renovations to 313 Washington Street, John M.
Sheskey + Associates, Inc. has measured the overall building as well as
individual tenant spaces as requested by The Grossman Companies, Inc. The
methods of measurement used are based on the ANSI/BOMA 265.1-1996, Standard
Method for Measuring Floor Area in Office Buildings. The Second Floor space to
be leased to MCK Communications, Inc. has been determined to have a useable
number of 5,905 sf and a rentable number of 6,968 sf. The rentable number is
based on an R/U Factor of 1.18 in accordance with BOMA Standards.
Sincerely,
/s/ Stephanie N. Sedgeley
Stephanie N. Sedgeley
ARCHITECTURE
Kenneth J. Hagan RA
Vice President
Garry W. Gardner RA
Associate
Alan R. States RA
Associate
Douglas A. Berg
Computer Applications
<PAGE> 35
EXHIBIT "C"
313 WASHINGTON STREET
NEWTON, MASSACHUSETTS
LANDLORD SERVICES
I. CLEANING
A. Daily Operations (5 times per week)
1. Office Areas
a. Empty and clean all waste receptacles; wash receptacles.
b. Vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin dispensers.
f. Refill toilet tissue, towel, soap and sanitary napkin
dispensers.
3. Common Areas
a. Wipe down entrance doors and clean glass (interior and
exterior).
b. Vacuum elevators carpets and wipe down doors and walls.
B. Weekly Operations
1. Office Area, Lavatories, Public Areas
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a. Hand-dust and wipe clean, with treated cloths, all horizontal
surfaces which (i) are within normal reach and (ii) have been
cleared by Tenant, including furniture, office equipment,
window sills, door ledges, chair rails, baseboards, convector
tops, etc.
b. Remove finger marks from private entrance doors, light
switches and doorways.
c. Sweep all stairways.
C. Monthly Operations
1. Office and Common Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet partitions.
D. Window Cleaning all exterior windows will be periodically washed on
the inside and outside surfaces.
II. HEATING VENTILATING AND AIR CONDITIONING
A. Heating, ventilating and air conditioning as required to provide
comfortable temperatures for normal business days (except holidays);
Monday through Friday from 8:00 a.m. to 6:00 p.m. and Saturday from
9:00 a.m. to 1:00 a.m.
B. Maintenance on any additional or special conditioning equipment and
the associated operating cost will be at Tenant's expense.
C. In the event of federal, state or local government controls, rules,
regulations or restrictions on the use or consumption of energy or
other utilities during the term of tills lease, including renewals or
extensions thereof, both Tenant and Landlord shall be bound and shall
comply with the same, regardless of any other provisions of this
lease-, in the event regulations or restrictions by Landlord shall
prevail and Landlord shall, without exposure to legal process by
Tenant, have the right to enforce compliance including tile right of
entry into Tenant's space to effect compliance.
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III. WATER
A. Hot water for lavatory purposes and cold water for drinking, lavatory
and toilet purposes.
IV. ELEVATORS
A. Elevators are for the use of all Tenants and the general public for
access to and from all floors of the Building. Programming of
elevators (including but not limited to service elevators) shall be as
Landlord from time to time determines best for the building as a
whole.
V. RELAMPING OF LIGHT FIXTURES
A. Tenant will reimburse Landlord for the cost of lamps, ballasts and
starters and the cost of replacing same within the Premises.
VI. CAFETERIA AND VENDING INSTALLATIONS
A. Any space within the Premises to be used primarily for lunchroom or
cafeteria operation shall be Tenant's responsibility to keep clean and
sanitary, it being understood that Landlord's approval of such use
must be first obtained in writing.
B. Vending machines or refreshment service installation by Tenant must be
approved by Landlord in writing and shall be restricted in use to
employees and business callers. All cleaning necessitated by such
installation shall be at Tenant's expense.
VII. ADDITIONAL SERVICES
A. Any additional services provided by Tenant which are not provided in
like manner or quantities to all Tenants shall be at tile sole cost of
those Tenants receiving such service or services.
B. Landlord shall remove snow from the parking lot and walkways.
C. Landlord shall maintain exterior landscaping.
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EXHIBIT "D"
ADDITIONAL PROVISIONS
8.16 TENANT'S PARKING: In consideration for Tenant's execution of this
Lease (and for so long as this Lease shall remain in full force and effect),
Tenant shall have the right, without charge, to use 14 parking spaces ("Tenant's
Spaces") in the parking garage serving the Building. The use of Tenant's Spaces
shall be subject to the following terms and conditions;
1) The availability of Tenant's Spaces constitutes a right to use
unreserved spaces in the garage and does not constitute a representation or
warranty that any particular space in the garage will be available at any
time.
2) The right to use Tenant's Spaces shall be made available by Tenant only
to its employees, customers and other invitees; and such right shall not be
subleased, assigned or otherwise severed from the tenant's interest under
this Lease.
3) The provisions of Sections 5.6 and 5.7 of this Lease shall apply to
Tenant's exercise of its rights under this Section 8.16.
4) The use of Tenant's Spaces shall be subject to such rules and
regulations as may be adopted by Landlord from time to time for application
generally to par-ties permitted to use the garage.
8.17 LANDLORD'S IMPROVEMENTS TO THE COMMON AREAS: Landlord has indicated to
Tenant that Landlord intends to renovate tile common areas of the Building in
various respects, and Landlord acknowledges that it has been informed by Tenant
that such indication has served as a material inducement to Tenant to enter into
this Lease. Specifically, Landlord has indicated its intention to (i) renovate
the main building lobby (including, if reasonably practicable, installation of a
stairway to tile second floor of the Building), (ii) install a new tenant
directory in the main building lobby, and (iii) paint walls, repair ceilings and
install new carpeting and lighting in the common hallways of the Building.
8.18 TEMPORARY PREMISES: As used herein, the "Temporary Premises" shall
mean the premises shown on Exhibit I annexed, consisting of a rentable area of
1130 square feet. Following the execution of this Lease. Tenant shall have the
right to use and occupy the Temporary Premises. Such use and occupancy shall be
upon all of the terms and conditions set forth in this Lease, except that
Tenant's monthly Annual Rent obligation with respect to the Temporary Premises
shall be $2165.83 per month (and proportionately at such rate for any partial
month), being the product of tile rentable area of the Temporary Premises and
1/12 of $23.00. Promptly upon the occurrence of the Commencement Date, Tenant
shall quit and deliver up to Landlord the Temporary Premises, the Temporary
Premises to be then in the condition which the Premises are required to be in
upon the expiration or earlier termination of this Lease. If Tenant fails to
quit and deliver up the Temporary
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Premises in a timely manner, then, in addition to such other rights and remedies
as may accrue to Landlord. Tenant shall be liable for "holdover rent" with
respect to the Temporary Premises, computed in the manner provided in Section
5.13, above.
If the Commencement Date is a day other than the first day of a calendar
month, then Tenant shall receive a credit toward Tenant's first Annual Rent
payment with respect to the Premises in an amount equal to (i) the Annual Rent
payment made by Tenant with respect to the Temporary Premises, for the calendar
month in which the Commencement Date occurs, multiplied by (ii) a fraction whose
numerator is the number of days between the Commencement Date and the last day
of' the calendar month in which the Commencement Date occurs (inclusive) and
whose denominator is the number of days in the calendar month in which the
Commencement Date occurs.
8.19 TENANT'S OPTION TO EXTEND: So long as this Lease is then in full force
and effect and Tenant is not in default, beyond the expiration of any applicable
grace and/or cure periods, in the performance of its obligations hereunder,
Tenant shall have the option to extend this Lease for one period of sixty (60)
months (the "New Term"), commencing on the first day of the sixty-first full
calendar month following the Commencement Date. If Tenant shall exercise such
option in a timely manner, then this Lease shall automatically be extended for
the New Term, on all of the terms and conditions set forth herein, without the
execution of any further instrument. If, however, Tenant shall not exercise such
option in a timely manner, then Tenant shall have no further right to extend the
Term of this Lease, and this Lease shall expire on the Expiration Date specified
in Section 1.1.
Tenant's option to extend the Term for the New Term shall be exercised (and
Annual Rent for tile New Term shall be determined) in the following manner:
(a) Not later than with eight (8) months prior to the "Expiration
Date", Tenant shall provide Landlord with notice (the
"Intention Notice") of Tenant's potential desire to extend the
Term. If Tenant falls to deliver the Intention Notice on or
before with eight (S) months prior to the Expiration Date,
Tenant shall have no further right to extend the Term.
(b) If Tenant delivers the Intention Notice in a timely manner,
then, not later than seven (7) months prior to the Expiration
Date, Landlord shall notify Tenant, in writing, of' Landlord's
estimate ("Landlord's Estimate") of the fair market rental
value for the Premises with respect to the first twelve (12)
months of the New Term.
(c) Within 15 days after Tenant's receipt of Landlord's Estimate,
Tenant shall inform Landlord if Tenant disputes Landlord's
Estimate. Tenant's failure to notify Landlord prior to the
expiration of such fifteen (15) day period shall be deemed to
constitute a waiver of Tenant's right to dispute Landlord's
Estimate, and, if the Term is extended for the New Term.
Annual Rent for the first twelve (12) months of the New Term
will be deemed to have been established as Landlord's
Estimate.
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<PAGE> 40
(d) If Tenant notifies Landlord of Tenant's desire to dispute
Landlord's Estimate, Landlord and Tenant shall each select an
independent appraiser, who shall attempt to reach agreement as
to the fair market rental value for the Premises for the first
twelve (12) months of the New Term. If they are unable to
agree, the appraisers selected by Tenant and Landlord shall
mutually agree upon a third appraiser, who shall choose either
the value proposed by Tenant's appraiser or the value proposed
by Landlord's appraiser as being the fair market rental value
for the Premises for the first 12 months of the New Term. The
Annual Rent for the first 12 months of the New Term shall be
deemed to be the fair market rental value as determined by the
appraiser(s); provided, however, that the Annual Rent for the
first 12 months of the second New Term shall be not less than
the annual rent payable with respect to the 12 months
immediately preceding the Expiration Date.
Each appraiser shall be a reputable independent MAI real
estate appraiser, with at least 5 years of experience in the
Commonwealth of Massachusetts. The costs and expenses of the
appraiser selected by Landlord shall be borne by Landlord; the
costs and expenses of the appraiser selected by Tenant shall
be borne by Tenant: and tile costs and expenses of the third
appraiser (if any) shall be shared equally by Tenant and
Landlord.
(e) Tenant shall have the right to exercise its option to extend
the Term by notice to Landlord not later than that date (the
"Last Notice Date") which is the later to occur of (i) thirty
(30) days after the date on which the Annual Rent payable with
respect to the first twelve (12) months of the New Term has
been established and (ii) six (6) months prior to the
Expiration Date. If Tenant shall fall to exercise its option
to extend tile Term prior to the Last Notice Date, Tenant
shall have no further right to extend the Term and this Lease
shall expire as of the Expiration Date. However,
notwithstanding such failure by Tenant, Landlord shall have
the option (which option shall be exercised, if at all, by
notice to Tenant not later than thirty (30) days after the
Last Notice Date), if the Last Notice Date is a date which is
later than six (6) months prior to the Expiration Date, to
extend the Term for a period equal to the number of days
between the date which is six (6) months prior to the
Expiration Date and the Last Notice Date, for Annual Rent
which is the Annual Rent in effect immediately prior to the
Expiration Date.
(f) If the Annual Rent payable with respect to the first 12 months
of the New Term has not been established prior to the
Expiration Date, Tenant shall continue to pay Annual Rent on
the basis of the Annual Rent payable with respect to the
twelve (12) months immediately preceding the Expiration Date.
If the Term is subsequently extended, then, at such time as
the new Annual Rent has been established, (i) all future
payments of Annual Rent during the first 12 months of the New
Term shall be in the amount so established and (ii) if the new
Annual Rent is higher than the Annual Rent previously paid by
Tenant, Tenant shall make an appropriate
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<PAGE> 41
additional payment allocable to the period prior to the
establishment of the new Annual Rent, to the end that Tenant
will be required to pay the new Annual Rent with respect to
the entire first 12 months of the New Term.
(g) Annual Rent for the second 12 months of the New Term "I be the
sum of (i) Annual Rent for the first 12 months of the New
Term, plus (ii) S-50 x the rentable floor area of the
Premises. Annual Rent for each succeeding 12 month period
during the New term shall be the sum of (i) Annual Rent for
the immediately preceding 12 month period, plus (ii) $.50 x
the rentable floor area of the Premises.
8.20 REDUCTION OF THE SECURITY DEPOSIT: As used herein, the "Reduction
Date" shall mean that date (if any) on which all of the following conditions
have been satisfied:
(i) Tenant has, throughout the Term of this Lease, satisfied in a
timely manner all of its monetary obligations hereunder, as well as all
other material obligations hereunder;
(ii) Tenant has completed an "Initial Public Offering",
(iii) Tenant has a net worth of at least $5,000,000; and
(iv) For each of four consecutive fiscal quarters following the
completion of its Initial Public Offering, Tenant's activities have
resulted in a profit (as determined in accordance with generally
accepted accounting principles, consistently applied).
At such time (if any) as the Reduction Date has occurred, Tenant shall so
notify Landlord. (Such notice shall be accompanied by such materials as may
reasonably be required in order to permit Landlord to confirm that, in fact, the
Reduction Date has occurred.) Upon Landlord's receipt of such notice (and
Landlord's confirmation that, in fact, the Reduction Date has occurred), the
security deposit hereunder shall be reduced by $40,066.00 (i.e. 50% of the
security deposit specified in Section 1.1), and the amount of such reduction
shall promptly be reimbursed to Tenant by Landlord
8.21 CREATION OF A RIGHT OF FIRST OFFER, IN FAVOR OF TENANT: As used
herein, a "Junior Right of First Offer" shall mean a right of first offer
granted by Landlord while Tenant occupies the Affected Floor with respect to any
portion of that floor of the Building on which the Premises are situated from
time to time (the "Affected Floor"), in favor of any other tenant of the
Building. If Landlord grants any Junior Right of First Offer, Landlord shall so
notify Tenant. (Such notice shall be accompanied by a copy of the Junior Right
of First Offer.) Upon the granting of a Junior Right of First Offer, an
identical night of first offer ("Tenant's Right of First Offer"), having
priority over the Junior Right of First Offer, shall deemed to have been created
in favor of Tenant. Thereafter, if, while Tenant still occupies the Affected
Floor, a condition arises which would permit the holder of the Junior Right of
First Offer to exercise the Junior Right of First Offer, Tenant shall also have
the right to exercise Tenant's Right of First Offer; and the holder of the
Junior Right of First Offer
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<PAGE> 42
shall not be permitted to exercise the Junior Right of First Offer unless Tenant
either waives Tenant's Right of First Offer or fails to exercise Tenant's Right
of First Offer in a timely manner. If Tenant waives (or fails to exercise in a
timely manner) Tenant's Right of First Offer, then Tenant's Right of First Offer
shall be deemed to have been terminated, Tenant shall have no further right of
first offer with respect to any portion of the Affected Floor and this Section
8.21 shall automatically be deemed to have been deleted from this Lease in its
entirety.
8.22 TENANT'S CONTRIBUTION TOWARD THE COST OF LANDLORD'S WORK: Upon the
substantial completion of Landlord's Work, Landlord shall submit to Tenant a
statement, in reasonable detail, of the costs and expenses incurred by Landlord
in connection with Landlord's Work. Within fifteen (15) days following Tenant's
receipt of such statement, Tenant shall deliver to Landlord a payment, as a
contribution toward such costs and expenses, in the amount of $52,260.00 (i.e.
$7.50 x the rentable floor area of the Premises).
39
<PAGE> 43
EXHIBIT "E"
313 WASHINGTON STREET
BUILDING STANDARD TENANT IMPROVEMENT
Floor Coverings: 30 ounce carpet shall be provided throughout the tenant
space. Material to be selected by tenant from building
standard samples.
Partitions: a. Partitions will be 5/8" metal studs 16" o.c. with one
layer of 1/2" gypsum wallboard on each side.
Partitions will extend from floor to 2" above
suspended acoustic ceiling. Demising wall partitions
will be constructed with 3-5/8" metal studs with one
layer of 5/8" fire code gypsum wallboard on each side
insulated with 3-1/2" fiberglass batt insulation and
shaft extend to underside of the floor above. One
half of tenant's demising wall will be credited
against the interior partition allowance.
b. All partitions will have a vinyl base 4" high, color
to be selected from building standard samples.
c. interior partition allowance shall be one lineal foot
of partition for every 15 feet of net usable floor
space.
Door: a. Entrance Doors - Each tenant's principal entry door
will be a 3'-0' x 7'-8" x 1-3/4" solid core oak door
entry-way with glass insert. `Me door will have a
natural sealed finish and a 1'-6" wide full height
sidelight.
b. Interior Doors - Each tenant shall be provided with
one interior door per 25 lineal feet of interior
partition allowance. The interior door shall consist
of a 3'-0" x 6'-8" x 1-3/4" wood solid core oak door
in a natural sealed finish. The frame shall be
pressed metal and will receive two coats of enamel
paint from building standard samples. Hardware will
include one lever handle passage set and door
doorstop.
c. Egress Doors - The tenant egress door unit shall
consist of a 3'-0" x 7'-8" x 1-3/4" solid core oak
door and frame The door will have a naturally sealed
finish Hardware "I include one lever handle mortised
lock set, closer and doorstop in a brass finish.
Allowance of one per tenant space in excess of 2,000
usable square feet.
Ceiling: A simulated 2'x 2' tegular, fissured acoustical tile in a
2'x 4'grid system. Acoustical ceilings shall be installed
at a height of approximately 7'-6"
Lighting: 2'x 4'parabolic fixtures.
<PAGE> 44
Page 2.
EXHIBIT "E"
Window Treatment: Horizontal blinds will be provided on all exterior
windows.
Wall Finishes: All interior partitions will receive one coat of primer
and two coats of latex wall paint with an eggshell finish.
Color selection will be from tenant standard selections
with not more than one color per room.
Electrical a. Outlets - One duplex outlet will be provided for each
100 square feet of usable area.
b. Switches - One single pole quiet wall switch for
every 350 square feet of usable area.
Telephone Outlets: One telephone outlet box and conduit to top of interior
partitions will be provided for every 275 square feet of
usable area. Tenant is responsible for all wiring, jacks
and telephone equipment.
Heating, Ventilating
& Air Conditioning: Landlord shall provide heating, air conditioning and
ventilation in good working order and condition. The
system shall include all distribution ductwork, diffusers,
return air grilles and thermostatic control for a normal
office layout.
Sprinklers: Landlord will provide a sprinkler system throughout the
building in accordance with current fire safety codes.
Tenant Sign &
Directory: Landlord will provide one tenant entry sign. Tenants will
be provided with their name on the Building Directory in
the lobby area.
<PAGE> 45
EXHIBIT F
[Plan showing an outline and location of the temporary premises.]
<PAGE> 46
EXHIBIT G
The HVAC system shall maintain 72 degrees DB and 50% or less relative humidity
in summer and 75 degrees DB in winter under current ASHRAE outside design
conditions for the locality (under 1% occurrence column).
<PAGE> 47
AMENDMENT TO LEASE
Reference is made to the following facts, documents and definitions:
A. Landlord: 313 Washington Street, LLC
B. Tenant: MCK Telecommunications, Inc.
C. Lease: That certain Lease, dated as of June 2, 1997, by and
between Landlord as Landlord and Tenant as Tenant.
Terms which are used herein but which are not
otherwise defined herein shall have meanings ascribed
to such terms in the Lease.
D. Original Premises: The premises demised to Tenant pursuant to the lease,
consisting of 6,968 rentable square feet of space in
the Building.
E. New Office Space: Certain premises in the Building as shown on Exhibit
A-1, annexed, consisting of 1,055 rentable square
feet of space in the Building.
F. Storage Space: Certain premises in the Building as shown on Exhibit
A-1, annexed, consisting of 42 rentable square feet
of space in the Building.
G. Effective date: The date on which the new Office Space and the
Storage Space are delivered to Tenant by Landlord. At
such time as the effective Date has occurred,
Landlord and Tenant shall enter into a written
instrument, confirming the exact date of the
Effective Date.
H. Landlord and Tenant wish to amend the Lease, so as to add the New Office
Space and the Storage Space to the premises demised under the Lease.
Now therefore, for one ($1.00) dollar and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by the
parties hereto, Landlord and Tenant agree that the Lease shall be (and it hereby
is) amended in the following respects:
1. Promptly following the execution of this Amendment to Lease, Landlord shall
deliver to Tenant the New Office Space and the Storage Space. Thereafter,
Tenant's rights and obligations with respect to the New Office Space and the
Storage Space shall be governed by all of the terms and conditions set forth in
the Lease (as amended hereby), all as if the Premises as originally described in
the Lease had consisted of the Original Premises, the New Office Space and the
Storage Space.
1
<PAGE> 48
2. Tenant expressly agrees that it will accept possession of the New Office
Space and the Storage Space in a totally "as is" condition, and that Landlord
shall have no obligation to alter, renovate or improve the New Office Space or
the Storage Space in any respect (provided, however, that the Storage Space
shall be delivered to Tenant in "broom-clean" condition).
3. The New Office Space shall be used solely for general office purposes, and
the Storage Space shall be used solely for storage purposes.
4. From and after the Effective Date, the Rentable Floor Area of Tenant's
Space shall be deemed to be 8,023 square feet (i.e., the sum of the rentable
area of the Original Premises and the rentable area of the New Office Space),
Tenant's Share of Building Operation Costs and Real Estate Taxes shall be deemed
to be 10.49% (i.e., the percentage obtained by dividing the sum of the rentable
area of the Original Premises and the rentable area of the New Office Space by
the Rentable Floor Area of the Building) and Tenant's Share of Office Operation
Costs shall be deemed to be 12.13% (i.e., the percentage obtained by dividing
the sum of the rentable area of the Original Premises and the rentable area of
the New Office Space by the Rentable Floor Area of the Office Areas).
5. From and after the Effective Date, Annual Rent shall be payable in
accordance with the following schedule:
a. For the period commencing on the Effective Date and ending on August
31, 1998 - $186,449.00 per annum (i.e., $15,537.42 per month, and
proportionately at such rate for any partial calendar month),
consisting of $186,029.00 per annum for the Original Premises and the
New Office Space + $10.00 per rentable square foot per annum for the
Storage Space.
b. For the period commencing on September 1, 1998 and ending on August 31,
1999 - $190,460.50 per annum (i.e., $15,871,71 per month), consisting
of 190,040.50 per annum for the Original Premises and the New Office
Space + $10.00 per rentable square foot per annum for the Storage
Space.
c. For the period commencing on September 1, 1999 and ending on August 31,
2000 - 194,493.00 per annum (i.e., $16,207.75 per month), consisting of
194,052.00 per annum for the Original Premises and the New Office Space
+ $10.50 per rentable square foot per annum for the Storage Space.
d. For the period commencing on September 1, 2000 and ending on August 31,
2001 - 202,537.00 per annum (i.e., $16,878.03 per month), consisting of
$202,075.00 per annum for the Original Premises and the New Office
Space + $11.00 per rentable square foot per annum for the Storage
Space.
2
<PAGE> 49
e. For the period commencing on September 1, 2001 and ending on August 31,
2002 - $206,569.50 per annum (i.e., $17,214.13 per month), consisting
of $206,086.50 per rentable square foot per annum for the Original
Premises and the New Office Space + $11.50 per rentable square foot per
annum for the Storage Space.
6. Section 8.16 of Exhibit "D" to the Lease (entitled "Tenant's Parking" is
amended so as to provide that Tenant's Spaces shall consist of 16 parking spaces
(and not 14 parking spaces, as heretofore provided in the Lease).
7. Except as expressly set fourth herein, the Lease shall be and remain in
full force and effect, in accordance with its terms.
EXECUTED under seal, as of April 22, 1998.
313 WASHINGTON STREET, LLC
By: /s/ Louis J. Grossman
--------------------------------------
Louis J. Grossman
Its Manager
MCK TELECOMMUNICATIONS, INC.
By: /s/ Paul K. Zurlo
--------------------------------------
Its CFO
hereunto duly authorized
3
<PAGE> 50
EXHIBIT A-1
MCK EXPANSION
SPACE (OFFICE & STORAGE)
[Plan showing an outline and location of the premises.]
<PAGE> 51
EXHIBIT A-1
MCK EXPANSION
SPACE (OFFICE & STORAGE)
[Plan showing an outline and location of the premises.]
<PAGE> 52
SECOND AMENDMENT TO LEASE
Reference is made to the following facts, documents and definitions:
A. Landlord: - 313 Washington Street, LLC
B. Tenant - MCK Telecommunications, Inc.
C. Lease - That certain Lease, dated as of June 2, 1997, by and between
Landlord as Landlord and Tenant as Tenant, as amended by that certain Amendment
to Lease Dated April 22, 1998. Terms which are used herein, but which are not
otherwise defined herein shall have the meanings ascribed to such terms in the
Lease.
D. Second Storage Space - Certain premises in the Building as shown on
Exhibit A-2, annexed, consisting of fifty (50) rentable square feet of space in
the Building.
E. Effective Date - The date on which the Second Storage Space is delivered
to Tenant by Landlord. At such time as the Effective Date has occurred, Landlord
and Tenant shall enter into a written instrument, confirming the exact date of
the Effective Date.
F. Landlord and Tenant wish to amend the Lease, so as to add the Second
Storage Space to the premises demised under the Lease.
Now therefore, for $1.00 and other good and valuable consideration, the receipt
and sufficiency of which are acknowledged by the parties hereto, Landlord and
Tenant agree that the Lease shall be (and it hereby is) amended in the following
respects:
1. Promptly following the execution of this Second Amendment to Lease,
Landlord shall deliver to Tenant the Second Storage Space. From and after the
Effective Date, Tenant's rights and obligations with respect to the Second
Storage Space shall be governed by all of the terms and conditions set forth in
the Lease (as amended hereby), all as if the Premises as originally described in
the Lease had included the Second Storage Space.
2. Tenant expressly agrees that it will accept possession of the Second
Storage space in a totally "as is" condition, and that Landlord shall have no
obligation to alter, renovate or improve the Second Storage Space in any respect
(provided, however, that the Second Storage Space shall be delivered to Tenant
in "broom clean" condition).
3. The Second Storage Space shall be used solely for storage purposes.
4. Notwithstanding the inclusion of the Second Storage Space in the
Premises under the Lease, the Rentable Floor Area of Tenant's Space, Tenant's
share of Building Operation Costs and Real Estate Taxes and Tenant's Share of
Office Operation Costs shall not be altered.
1
<PAGE> 53
5. From and after the Effective Date, Annual Rent shall be increased in
accordance with the following schedule:
(a) For the period commencing on the Effective Date and ending on
august 31, 1999 - $420 (i.e., $10.00 per rentable square foot per annum
for the Second Storage Space).
(b) For the period commencing on September 1, 1999 and ending on August
31, 2000 - $441 (i.e., $10.50 per rentable square foot per annum for
the Second Storage Space).
(c) For the period commencing on September 1, 2000 and ending on august
31, 20001 - $462 (i.e., $11.00 per rentable square foot per annum for
the Second Storage Space).
(d) For the period commencing on September 1, 2001 and ending on August
31, 2002 - $483 (i.e., $11.50 per rentable square foot per annum for
the Second Storage Space).
6. Except as expressly set forth herein, the Lease shall be and remain in
full force and effect, in accordance with its terms.
Executed under seal, as of June 30, 1998
313 Washington Street, LLC
By: /s/ Louis J. Grossman
-----------------------------------
Louis J. Grossman, its Manager
MCK Telecommunications, Inc.
By: /s/ Paul K. Zurlo
-----------------------------------
Its CFO
hereunto duly authorized
2
<PAGE> 54
EXHIBIT A-2
MCK STORAGE SPACE
[Plan showing an outline and location of the premises.]
<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.15
Agreement No. WR71980064
Sheet 1 of 32
MCK Communications, Inc.
313 Washington Street
Newton, MA 02158
This Agreement is made by and between Lucent Technologies Inc. ("Company")
having an office at 211 Mt. Airy Road, Basking Ridge, NJ 07920 and MCK
Communications, Inc. ("Supplier") having an office at 313 Washington Street,
Newton, MA 02158. Company agrees to purchase and Supplier agrees to sell in
accordance with the terms and conditions stated in this Agreement and any
attachments to this Agreement.
WHEREAS, Company wishes to purchase products of Supplier's (design and)
manufacture for resale to Company's customers, and
WHEREAS, Supplier desires to sell such materials to Company for resale to
Company's customers,
THEREFORE, the parties agree as follows
1. AGREEMENT EFFECTIVE PERIOD
The term of this Agreement shall commence on April 30, 1999 and shall, except as
otherwise provided in this Agreement, continue in effect thereafter until April
30, 2002.
<PAGE> 2
Agreement No. WR71980064
Sheet 2 of 31
2. MATERIAL
"MATERIAL" as used in this Agreement shall mean Supplier's DCP-based
Extender product line as listed in APPENDIX A, attached and made a part of
this Agreement. Such MATERIAL is hereby offered for sale by Supplier and
may be purchased by Company in accordance with the terms, conditions and
specifications stated in this Agreement. This Agreement is a non-commitment
agreement and MATERIAL shall be furnished by Supplier on an as-ordered
basis. "Specification(s)" as used in this Agreement shall mean all of the
specifications made part of this Agreement.
3. OPTION TO EXTEND
Company shall have the right to extend the period specified in the
section "AGREEMENT EFFECTIVE" for up to twelve (12) months by giving
Supplier at least thirty (30) business days prior written notice.
Within ten (10) business days of the date of Company's notice to
extend the period, Supplier shall notify Company in writing whether
Supplier proposes to revise the price(s) under this Agreement. If the
parties fail to agree on the revised price(s) within twenty (20) business
days after the date of Supplier's notice, Company's notice of extension
shall be considered withdrawn and prices for outstanding orders or orders
placed during the term of this Agreement shall not be revised.
4. PRICE
Prices and discounts shall be as shown in APPENDIX A. Prices as listed
in APPENDIX A shall remain in effect during the term of this Agreement.
5. [***]
6. [***]
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 3
Agreement No. WR71980064
Sheet 3 of 31
[***]
7. TERMS OF PAYMENT
Net thirty (30) business days from the date of delivery of the
MATERIAL to Company or receipt of the applicable invoice therefor by
Company whichever occurs later.
8. FORECASTS
Company shall provide Supplier with a [***] month non-binding
forecast submitted to Supplier by the [***] business day of each calendar
month. Such forecast shall be used by Supplier for planning purposes only
and shall not be deemed a commitment by Company to purchase the MATERIAL
shown in the forecast.
9. FOB
The MATERIAL shall be shipped FOB Supplier's location (or such other
Supplier's location as may be designated by Supplier). Supplier shall
notify Company's transportation representative on (303) 538-8278 or (303)
538-2907 when MATERIAL is ready for shipment. Company shall select the
carrier and arrange at Company's expense for the transportation of the
MATERIAL.
10. FREIGHT CLASSIFICATION
MATERIAL purchased under this Agreement shall be shipped to Company
subject to freight charges appropriate for goods classified as DCP-based
Extenders and D/A Converters. Supplier shall indicate on the bill of lading
that Company's contract rates apply.
11. NON-EXCLUSIVE MARKET RIGHTS
This Agreement neither grants to Supplier an exclusive right or
privilege to sell to Company any or all products of the type described in
the MATERIAL section which Company may require, nor requires the purchase
of any MATERIAL or other products from Supplier by Company. Therefore,
Company may contract with other manufacturers and suppliers for the
procurement of comparable products. In addition, Company shall, at its sole
discretion, decide the extent to which Company will market advertise,
promote, support or otherwise assist in further offerings of the MATERIAL.
Purchases by Company under this Agreement shall neither restrict the
right of Company to cease purchasing nor require Company to continue any
level of such purchases.
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 4
Agreement No. WR71980064
Sheet 4 of 31
12. SPECIFICATIONS OR DRAWINGS
Supplier's standard commercial Technical Specifications are included
by reference and further described in APPENDIX B attached hereto and made a
part of this Agreement.
In accordance with the notification requirements outlined in Section
"PRODUCT CHANGE NOTICES", Supplier shall provide Company with at least
[***] business days prior written notice of any change proposed to be made
by Supplier in the MATERIAL furnished pursuant to said Technical
Specification under this Agreement.
If Company, in its sole discretion, does not agree to the change
proposed by Supplier, then in addition to all other rights and remedies at
law or equity or otherwise, and without any cost to or liability or
obligation of Company, Company shall have the right to terminate this
Agreement and to terminate any or all purchase orders for MATERIAL affected
by such change.
Supplier shall continue to supply MATERIAL to Company pursuant to the
Technical Specification for the term of the Agreement. If Supplier is
unable to continue to thus supply or discontinues manufacture of MATERIAL,
Company shall be entitled to [***] advance notice.
13. ASSIGNMENT
Supplier shall not assign any right or interest under this Agreement
(excepting solely for moneys due or to become due) without the prior
written consent of Company. Supplier shall be responsible to Company for
all Work performed by Supplier's subcontractor(s) at any tier.
14. BANKRUPTCY AND TERMINATION FOR FINANCIAL INSECURITY
Either party may terminate this Agreement by notice in writing:
(i) if the other party makes an assignment for the benefit of
creditors (other than solely an assignment of monies due); or:
(ii) if the other party evidences an inability to pay debts as they
become due, unless adequate assurance of such ability to pay is
provided within thirty (30) days of such notice.
If a proceeding is commenced under any provision of the United States
Bankruptcy Code, voluntary or involuntary, by or against either party, and
this Agreement has not been terminated, the non-debtor party may file a
request with the bankruptcy court to have the court set a date within sixty
(60) days after the commencement of the case, by which the debtor party
will assume or reject this Agreement, and the debtor party shall cooperate
and
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 5
Agreement No. WR71980064
Sheet 5 of 31
take whatever steps necessary to assume or reject the Agreement by such
date.
15. CFC PACKAGING
Supplier warrants that all packaging materials furnished under this
Agreement and all packaging associated with MATERIAL furnished under this
Agreement were not manufactured using and do not contain
chlorofluorocarbons. "Packaging" means all bags, wrapping, boxes, cartons
and any other packing materials used for packaging. Supplier shall
indemnify and hold Company harmless for any liability, fine or penalty
incurred by Company to any third party or governmental agency arising out
of Company's good faith reliance upon said warranty.
16. CHOICE OF LAW
This Agreement and all transactions under it shall be governed by the
laws of the State of New Jersey excluding its choice of laws rules and
excluding the Convention for the International Sale of Goods. Supplier
agrees to submit to the jurisdiction of any court wherein an action is
commenced against Company based on a claim for which Supplier has agreed to
indemnify Company under this Agreement.
17. COMPLIANCE WITH LAWS
Supplier and all persons furnished by Supplier shall comply at their
own expense with all applicable laws, ordinances, regulations and codes,
including the identification and procurement of required permits,
certificates, licenses, insurance, approvals and inspections in performance
under this Agreement.
18. CONTINUING AVAILABILITY
Supplier shall offer for sale to Company, during the term of this
Agreement and for at least [***] after the expiration of this Agreement,
MATERIAL conforming to the Technical Specifications and other
Specifications set forth in this Agreement. Supplier further shall offer
for sale to Company, during the term of this Agreement and until [***]
after the expiration of this Agreement, maintenance, replacement, and
repair parts ("Parts") which are functionally equivalent and identical in
form and fit for the MATERIAL covered by this Agreement. The price for the
MATERIAL and Parts shall be the price set forth in Supplier's then current
agreement with Company for said MATERIAL or Parts or, if no such agreement
exists, at a price agreed upon by Company and Supplier. If the parties fail
to agree on a price, the price shall be a reasonably competitive price for
said MATERIAL or Parts at the time for delivery. The MATERIAL and Parts
shall be warranted as set forth in the "WARRANTY" section of this
Agreement. The term "Parts" is included in the term "MATERIAL."
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 6
Agreement No. WR71980064
Sheet 6 of 31
In the event Supplier fails to supply such MATERIAL or Parts and
Supplier is unable to obtain another source of supply for Company, then
such failure or inability shall be considered noncompliance with this
section and Supplier shall, without obligation of or charge to Company,
provide Company with the technical information or any other rights required
so that Company can provide technical support and maintenance to its
customers.
The technical information includes, by example; and not by way of
limitation: (a) manufacturing drawings and specifications of raw materials
and components comprising such MATERIAL or Parts, (b) manufacturing
drawings and specifications covering special tooling and the operation
thereof (c) a detailed list of all commercially available MATERIAL or Parts
and components purchased by Supplier on the open market disclosing the
MATERIAL or Part number, name and location of the Supplier and price lists
for the purchase thereof, and (d) one complete copy of the executable code
used in the preparation of any software licensed or otherwise acquired by
Company from Supplier under this Agreement.
19. DEFAULT
If either party shall be in breach or default of any of the terms,
conditions or covenants of this Agreement or of any purchase order, and if
such breach or default shall continue for a period of ten (10) business
days after the giving of written notice to other party thereof, then, in
addition to all other rights and remedies which the non-defaulting party
may have at law or equity or otherwise, the non-defaulting party shall have
the right to cancel this Agreement and/or any purchase orders placed
without any charge to or obligation or liability of non-defaulting party.
20. ELECTRONIC DATA INTERCHANGE
Supplier agrees, if requested by Company, to implement Electronic Data
Interchange (EDI) ordering and payment arrangements as an electronic means
of trading business document with Company. The electronic business
documents include purchase orders, acknowledgments, purchase order changes,
ship notices, invoices, remittance advice, electronic funds transfer (EFT)
or such purchasing communications as may be requested by Company for
transaction under this Agreement. Supplier shall at its sole expense,
obtain, make fully operational and maintain all equipment, software and
other materials set forth in Company's EDI Planning Guide. Supplier shall
also execute an Electronic Purchasing Agreement with Company at the time of
execution of this Agreement.
21. EPIDEMIC CONDITION
If during the term of this Agreement and for one (1) year after the
last shipment date of MATERIAL under this Agreement Company notifies
Supplier that MATERIAL shows evidence of an "Epidemic Condition,"
<PAGE> 7
Agreement No. WR71980064
Sheet 7 of 31
Supplier shall prepare and propose a Corrective Action Plan ("CAP") with
respect to such MATERIAL within five (5) working days of such notification,
addressing implementation and procedure milestones for remedying such
Epidemic Condition(s). An extension of this time-frame is permissible upon
mutual written agreement of the parties.
Upon notification of the Epidemic Condition to Supplier, Company shall
have the right to postpone all or part of the shipments of unshipped
MATERIAL, by giving written notice of such postponement to Supplier,
pending correction of the Epidemic Condition. Such postponement shall
temporarily relieve Supplier of its shipment liability and Company of its
shipment acceptance liability. Should Supplier not agree to the existence
of an Epidemic Condition or should Company not agree to the CAP, then
Company shall have the right to suspend all or part of its unshipped orders
without liability to Company until such time as a mutually acceptable
solution is reached.
An Epidemic Condition will be considered to exist when one or more of
the following conditions occur:
(1) Failure reports or statistical samplings show that MATERIAL
shipped contain a potential safety hazard (such as personal injury or
death, fire, explosion, toxic emissions, etc.), or exhibit a highly
objectionable symptom (such as emissions of smoke, loud noises, deformation
of housing) or other disconcerting symptoms of this type.
(2) Reliability plots of relevant data indicate that the MATERIAL has
actual Mean Time Between Failures (MTBF) of less than 80% of the MTBF
stipulated in the Technical Specification. The MTBF parameter of MATERIAL
is defined as the total operating or power-on time of any population under
observation ("T"), in hours, divided by the total number of critical
failures ("n") that have occurred during the observed period. A critical
failure is defined as a failure to operate per the requirements of the
Technical Specification. The total operating time of a population is the
summation of operating time of individual units in that population. MTBF is
expressed as MTBF = T/n. An Epidemic Condition shall exist when data
derived from populations being tracked confirms the condition with 80%
confidence. (3) MATERIAL Dead on Arrival (DOA) failures exceed the Epidemic
DOA failure rate which is defined as 1.2 x DOA specified in the section of
this Agreement entitled PRODUCT CONFORMANCE REVIEW.
Only major functional and visual/mechanical/appearance defects are
considered for determining Epidemic Condition. MATERIAL could be either
sampled or, a Company's option, 100% audited at Company warehouses,
<PAGE> 8
Agreement No. WR71980064
Sheet 8 of 31
factories or Company's customers' locations. If MATERIAL is sampled, the
data must have 80% or better statistical confidence.
For the purpose of this Agreement, functional DOA shall be defined as
any MATERIAL that during the test, installation or upon its first use fails
to operate as expected or specified. Visual/mechanical/appearance DOA is
defined as any MATERIAL containing one or more major defects that would
make the MATERIAL unfit for use or installation.
An Epidemic Condition shall not include failures due to customer
misapplication, utilization of parts not approved by Supplier, or chain
failures induced by internally or externally integrated subassemblies.
In the event that Supplier develops a remedy for the defect(s) that
caused the Epidemic Condition and Company agrees in writing that the remedy
is acceptable Supplier shall:
(a) Incorporate the remedy in the affected MATERIAL in accordance with
Company's instructions.
(b) Ship all subsequent MATERIAL incorporating the required modification
correcting the defect(s) at no additional charge to Company; and
(c) Repair and/or replace MATERIAL that caused the Epidemic Condition. In
the event that Company incurs costs due to such repair and/or replacement,
including but not limited to labor and shipping costs, Supplier shall
reimburse Company for such costs. Supplier shall bear risk of in transit
loss and damage for such repaired and/or replaced MATERIAL.
Supplier and Company shall mutually agree in writing as to the
remedy's implementation schedule. Supplier shall use its best efforts to
implement the remedy in accordance with the agreed-upon schedule.
If Supplier is unable to develop a mutually agreeable remedy, or does
not adequately take into account the business interests of Company, as
reasonably agreed by the parties, Company may (1) [***] (3) terminate
this Agreement without further liability.
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 9
Agreement No. WR71980064
Sheet 9 of 31
22. EXPORT CONTROL
Supplier will not use, distribute, transfer or transmit any products,
software or technical information (even if incorporated into other
products) provided under this Agreement except in compliance with U.S.
export laws and regulations (the "Export Laws"). Supplier will not,
directly or indirectly, export or re-export the following items to any
country which is in the then current list of prohibited countries specified
in the applicable Export Laws: (a) software or technical data disclosed or
provided to Supplier by Company or Company's subsidiaries or affiliates; or
(b) the direct product of such software or technical data. Supplier agrees
to promptly inform Company in writing of any written authorization issued
by the U.S. Department of Commerce office of export licensing to export or
re-export any such items referenced in (a) or (b). The obligations stated
above in this clause will survive the expiration, cancellation or
termination of this Agreement or any other related agreement.
23. FORCE MAJEURE
Neither party shall be held responsible for any delay or failure in
performance of any part of this Agreement to the extent such delay or
failure is caused by fire, flood, strike, civil, governmental, or military
authority, act of God, or other similar causes beyond its control and
without the fault or negligence of the delayed or non performing party or
its subcontractors. Supplier's liability for loss or damage to Company's
MATERIAL in Supplier's possession or control shall not be modified by this
section. When a party's delay or nonperformance continues for a period of
at least fifteen (15) days, the other party may terminate, at no charge,
this Agreement or an order under the Agreement.
24. GOVERNMENT CONTRACT PROVISIONS
The following provisions regarding equal opportunity, and all
applicable laws, rules, regulations and executive orders specifically
related thereto, including applicable provisions and sections from the
Federal Acquisition Regulation and all supplements thereto are incorporated
in this Agreement as they apply to work performed under specific U.S.
Government contracts: 41 CFR 60-1.4, Equal Opportunity; 41 CFR 60-1.7,
Reports and Other Required Information; 41 CFR 60-1.8, Segregated
Facilities; 41 CFR 60-250.4, Affirmative Action For Disabled Veterans and
Veterans of the Vietnam Era (if in excess of $10,000); and 41 CFR 60-741.4,
Affirmative Action for Disabled Workers (if in excess of $2,500), wherein
the terms "contractor" and "subcontractor" shall mean "Supplier". In
addition, orders placed under this Agreement containing a notation that the
material or services are intended for use under Government contracts shall
be subject to such other Government provisions printed, typed or written
thereon, or on the reverse side thereof, or in attachments thereto.
<PAGE> 10
Agreement No. WR71980064
Sheet 10 of 31
25. HEAVY METALS IN PACKAGING
Supplier warrants to Company that no lead, cadmium, mercury or
hexavalent chromium have been intentionally added to any packaging or
packaging component (as defined under applicable laws) to be provided to
Company under this Agreement and that packaging materials were not
manufactured using and do not contain chlorofluorocarbons. Supplier further
warrants to Company that the sum of the concentration levels of lead,
cadmium, mercury and hexavalent chromium in the package or packaging
component provided to Company under this Agreement does not exceed 100
parts per million. Upon request, Supplier shall provide to Company
Certificates of Compliance certifying that the packaging and/or packaging
components provided under this Agreement are in compliance with the
requirements set forth above in this section.
26. IDENTIFICATION
Supplier shall not, without Company's prior written consent, engage in
publicity related to this Agreement, or make public use of any
Identification in any circumstances related to this Agreement.
"Identification" means any semblance of any trade name, trademark, service
mark, insignia, symbol, logo, or any other designation, or drawing of
Company or its affiliates. Supplier shall remove or obliterate any
Identification prior to any use or disposition of any MATERIAL rejected or
not purchased by Company.
27. IMPLEADER
Supplier shall not implead or bring an action against Company based on
any claim by any person for personal injury or death to an employee of
Company for which Company has previously paid or is obligated to pay
worker's compensation benefits to such employee or claimant and for which
such employee or claimant could not otherwise bring legal action against
Company.
28. INDEMNITY
At Company's request, Supplier agrees to indemnify, defend and hold
harmless Company, its affiliates, customers, employees, successors and
assigns (all referred to as "Company") from and against any losses,
damages, claims, fines, penalties and expenses (including reasonable
attorney's fees) that arise out of or result from: (i) injuries or death to
persons or damage to property, including theft, in any way arising out of
or caused or alleged to have been caused by the Work or services performed
by, or material provided by Supplier or persons furnished by Supplier; (ii)
assertions under Workers' Compensation or similar acts made by persons
furnished by Supplier; or (iii) any failure of Supplier to perform its
obligations under this Agreement.
<PAGE> 11
Agreement No. WR71980064
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29. INFRINGEMENT
Supplier shall indemnify and save harmless Company, its affiliates and
their customers, officers, directors, employees (all referred to in this
section as "Company") from and against any losses, damages, liabilities,
fines, penalties, and expenses (including reasonable attorneys' fees) that
arise out of or result from any and all claims (i) of infringement of any
patent, copyright, trademark or trade secret right, or other intellectual
property right, private right, or any other proprietary or personal
interest, and (ii) related by circumstances to the existence of this
Agreement or performance under or in contemplation of it (an Infringement
Claim). If the Infringement Claim arises solely from Supplier's adherence
to Company's written instructions regarding services or tangible or
intangible goods provided by Supplier (Items) and if the Items are not (i)
commercial items available on the open market or the same as such items, or
(ii) items of Supplier's designated origin, design or selection, Company
shall indemnify Supplier. Company or Supplier (at Company's request) shall
defend or settle, at its own expense any demand, action or suit on any
Infringement Claim for which it is indemnitor under the preceding
provisions and each shall timely notify the other of any assertion against
it or any Infringement Claim and shall cooperate in good faith with the
other to facilitate the defense of any such Claim.
30. INSIGNIA
Upon Company's written request, "Insignia", including certain
trademarks, trade names, insignia, symbols, decorative designs or packaging
designs of Company, or evidences of Company's inspection will be properly
affixed by Supplier to the MATERIAL furnished or its packaging. Such
Insignia will not be affixed, used or otherwise displayed on the MATERIAL
furnished or in connection therewith without written approval by Company.
The manner in which such Insignia will be affixed must be approved in
writing by Company in accordance with standards established by Company.
Company shall retain all right, title and interest in any and all packaging
designs, finished artwork and separations furnished to Supplier. This
section does not reduce or modify Supplier's obligations under the
"IDENTIFICATION" and "USE OF INFORMATION" section.
31. INSURANCE
Supplier shall maintain and cause Supplier's subcontractors to
maintain during the term of this Agreement: (i) Workers' Compensation
insurance as prescribed by the law of the state or nation in which the Work
is performed; (ii) employer's liability insurance with limits of at least
$500,000 for each occurrence; (iii) automobile liability insurance if the
use of motor vehicles is required, with limits of at least $1,000,000
combined single limit for bodily injury and property damage for each
occurrence; (iv) Commercial General Liability ("CGL") insurance, ISO 1988
or later occurrence form of insurance including Blanket Contractual
Liability and Broad Form Property
<PAGE> 12
Agreement No. WR71980064
Sheet 12 of 31
Damage, with limits of at least $1,000,000 combined single limit for bodily
injury and property damage for each occurrence; and (v) if the furnishing
to Company (by sale or otherwise) of products or material is involved, CGL
insurance endorsed to include products liability and completed operations
coverage in the amount of $2,000,000 per occurrence. All CGL and automobile
liability insurance shall designate Company, its affiliates, and its
directors, officers and employees (all referred to as "Company") as
additional insured. All such insurance must be primary and non-contributory
and required to respond and pay prior to any other insurance or
self-insurance available. Any other coverage available to Company shall
apply on an excess basis. Supplier agrees that Supplier, Supplier's
insurer(s) and anyone claiming by, through, under or in Supplier's behalf
shall have no claim, right of action or right of subrogation against
Company and its customers based on any loss or liability insured against
under the foregoing insurance. Supplier and Supplier's subcontractors shall
furnish prior to the start of Work, certificates or adequate proof of the
foregoing insurance, including if specifically requested by Company,
endorsements and insurance policies. Company shall be notified in writing
at least thirty (30) days prior to cancellation of or any change in the
policy. Insurance companies providing coverage under this Agreement must be
rated by A-M Best with at least an A- rating.
32. INVOICING FOR GOODS
Supplier shall: (i) render original invoice, or as otherwise specified
in this Agreement, showing Agreement and order number, through routing and
weight, (ii) render separate invoices for each shipment within twenty-four
(24) hours after shipment, and (iii) mail invoices with copies of bills of
lading and shipping notices to the address shown on this Agreement or
order. If prepayment of transportation charges is authorized, Supplier
shall include the transportation charges from the F.O.B. point to the
destination as a separate item on the invoice stating the name of the
carrier used.
33. INVOICING FOR STOCKS
If Company requests for reasons other than covered by Section "FORCE
MAJEURE", that shipment be postponed beyond the date shown on a purchase
order, Supplier may invoice Company as of the original scheduled delivery
date for MATERIAL manufactured under this Agreement, if it has been
inspected and approved by Company's designated quality organization
(provided inspection has been specified in this Agreement or in an order
issued under this Agreement).
34. JURISDICTION
Subject to the section "MEDIATION", Supplier agrees that any action or
legal proceeding arising out of this Agreement shall be brought only in a
court of competent jurisdiction in the United States of America and
Supplier
<PAGE> 13
Agreement No. WR71980064
Sheet 13 of 31
expressly submits to, and accepts the jurisdiction of, any such court in
connection with such action or proceeding and Supplier further consents to
the enforcement of any judgment against it arising therefrom in any
jurisdiction in which it has or shall have any assets.
35. LICENSES
No Licenses, express or implied, under any patents are granted by
Company to Supplier under this Agreement or order.
36. MARKING
All MATERIAL furnished under this Agreement shall be marked for
identification purposes in accordance with the specifications set forth in
this Agreement and as follows:
(a) with Supplier model/serial number; and
(b) with month and year of manufacture.
(c) with Company's Comcode
In addition, Supplier shall add any other identification which might
be requested by Company such as but not limited to indicia conforming to
the Company's Serialization Plan (KS-23490) and is included by reference, a
copy being in the possession of the Supplier. Charges, if any, for such
additional identification marking shall be as agreed upon by Supplier and
Company. This section does not reduce or modify Supplier's obligations
under the "IDENTIFICATION" section.
37. MEDIATION
If a dispute relates to this Agreement, or its breach, and the parties
have not been successful in resolving such dispute through negotiation, the
parties shall attempt to resolve the dispute through mediation by
submitting 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"). Each party shall bear its own expenses and an equal
share of the expenses of the mediator and the fees of the AAA. All defenses
based on passage of time shall be suspended pending the termination of the
mediation. Nothing in this section shall be construed to preclude any party
from seeking injunctive relief in order to protect its rights pending
mediation.
38. MONTHLY ORDER AND SHIPMENT REPORTS
Supplier shall render monthly order and shipment reports on or before
the fifth (5th) working day of the succeeding month containing the
information agreed to by Company and Supplier.
<PAGE> 14
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39. NEW AND CHANGED METHODS, PROCESSES AND EQUIPMENT
Supplier shall use reasonable efforts to keep abreast of major
developments in Supplier's industry and to promptly advise Company of any
developments that might affect the production of any MATERIAL under this
Agreement.
40. NON WAIVER
The failure of either party at any time to enforce any right or remedy
available to it under this Agreement or otherwise with respect to any
breach or failure by the other party shall not be construed to be a waiver
of such right or remedy with respect to any other breach or failure by the
other party.
41. NOTICES
Any notice given or demand which under the terms of this Agreement or
under any statute must or may be given or made by Supplier or Company shall
be in writing and shall be given or made by confirmed facsimile, or similar
communication or by certified or registered mail addressed to the
respective parties as follows
To Company: Lucent Technologies Inc.
Global Procurement Organization
211 Mt. Airy Road
Room 3W222
Basking Ridge, NJ 07920
Attn.: Sourcing Manager
-OR-
To Supplier: MCK Communications, Inc.
313 Washington Street
Newton, MA 02158
Attn.: Chief Executive Officer
Such notice or demand shall be deemed to have been given or made when
sent by facsimile, or other communication or when deposited, postage
prepaid in the U.S. mail. The above addresses may be changed at any time by
giving prior written notice as above provided.
The above addresses may be changed at any time by giving prior written
notice as above provided.
<PAGE> 15
Agreement No. WR71980064
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42. OPERATING SYSTEM SOFTWARE
The term MATERIAL includes any software (operating program in machine
readable form and related documentation) and storage media therefor
normally furnished with or embedded in the MATERIAL. Title to the software,
including copyright, shall remain in Supplier. The party having title to
the MATERIAL shall have title to the software storage media. For the life
of the MATERIAL listed in this Agreement, Supplier grants to Company and
any subsequent purchaser, lessee or other end user (referred to
collectively in this section as "end user") a non-exclusive license to use
said software on the MATERIAL on which it was delivered. Company and any
subsequent end user may copy the software for use on such MATERIAL with
which it was originally delivered and for archival purposes, but shall not
knowingly reproduce either the original software for distribution to
others. Company and any subsequent end user may add to, delete from or
modify the software in any manner, but no changes, however extensive, shall
alter Supplier's title to such original software. Title to any such
modification or addition to the software shall remain in the entity which
creates the modification or addition.
43. OZONE DEPLETING CHEMICALS
Supplier hereby warrants that it is aware of international agreements
and pending legislation in several nations, including the United States,
which would limit, ban and/or tax importation of any product containing, or
produced using ozone depleting chemicals ("ODCs"), including
chlorofluorocarbons, halons and certain chlorinated solvents. Supplier
hereby warrants that the MATERIAL furnished to Company will conform to all
applicable requirements established pursuant to such agreements,
legislation and regulations, and the MATERIAL furnished to Company will be
able to be imported and used lawfully (and without additional taxes
associated with ODCs not reported to Company by Supplier as set forth in
this section) under all such agreements, legislation and requirements.
Supplier also warrants that it is currently reducing, or if Supplier is not
the manufacturer of the MATERIAL, is currently causing the manufacturing
vendor to reduce and will, in an expeditious manner, eliminate, or, as
applicable, have its manufacturing vendor eliminate the use of ODCs in the
manufacture of the MATERIAL.
If the MATERIAL furnished by Supplier under this Agreement is
manufactured outside the United States, Supplier shall, upon execution of
this Agreement, and at any time that new products are added to this
Agreement or changes are made to the MATERIAL furnished under this
Agreement, complete, sign and return to Company the attached ODC Content
Certification. The ODC Content Certification must be signed by Supplier's
facility manager, corporate officer or his delegate.
The term "ODC content" on the ODC Content Certification means the
total pounds of ODC used directly in the manufacture of each unit of
<PAGE> 16
Agreement No. WR71980064
Sheet 16 of 31
MATERIAL. This includes all ODCs used in the manufacturing and assembly
operations for the MATERIAL plus all ODCs used by Supplier's vendors and
any other vendors in producing components or other products incorporated
into the MATERIAL sold to Company.
Supplier is responsible to obtain information on the ODC content of
all components and other products acquired to manufacture the MATERIAL and
to incorporate such information into the total ODC content reported to
Company. Provided however, that Supplier should not include in the ODC
content those components or other products which are manufactured in the
United States. Supplier hereby warrants to Company that all information
furnished by Supplier on the ODC Content Certification is complete and
accurate and that Company may rely on such information for any purpose,
including but not limited to providing reports to government agencies or
otherwise complying with applicable laws. Supplier shall defend, indemnify
and hold Company harmless of and from any claims, demands, suits,
judgments, liabilities, fines, penalties, costs and expenses (including
additional ODC taxes as provided for in paragraph one of this section and
reasonable attorney's fees) which Company may incur under any applicable
federal, state, or local laws or international agreements, and any and all
amendments thereto by reason of Company's use of reliance on the
information furnished to Company by Supplier on the ODC Content
Certification or by reason of Supplier's breach of this section. Supplier
shall cooperate with Company in responding to any inquiry concerning the
use of ODCs to manufacture the MATERIAL or components thereof and to
execute without additional charge any documents reasonably required to
certify the absence or quantity of ODCs used to manufacture the MATERIAL or
components thereof.
44. OZONE DEPLETING SUBSTANCES LABELING
Supplier warrants and certifies that all MATERIAL and other products,
including packaging and packaging components, provided to Company under
this Agreement have been accurately labeled, in accordance with the
requirements of 40 CFR, Part 82 entitled "Protection of Stratospheric
Ozone, Subpart E- The Labeling of Products Using Ozone Depleting
Substances."
45. PACKING, LABELING AND SERIALIZATION
MATERIAL purchased, repaired, replaced or refurbished under this
Agreement shall be packed, labeled and serialized by Supplier at no
additional charge in accordance with specifications OEMPS No. 101 "Packing
and Shipping Requirements," X-20587 "Specification Requirements for Package
Content Identification Label," and KS-23490 "Product Bar Code, Serial and
Comcode Label," is included by reference, a copy being in the possession of
the Supplier and as changed from time to time with Supplier's written
approval.
<PAGE> 17
Agreement No. WR71980064
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46. PRODUCT CHANGES
Supplier shall notify Company in advance, in writing of any change
proposed to be made in accordance with this Agreement, or in the
Specification and documentation covered by this Agreement that would impact
upon: (i) reliability, (ii) requirements of the Specification, or (iii)
form, fit or function (as defined below).
In order for Company to review these proposed changes, at least thirty
(30) business days advance notice will be required except for those cases
where an extremely unsatisfactory condition requires immediate action. In
that instance, verbal notification to Company shall be used, followed by
Supplier's immediate written confirmation.
"Form" shall mean changes in appearance visible to the user (customer,
repair personnel, developer) of the MATERIAL.
"Fit" shall mean changes in parts to components that are not
physically interchangeable.
"Function" shall mean changes that affect operational characteristics
of the MATERIAL or require the operator to change the method of operation.
Supplier shall submit a proposal to Company, specifically documenting
all cost factors, implementation schedules, and repair changes.
The change notice shall be sent to the following address:
Lucent Technologies Inc.
211 Mt. Airy Road
Room 3W222
Basking Ridge, NJ 07920
Attn.: Sourcing Manager:
The format of Supplier's notification document shall be the
responsibility of Supplier but said notification document shall contain at
least the following information.
1. Supplier's name.
2. Agreement number.
3. MATERIAL description.
4. Change number.
5. MATERIAL affected.
6. Reason for change.
<PAGE> 18
Agreement No. WR71980064
Sheet 18 of 31
7. Description of change (including the impact upon: (i) reliability,
(ii) requirements of the Specification and (iii) form, fit or
function.)
8. [***]
9. Marking method of identifying changed units.
10. Documentation
a. Marked up documents shall be provided until the document or
drawing is re-issued.
b. Listing of documents and drawings to be changed.
c. Field repair or modification kit documentation (if
applicable).
11. Unit in process, in stock and installed affected by change.
12. Date changes are proposed to be implemented.
13. All necessary and relevant temporary changes affected by this
notice.
14. All necessary and relevant attachments.
15. Additional comments.
If, as mutually agreed by Company and Supplier, sufficient changes
have been made to warrant a MATERIAL re-qualification, such
re-qualification will be performed at no cost to Company unless otherwise
agreed.
MATERIAL shall be in accordance with the latest information stated or
referenced in the Specification.
The quality of MATERIAL used and the method of manufacturing, handling
and shipping, shall be such that the finished MATERIAL meets the properties
and requirements shown in the Specification and in the other sections of
this Agreement.
If Company, in its sole discretion, does not agree to the change(s)
proposed by Supplier, then in addition to all other rights and remedies at
law or equity or otherwise, and without any cost to or liability or
obligation of Company, Company shall have the right to terminate this
Agreement and to terminate any or all orders for MATERIAL affected by such
change.
47. PRODUCT CONFORMANCE REVIEWS
Supplier shall, utilizing documented procedures specified herein, make
such tests and inspections as are necessary to insure that MATERIAL meets
all technical requirements of the MATERIAL specification. Supplier shall
provide, without charge, any production testing facilities and personnel
required to inspect the MATERIAL under Quality Program Specification (QPS)
Nos. 40.002 and 40.030, included by reference, a copy being in possession
of the Supplier as changed from time to time with Supplier's written
approval. Company reserves the right to inspect MATERIAL prior to shipment
from Supplier or Supplier's subcontractor(s). Such inspection shall
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 19
Agreement No. WR71980064
Sheet 19 of 31
be conducted by Company's Engineering and Environmental Technologies (EE&T)
organization utilizing a 0.65% Acceptability Level (AQL) sampling plan as
described in QPS 40.030. If MATERIAL fails inspection, Supplier agrees to
pay for all re-inspection costs. Inspection requirements may be waived only
by written notification from Company's Engineering and Environmental
Technologies (EE&T) organization. In the event that any or all work under
this Agreement is subcontracted to another Supplier, Company reserves the
right to conduct the aforementioned inspections at the subcontractors
facilities.
48. PRODUCT DOCUMENTATION
Supplier shall furnish, at no charge, product documentation, and any
succeeding changes thereto, as described in the Technical Specification.
Company may use, reproduce, reformat, modify and distribute such product
documentation.
Company shall reproduce Supplier's copyright notice contained in any
documentation reproduced without change by Company. For documentation which
is reformatted or modified by Company, Company shall have the right to
place only Company's own copyright notice on the reformatted or modified
documentation. It is the intent of the parties that Company's copyright
notice shall be interpreted to protect the underlying copyright rights of
Supplier to the documentation to the extent such underlying rights are
owned by Supplier.
49. PURCHASE ORDERS
Purchase orders issued under this Agreement shall be sent to the
following address:
MCK Communications, Inc.
313 Washington Street
Newton, MA 02158
Attn.: Vice President Sales
Purchase orders shall specify: (i) description of MATERIAL, inclusive
of any numerical/alphabetical identification referenced in the price list
in this Agreement, (ii) delivery date, (iii) applicable price, (iv)
location to which the MATERIAL is to be shipped and (v) location to which
invoices shall be sent for payment.
50. REGISTRATION AND RADIATION STANDARDS
When MATERIAL furnished under this Agreement is subject to Part 68,
Part 15 or any other part of the Federal Communication Commission's Rules
and Regulations, as may be amended from time to time (hereinafter
<PAGE> 20
Agreement No. WR71980064
Sheet 20 of 31
"FCC Rules"), Supplier warrants that such MATERIAL complies with the
registration, certification, type-acceptance and/or verification standards
of the FCC Rules including, but not limited to, all labeling, customer
instruction requirements, and the suppression of radiation to specified
levels. Supplier shall also establish periodic on-going compliance
retesting and follow a Quality Control program, submitted by Company, to
assure that MATERIAL shipped complies with the applicable FCC Rules.
Supplier shall indemnify and save Company harmless from any liability,
fines, penalties, claims or demands (including the costs, expenses and
reasonable attorney's fees on account thereof) that may be made because of
Supplier's noncompliance with the applicable FCC Rules. Supplier shall
defend Company, at Company's request, against such liability, claim or
demand.
In addition, should MATERIAL which is subject to Part 15 of the FCC
Rules, during use generate harmful interference to radio communications,
Supplier shall provide the Company information relating to methods of
suppressing such interference and pay the cost of suppressing such
interference or, at the option of Company, accept the return of the
MATERIAL and refund to Company the price paid for the MATERIAL less a
reasonable amount for depreciation, if applicable.
To the extent that MATERIAL furnished under this Agreement is also
subject to FCC Rules governing the use of the MATERIAL as a component in a
system, Company shall be responsible for compliance with the applicable FCC
Rules governing the system. Supplier shall fully cooperate with Company, by
providing technical support and information, and, upon written request from
Company, shall modify MATERIAL to enable Company to ensure ongoing
compliance with the FCC Rules. Company shall pay any increase in Supplier's
costs and/or expenses resulting from Company's request to modify MATERIAL
to enable Company to comply with the FCC Rules.
Nothing in this section shall be deemed to diminish or otherwise limit
Supplier's obligations under the "WARRANTY" section or any other section of
this Agreement.
51. REJECTIONS
If Company rejects any or all of the MATERIAL, Company may, in
addition to all its other rights and remedies at law or equity, exercise
one or more of the following remedies: (1) return rejected MATERIAL for
full credit at the price charged plus transportation charges from
Supplier's plant, and return; or (2) accept a conforming part of any
shipment; or (3) have rejected MATERIAL replaced by Supplier at the
purchase price stipulated in this Agreement.
<PAGE> 21
Agreement No. WR71980064
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52. RELEASES VOID
Neither party shall require (i) waivers or releases of any personal
rights or (ii) execution of documents which conflict with the terms of this
Agreement, from employees, representatives or customers of the other in
connection with visits to its premises and both parties agree that no such
releases, waivers or documents shall be pleaded by them or third persons in
any action or proceeding.
53. REPAIRS NOT COVERED UNDER WARRANTY
In addition to repairs provided for in the "WARRANTY" section Supplier
shall provide repair service on all MATERIAL ordered under this Agreement
during the term of this Agreement and until five (5) years after the
expiration of this Agreement. MATERIAL to be repaired under this section
will be returned to a location designated by Supplier, and unless otherwise
agreed upon by Supplier and Company, Supplier shall ship the repaired
MATERIAL which meets the Specifications set forth in the "SPECIFICATIONS OR
DRAWINGS" section and all other Specifications within ten (10) business
days of receipt of the defective or non-conforming MATERIAL. With the
concurrence and scheduling of Company, repair may be made by Supplier on
site.
If MATERIAL is returned to Supplier for repair as provided for in this
section and is determined to be beyond repair, Supplier shall so notify
Company. If requested by Company, Supplier will sell to Company a
replacement at the price set forth in Supplier's then current agreement
with Company for said MATERIAL or, if no such agreement exists, at a price
agreed upon by Supplier and Company. If the parties fail to agree on a
price, the price shall be a reasonably competitive price for such MATERIAL
at the time for delivery. Further, if requested by Company, Supplier shall
take the necessary steps to dispose of the unrepairable MATERIAL and pay to
Company the salvage value, if any. Replacement and repaired MATERIAL shall
be warranted as set forth in the "WARRANTY" section.
This Agreement does not grant Supplier an exclusive privilege to
repair any or all of the MATERIAL purchased under this Agreement for which
Company may require repair; and Company may perform the repairs or contract
with others for these services. In addition, Supplier authorizes Company
and any qualified repairer with whom Company may contract to perform
repairs on all MATERIAL purchased under this Agreement.
All transportation costs of and in transit risk of loss and damage to
MATERIAL returned to Supplier for repair under this section will be borne
by Company and all transportation costs of and in transit risk of loss and
damage to such repaired or replacement MATERIAL returned to Company will be
borne by Company.
<PAGE> 22
Agreement No. WR71980064
Sheet 22 of 31
Price schedules for repairs under this section are listed in APPENDIX
A.
54. REPAIR PROCEDURES
Company shall furnish the following information with MATERIAL returned
to Supplier for repair: (a) Company's name and complete address; (b)
name(s) and telephone numbers(s) of Company's employee(s) to contact in
case of questions about the MATERIAL to be repaired; (c) ship-to address
for return of repaired MATERIAL if different than (a); (d) a complete list
of MATERIAL returned; (e) the nature of the defect or failure if known; and
(f) whether or not returned MATERIAL is in warranty. Supplier shall, within
ten (10) days of the execution of this Agreement, provide a written notice
to Company specifying (i) the name(s) and telephone number(s) of the
individual(s) to be contacted concerning any questions that may arise
concerning repair, and (ii) if required, any special packing of MATERIAL
which might be necessary to provide adequate in-transit protection from
transportation damage.
MATERIAL repaired by Supplier shall have the repair completion date
stenciled or otherwise identified in a permanent manner at a readily
visible location on the MATERIAL and the repaired MATERIAL shall be
returned with a tag or other papers describing the repairs which have been
made.
All invoices originated by Supplier for repair services must be
clearly identified as such, and must contain: (i) a reference to Company's
purchase order for these repair services, (ii) a detailed description of
repairs made by Supplier and the need therefor, and (iii) an itemized
listing of parts and labor charges, if any. Replaced parts will, upon
request, be available for inspection by or returned to Company. Further,
the provisions of the "INVOICING" and "SHIPPING" sections, other than
provisions relating to transportation charges with respect to MATERIAL
repaired under warranty, shall apply to Supplier's return to Company of
repaired MATERIAL.
55. RIGHT OF ENTRY
Each party shall have the right to enter the premises of the other
party during standard business hours with respect to the performance of
this Agreement, including an inspection or a Quality Review, subject to all
plant rules and regulations, clearances, security regulations and
procedures as applicable. Each party shall provide safe and proper
facilities for such purpose. No charge shall be made for such visits. It is
agreed that prior notification will be given when access is required.
<PAGE> 23
Agreement No. WR71980064
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56. SAFETY CERTIFICATION
All MATERIAL purchased under this Agreement shall be designed to be in
compliance with the applicable Underwriters Laboratories (UL) and Canadian
Standards Association (CSA) rules and regulations. It is agreed that
Supplier shall be responsible for filing the required documents to obtain
compliance with said Underwriters Laboratories Standards and Canadian
Standards. Supplier shall be responsible for making the MATERIAL available
for testing.
57. SECTION HEADINGS
The headings of the sections in this Agreement are inserted for
convenience only and are not intended to affect the meaning or
interpretation of this Agreement.
58. SERVICES
Visits by Supplier's representatives or its suppliers' representatives
for inspection, adjustment or other similar purposes in connection with
MATERIAL purchased under this Agreement shall for all purposes be deemed
"Work under this Agreement" and shall be at no charge to Company unless
otherwise agreed in writing between the parties.
59. SEVERABILITY
If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Agreement, but rather the entire Agreement
shall be construed as if not containing the particular invalid or
unenforceable provision or provisions, and the rights and obligations of
Supplier and Company shall be construed and enforced accordingly.
60. SHIPPING
Supplier shall: (i) ship the MATERIAL covered by this Agreement or
order complete unless instructed otherwise, (ii) ship to the destination
designated in the Agreement or order, (iii) ship according to routing
instructions given by Company, (iv) place the Agreement and order number on
all subordinate documents, (v) enclose a packing memorandum with each
shipment and, when more than one package is shipped, identify the package
containing the memorandum; and (vi) mark the order number on all packages
and shipping papers. Adequate protective packing shall be furnished at no
additional charge. Shipping and routing instructions may be furnished or
altered by Company without a writing. If Supplier does not comply with the
terms of the FOB section of the Agreement or order or with Company's
shipping or routing instructions, Supplier authorizes Company to deduct
from any invoice of Supplier (or to charge back to Supplier), any increased
cost incurred by Company as a result of Supplier's noncompliance.
<PAGE> 24
Agreement No. WR71980064
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61. SHIPPING INTERVAL
The delivery schedule applicable to each purchase order will be agreed
upon by Supplier and Company and set forth in the purchase order. (Note:
Supplier has indicated that MATERIAL can usually be shipped an average of
twenty (20) business days after receipt of Company's purchase order;
however, in no event shall the delivery interval exceed thirty (35)
business days after receipt of purchase order.)
If Supplier exceeds the above maximum interval then in addition to all
other rights and remedies at law or equity or otherwise, and without any
liability or obligation of Company, Company shall have the right to: (a)
cancel such purchase order, or (b) extend such delivery date to a later
date, subject, however, to the right to cancel as in (a) preceding if
delivery is not made or performance is not completed on or before such
extended delivery date. If Company elects to extend such delivery date,
Supplier shall absorb the difference between the charges to ship normal
transportation and the charges to ship premium overnight.
If a purchase order is canceled by Company pursuant to the above,
Company shall have the right to retain or return any or all MATERIAL
received by or paid for by Company under such purchase order. Within
fifteen (15) business days of Supplier's receipt of returned MATERIAL,
Supplier shall reimburse Company for the costs of shipping the MATERIAL
returned to Supplier and for any amounts, including shipping costs,
previously paid by Company for the MATERIAL. Company shall pay for any
MATERIAL if retains at the prices set forth in APPENDIX A, less applicable
discounts which shall be applied on the basis of the quantity specified in
the purchase order.
If, during the course of this Agreement, Supplier determines that
Supplier will no longer be able to ship within the above interval, Supplier
shall immediately notify Company's buyer to that effect. Supplier shall
also notify Company's buyer, as soon as it becomes apparent, if Supplier is
unable to meet the delivery date for an order. However, nothing contained
in this paragraph shall waive Company's rights as set forth above in this
section.
62. SHIPPING LOCATION
The material shall be shipped FOB Supplier's location 313 Washington
Street, Newton, MA 02158 or 130 Bowness Centre, Calgary, ALB T3B 5M5. The
1990 INCOTERM manual shall govern interpretation of shipment terms under
this Agreement.
63. STORAGE OF PAID FOR STOCK
Subject to the section "OPERATING SYSTEM SOFTWARE", Company has and
shall have at all times all right, title and interest in all
<PAGE> 25
Agreement No. WR71980064
Sheet 25 of 31
MATERIAL invoiced to Company in accordance with the section "INVOICING FOR
STOCKS". Such MATERIAL shall be referred to in this section as "Company
Property." [***]
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 26
Agreement No. WR71980064
Sheet 26 of 31
[***]
64. SUPPLIER'S INFORMATION
Supplier shall not provide under, or have provided in contemplation
of, this Agreement any idea, data, program, technical, business or other
intangible information, however conveyed, or any document, print, tape,
disc, semiconductor memory or other information-conveying tangible article,
unless Supplier has the right to do so, and Supplier shall not view any of
the foregoing as confidential or proprietary. If Supplier must furnish any
such information to Company with restrictions, it shall only be furnished
after negotiation and execution on behalf of Company of a separate written
agreement specifically identifying the documents to be furnished and
setting forth Company's rights and obligations with respect hereto.
65. SURVIVAL OF OBLIGATIONS
The obligations of the parties under this Agreement which by their
nature would continue beyond the termination, cancellation or expiration of
this Agreement shall survive termination, cancellation or expiration of
this Agreement.
66. TAXES
Company shall reimburse Supplier only for the following tax payments
with respect to transactions under this Agreement unless Company advises
Supplier than an exemption applies: state and local sales and use taxes, as
applicable. Taxes payable by Company shall be billed as separate items on
Supplier's invoices and shall not be included in Supplier's prices. Company
shall have the right to have Supplier contest any such taxes that Company
deems improperly levied at Company's expense and subject to Company's
direction and control.
67. TECHNICAL SUPPORT
Company shall be entitled to ongoing technical support including field
service and assistance, provided, however, that the availability or
performance of this technical support service shall not be construed as
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 27
Agreement No. WR71980064
Sheet 27 of 31
altering or affecting Supplier's obligations as set forth in the "WARRANTY"
section or elsewhere provided for in this Agreement.
Ongoing technical support via telephone will be at no charge to
Company from Monday to Friday between hours of 8:00AM and 5:00PM.
68. TERMINATION OF PURCHASE ORDER
Company may at any time terminate any portion or the total quantity of
any purchase order(s) placed under this Agreement. Company's liability to
Supplier with respect to such termination shall be limited to (i)
Supplier's purchase price of all components for the MATERIAL (not usable in
Supplier's other operations or salable to Supplier's other customers), plus
(ii) the actual costs incurred by Supplier in procuring and manufacturing
MATERIAL (not usable in Supplier's other operations or salable to
Supplier's other customers) in process as of the date of giving notice of
termination, less (iii) any salvage value thereof. However, no such
termination charges will be invoiced if, within [***] days of notice of
termination, MATERIAL equivalent in kind to that being terminated is
ordered by Company. If requested, Supplier shall substantiate such cost and
price with proof satisfactory to Company.
69. TIMELY PERFORMANCE
If Supplier has knowledge that anything prevents or threatens to
prevent the timely performance of the Work under this Agreement, Supplier
shall immediately notify Company's Representative thereof and include all
relevant information concerning the delay or potential delay.
70. TITLE AND RISK OF LOSS
Title (other than software) and risk of loss and damage to MATERIAL
including software purchased by Company under this Agreement or an order
issued pursuant to this Agreement shall vest in Company when the MATERIAL
has been delivered at the FOB point. If this Agreement or an order issued
pursuant to this Agreement calls for additional services including, but not
limited to, unloading, installation, or testing to be performed after
delivery, Supplier shall retain title and risk loss and damage to the
MATERIAL until the additional services have been performed. If Supplier is
authorized to invoice Company for MATERIAL prior to shipment or prior to
the performance of additional services, title to MATERIAL (other than
software) shall vest in Company upon payment of the invoice, but risk of
loss and damage shall pass to Company when the additional services have
been performed.
71. TOXIC SUBSTANCES AND PRODUCT HAZARDS
Supplier hereby warrants to Company that, except as expressly stated
elsewhere in this Agreement, all MATERIAL furnished by Supplier as
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 28
Agreement No. WR71980064
Sheet 28 of 31
described in this Agreement is safe for its foreseeable use, is not defined
as a hazardous or toxic substance or material under applicable federal,
state or local law, ordinance, rule, regulation or order (hereinafter
collectively referred to as "law" or "laws"), and presents no abnormal
hazards to persons or the environment. Supplier also warrants that it has
no knowledge of any federal, state or local law, that prohibits the
disposal of the MATERIAL as normal refuse without special precautions
except as expressly stated elsewhere in this Agreement. Supplier also
warrants that where required by law, all MATERIAL furnished by Supplier is
either on the EPA Chemical Inventory compiled under Section 8 (a) of the
Toxic Substance Control Act, or is the subject of an EPA-approved pre
manufacture notice under 40 CFR Part 720. Supplier further warrants that
all MATERIAL furnished by Supplier complies with all use restrictions,
labeling requirements and all other health and safety requirements imposed
under federal, state, or local laws. Supplier further warrants that, where
required by law, it shall provide to Company, prior to delivery of the
MATERIAL, a Material Safety Data Sheet which complies with the requirements
of the Occupational Safety and Health Act of 1970 and all rules and
regulations promulgated thereunder.
Supplier shall defend, indemnify and hold Company harmless for any
expenses (including, but not limited to, the cost of substitute material,
less accumulated depreciation) that Company may incur by reason of the
recall or prohibition against continued use or disposal of MATERIAL
furnished by Supplier as described in its Agreement whether such recall or
prohibition is directed by Supplier or occurs under compulsion of law.
Company shall cooperate with Supplier to facilitate and minimize the
expense of any recall or prohibition against use or disposal of MATERIAL
directed by Supplier or under compulsion of law.
Supplier further shall defend, indemnify and hold Company harmless of
and from any claims, demands, suits, judgments, liabilities, costs and
expenses (including reasonable attorney's fees) which Company may incur
under any applicable federal, state or local laws, and any and all
amendments thereto, including but not limited to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980; the
Consumer Product Safety Act of 1972; the Toxic Substance Control Act;
Fungicide, Rodenticide Act; the Occupational Safety and Health Act; and the
Atomic Energy Act; and any and all amendments to all applicable federal,
state, or local laws, by reason of Company's acquisition, use, distribution
or disposal of MATERIAL furnished by Supplier under this Agreement.
72. TRAINING
If requested by Company, Supplier will, without charge to Company:
<PAGE> 29
Agreement No. WR71980064
Sheet 29 of 31
(a) provide instructors and the necessary instructional material of
Supplier's standard format to train Company's personnel in the
installation, planning and practices, operation, maintenance and repair of
MATERIAL furnished under this Agreement. These classes shall be conducted
at reasonable intervals at locations agreed upon by Supplier and Company.
Or, at the option of Company,
(b) provide to Company training modules or manuals and any necessary
assistance, covering those areas of interest outlined in (a) of this
section, sufficient in detail, format and quantity to allow Company to
develop and conduct a training program.
73. USE OF INFORMATION
Supplier shall view as Company's property any idea, data, program,
technical, business or other intangible information, however conveyed, and
any document, print, tape, disc, tool, or other tangible
information-conveying or performance-aiding article owned or controlled by
Company, and provided to, or acquired by Supplier under or in contemplation
of this Agreement (Information). Supplier shall, at no charge to Company,
and as Company directs, destroy or surrender to Company promptly at its
request any such article or any copy of such Information. Supplier shall
keep Information confidential and use it only in performing under this
Agreement and obligate its employees, subcontractors and others working for
it to do so, provided that the foregoing shall not apply to information
previously known to Supplier free of obligation, or made public through no
fault imputable to Supplier.
74. VARIATION IN QUANTITY
Company assumes no liability for MATERIAL produced, processed or
shipped in excess of the amount specified in this Agreement or in an order
issued pursuant to this Agreement.
75. WARRANTY
Supplier warrants to Company and Customer, as defined in this section,
that MATERIAL furnished will be new, merchantable, free from defects in
design, material and workmanship and will conform to and perform in
accordance with the Specifications, drawings and samples set forth in this
Agreement. These warranties extend to the future performance of the
MATERIAL and shall continue for a period of twelve (12) months from the
date of delivery to an end user customer (hereinafter "Customer") or, for
MATERIAL installed by Company or its re-sellers, for a period of twelve
(12) months from the completion of installation.
Supplier also warrants to Company and Customers that services will be
performed in a first class, workmanlike manner. In addition, if MATERIAL
<PAGE> 30
Agreement No. WR71980064
Sheet 30 of 31
furnished contains one or more manufacturer's warranties, Supplier hereby
assigns such warranties to Company and Customers. Supplier warrants that at
the time of delivery to Company such MATERIAL shall be free of any security
interest or any other lien or any other encumbrance whatsoever. All
warranties shall survive inspection, acceptance and payment.
Defective or non-conforming MATERIAL will, at Company's option, either
be returned to Supplier for repair or replacement, at no cost to Company,
with risk of in-transit loss and damage borne by Supplier and freight paid
by Supplier, or be repaired or replaced by Supplier on Customer's site or
another site designated by Company at no cost to Company. Unless otherwise
agreed upon by Supplier and Company, Supplier shall complete repairs and
ship the repaired MATERIAL within ten (10) business days of receipt of
defective or non- conforming MATERIAL, or at Company's option, ship
replacement MATERIAL within ten (10) business days after verbal
notification is given Supplier by Company. Supplier shall bear the risk of
in-transit loss and damage and shall prepay and bear that cost of freight
for shipments to Company of repaired or replaced MATERIAL. If requested by
Company, Supplier shall begin on-site repairs within ten (10) business days
after verbal notification is given Supplier by Company.
If MATERIAL returned to Supplier or made available to Supplier on site
for repair as provided for in this section is determined to be beyond
repair, Supplier shall promptly so notify Company and, unless otherwise
agreed to in writing by Supplier and Company, Supplier shall ship
replacement MATERIAL without charge within ten (10) business days of such
notification.
Replacement MATERIAL shall be warranted as set forth above in this
"WARRANTY" section. Any MATERIAL which is repaired, modified, or otherwise
serviced by Supplier shall be warranted as provided in this "WARRANTY"
section for the remainder of the warranty period (based upon the date
repair, modification or other service is completed and accepted by Company)
or ninety (90) business days after the MATERIAL is returned to a Customer,
whichever is later.
Supplier also warrants that software will record, store, process and
present calendar dates falling on or after January 1, 2000, in the same
manner and with the same functionality as it performed before January 1,
2000. This maintenance will be considered part of and covered under the
maintenance provisions of the Agreement at no additional charge to Company.
<PAGE> 31
Agreement No. WR71980064
Sheet 31 of 31
76. ENTIRE AGREEMENT
This Agreement shall incorporate the typed or written provisions on
Company's orders issued pursuant to this Agreement and shall constitute the
entire agreement between the parties with respect to the subject matter of
this Agreement and the order(s) and shall not be modified or rescinded,
except by a writing signed by Supplier and Company. Printed provisions on
the reverse side of Company's orders (except as specified otherwise in this
Agreement) and all provisions on Supplier's forms shall be deemed deleted.
Estimates or forecasts furnished by Company shall not constitute
commitments. The provisions of this Agreement supersede all contemporaneous
oral agreements and all prior oral and written communications, and
understandings of the parties with respect to the subject matter of this
Agreement.
Accepted (Date) 4-29 19 99
---------- ---
<TABLE>
MCK COMMUNICATIONS, INC. LUCENT TECHNOLOGIES INC.
<S> <C>
------------------------------------------------- ------------------------------------------------
By: /s/ Paul Zurlo By: /s/ R. A. Murphy
------------------------------------------------- ------------------------------------------------
Name (Print) Paul Zurlo Name (Print) R. A. Murphy
------------------------------------------------- ------------------------------------------------
Title CFO Title Purchasing Manager
------------------------------------------------- ------------------------------------------------
</TABLE>
ATTACHMENTS - The following Attachments are hereby made part of the Agreement:
Appendix A, Price Schedule
Appendix B, Specifications
<PAGE> 32
Agreement No. WR71980064
Appendix A
1 of 4
DEFINITY EXTENDER PRODUCT MATRIX
<TABLE>
<CAPTION>
COMCODE DESCRIPTION MODEL PEC PRICE
<S> <C> <C> <C> <C>
40733931 Analog DEFINITY Extender - Switch Module 845 2174-PSB [***]
This PEC will drive out 1 box, containing the stand-alone
Switch Module, a stand-alone power supply, a D8W cord (7'
long), a D2R cord (25' long), and a System Administrator's
Guide.
407389907 Analog DEFINITY Extender - Remote Module 846 2174-RSM [***]
This PEC will drive out 1 box, containing the Remote Module,
a stand-alone power supply, a seven foot/two conductor
mounting cord, and a User's Guide.
407444934 POWER, MTCE. STND ALONE - 120V PS120 2174-MSP [***]
This PEC can be used to order a maintenance spare, or
replacement stand alone power supply for stand alone switch
modules, and/or stand-alone remote modules.
407445733 MOUNTING BRACKET - SINGLE UNIT WB102 2174-MTG [***]
This PEC will drive out one metal mounting bracket. This
bracket may be used to mount either one stand alone switch,
or one stand alone remote module, to a wall, desk, or other
suitable vertical surface.
407564905 EXTENDER-PBX-PLUG IN UNIT 855L1 2174-PCB [***]
This PEC is used to order one rack mountable DEFINITY
Extender Switch Module. This rack mountable module can not
be used on a stand-alone basis. A DEFINITY Extender
multi-mount (PEC #2174-BMM or #2174-48V), listed above, is
required for use with this unit.
407564921 EXTENDER MULTI-MOUNT - 120V AC 855L1 2174-BMM [***]
This PEC will provide one box containing one DEFINITY
Extender Multi-Mount Card Frame, and one 120 Volt/60 Hz
power supply. This multi-mount will hold up to twelve (12)
rack mountable DEFINITY Extenders (Analog Version). In
addition to providing a nesting place and power for the
plug- in DEFINITY Extender Modules, the multi-mount also
provides a means to connect the analog circuits and DCP
ports to the modules, A twenty five pair connecting cable,
of proper length for the particular installation, and the
appropriate connecting block(s) for the wall field must be
sourced locally.
407564939 EXTENDER MULTI-MOUNT - 48V DC 855L3 2174-48V [***]
This DC to DC converter should be ordered only for those
applications where input voltage will be 48 Volts Direct
Current. This product is not stocked, and is offered with an
eight week interval. This PEC will provide one box
containing one DEFINITYa Extender Multi-Mount Card Frame,
and one 48 volt DC to DC converter. This multi-mount will
hold up to twelve (12)
</TABLE>
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 33
Agreement No. WR71980064
Appendix A
2 of 4
<TABLE>
<S> <C> <C> <C> <C>
rack mountable DEFINITY Extenders (Analog Version). In
addition to providing a nesting place and power for the
plug-in DEFINITYa Extender Modules, the multi-mount also
provides a means to connect the analog circuits and DCP
ports to the modules. A twenty five pair connecting cable,
of proper length for the particular installation, and, the
appropriate connecting block(s) for the wall field must be
sourced locally.
407564897 PASSWORD ADMIN SOFTWARE 855L4 2174-PSA [***]
This PEC will drive out one Windows based, 3.5" floppy disk,
which is required to administer passwords for the rack
mountable DEFINITYa Extenders (Analog Version).
407578392 POWER SUPPLY SHELF 2174-PSS 2174-PSS [***]
This PEC is used to order a metal shelf, which can be used
as a flat surface on which to mount up to three Multi-mount
power supplies. It can be used with either the 120 volt AC
power supply, or the 48 volt DC to DC converter.
407578368 MTCE BULK POWER - 120V AC PSF110- 2174-PAC [***]
120VAC
This PEC can be used to order a maintenance spare, or a
replacement bulk stand alone power supply for maintenance
purposes.
407578384 MTCE BULK POWER - 48V DC 2174-PDC 2174-PDC [***]
This PEC ran be used to order a maintenance spare, or a
replacement bulk stand alone power supply (DC to DC
converter) for maintenance purposes.
407582899 EXTENDER MULTI-MOUNT - without power P855L2 2174-CFO [***]
407802966 ISDN DEFINITY Extender - Remote Module 876 2174-R2D [***]
This PEC will drive out 1 box, containing the Remote Module,
a stand-alone power supply, a seven foot/two conductor
mounting cord, and a User's Guide. Does not include TA.
407802958 ISDN DEFINITY Extender - Switch Module 875 2174-P2D [***]
This PEC will drive out 1 box, containing the standalone
Switch Module, a stand-alone power supply, a D8W cord (7'
long), a D2R cord (25' long), and a System Administrator's
Guide. Does not include TA.
407802982 ISDN DEFINITY Extender for Western Europe-- Remote 876WE 2174-RWE [***]
Module
This PEC will drive out I box, containing the Remote Module,
a stand-alone power supply, a seven foot/two conductor
mounting cord, and a User's Guide. Does not include TA.
407802974 ISDN DEFINITY Extender for Western Europe- Switch Module 875WE 2174-PWE [***]
This PEC will drive out 1 box, containing the stand alone
Switch Module, a stand-alone power supply, a D8W cord (7'
long), a D2R cord (25' long), and a
</TABLE>
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 34
Agreement No. WR71980064
Appendix A
3 of 4
<TABLE>
<S> <C> <C> <C> <C>
System Administrator's Guide. Does not include TA.
407809433 ISDN DEFINITY Extender for the UK- Remote Module 876UK 2174-RUK [***]
This PEC will drive out 1 box, containing the Remote Module,
a stand-alone power supply, a seven foot/two conductor
mounting cord, and a User's Guide. Does not include TA.
407809425 ISDN DEFINITY Extender for the UK- Switch Module 875UK 2174-PUK [***]
This PEC will drive out 1 box, containing the stand-alone
Switch Module, a stand-alone power supply, a D8W cord (7'
long), a D2R cord (25'long), and a System Administrator's
Guide. Does not include TA.
New
407924653 ISDN DEFINITY Extender - Switch Module 2100 2174-P1D [***]
This PEC will drive out 1 box. containing the stand-alone
Switch Module, a stand-alone power supply, a D8W cord (7'
long), a D2R cord (25' long), and a System Administrator's
Guide. Includes integrated TA.
407924661 ISDN DEFINITY Extender - Remote Module 2101 2174-R1D [***]
This PEC will drive out 1 box, containing the Remote
Module, a stand-alone power supply, a seven foot/two
conductor mounting cord, and a User's Guide. Includes
integrated TA.
New
407975051 Analog DEFINITY Extender - Remote Module 1101 2174-RSP [***]
This PEC will drive out 1 box, containing the Remote Module,
a stand-alone power supply, a seven foot/two conductor
mounting cord, and a User's Guide.
407974831 Analog DEFINITY Extender - Switch Module 1100 2174-PSP [***]
This PEC will drive out 1 box, containing the stand-alone
Switch Module, a stand-alone power supply, a D8W cord (7'
long), a D2R cord (25' long), and a System Administrators
Guide.
407995489 Trade-In Analog DEFINITY Extender - Switch Module 1100T 2174-TI [***]
This PEC will drive out 1 box, containing the standalone
Switch Module, a stand-alone power supply, and a System
Administrators Guide.
407995497 Trade-In Analog DEFINITY Extender - Remote Module 1101T 2174-TIP [***]
This PEC will drive out 1 box, containing the Remote Module,
a stand-alone power supply, and a Users Guide.
============================================================================================================================
408039996 DEFINITY EXTENDER Rack System 3000 2174-RAK [***]
This PEC will provide one box containing one DEFINITY
Extender Rack System. This rack will hold up to twelve (12)
cards, either analog or ISDN. The rack includes a built-in
power supply and fan.
The rack also provides a means to connect the analog and
ISDN circuits and DCP ports to the modules. A
</TABLE>
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 35
Agreement No. WR71980064
Appendix A
4 of 4
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
twenty five pair connecting cable, of proper length for the
particular installation, and the appropriate connecting
block(s) for the wall field must be sourced locally.
406040020 Switch Management Interface SOFTWARE SMI 2174-RAK [***]
This PEC will drive out two Windows based, 3.5" floppy disk,
used for simultaneous configuration, status,
troubleshooting, monitoring, and software upgrades for all
12 Switch Cards. The Switch Management Interface software is
year 2000 compliant. and requires Windows 95, or Windows NT
4.0 or higher to operate properly.
408039980 Analog DEFINITY Extender Rack Card 3100 2174-ACD [***]
This PEC will drive out one analog rack card that will
extend one remote user per card for a-total of 12 users per
rack.
408088714 ISDN DEFINITY Extender Rack Card 3200 2174-ICD [***]
This PEC will drive out one ISDN rack card that will extend
two remote users per card for a total of 24 users per rack.
</TABLE>
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been filed separately with the
Securities and Exchange Commission.
<PAGE> 36
Agreement No. WR71980064
Appendix B
1 of 2
DEFINITY EXTENDER PRODUCT DESCRIPTIONS
ANALOG DEFINITY EXTENDER - MODEL 845/846
The Lucent Technologies DEFINITY(R) Extenders (Analog Version), one at the
switch location and one at a remote site, will allow customers to use
proprietary Lucent Technologies DCP Telephone Sets at locations other than where
the DEFINITY(R) ECS is located. The full function digital DCP terminal at the
remote site will look and perform exactly as it would if it were connected
directly to the DEFINITY(R) ECS.
This will be accomplished through the use of two (2) DEFINITY(R) Extenders
(Analog Version), and either a dial-up analog line, or a dedicated circuit.
Prior to the introduction-of this product, users were required to be co-located
with their DEFINITY(R) System in order to use a digital DCP telephone set.
The introduction of the DEFINITY(R) Extenders (Analog Version) provides a much
requested solution for our customers, who are experiencing ever increasing
pressure to provide remote office solutions for their employees.
ANALOG CENTRAL SITE RACK DEFINITY EXTENDER - MODEL 855
The Lucent Technologies DEFINITY(R) Extenders Central Site Rack System (Analog
Version) one at the switch location, will allow customers to use proprietary
Lucent Technologies DCP Telephone Sets at locations other than where the
DEFINITY(R) ECS is located. The full function digital DCP terminal at the remote
site will look and perform exactly as it would if it were connected directly to
the DEFINITY(R) ECS.
This will be accomplished by packaging analog switch module cards into a rack
system. Each rack has 12 slots across. This allows for reduced footprint, for
multiple installs and a reduction in the per port cost.
ISDN DEFINITY EXTENDER - MODEL 875/876
The ISDN DEFINITY Extender* system adjunct allows users to make and receive
calls from a remote location via an ISDN circuit while appearing to be in the
office. The ISDN DEFINITY Extender has two modules- the DEFINITY Extender Switch
Module and the DEFINITY Extender Remote Module.
Using an 8410D, 8410DR, 8411D, 8434, or a Callmaster(R) III (603E) voice
terminal, the Extender allows remote users to access system features such as
display, multiple call appearance, transfer, voice mail, message light and
conference. Outgoing calls can be made by the remote user using the DEFINITY
Enterprise Communications Server (ECS) network facilities. A terminal adapter is
required at both ends of an ISDN circuit to make an ISDN connection.
<PAGE> 37
Agreement No. WR71980064
Appendix B
2 of 2
The introduction of this product permits users to enter a Call-On-Demand (COD)
Mode which automatically drops the dial-up connection to the central site after
a predetermined period of time.
With the analog version of this product, users can also connect a remote digital
telephone set to their DEFINITY ECS. Because standard analog call connections
take much longer than the two seconds it takes to establish an ISDN call, users
must usually remain logged-on for the duration of their work tour.
NEW ISDN DEFINITY EXTENDER - MODEL 2100/2101
The (SDN DEFINITY Extender central site (model 2100) and remote site (model
2101) data modules improve upon the first generation of ISDN DEFINITY Extender
units (PEC 2174-R2D and 2174-P2D). The new units include an integrated terminal
adapter, support 56 Kbps or 64 Kbps of data on one B-channel, and deliver
improved voice quality on the second B-channel for the same price as the first
generation product.
NEW ANALOG DEFINITY EXTENDER - MODEL 1100/1101
The Analog DEFINITY Extender central site module (model 1100) and remote site
module (model 1101) data modules improve upon the first generation of Analog
DEFINITY Extender units (PEC 2174-PSB and 2174-RSM). The new units include an
advanced V.34 modem, which enhances voice quality and reduces retrains. The data
transmission rate supports up to 20 Kbps with voice traffic. In addition two new
features have been added: Call On Demand and Dial Back.
<PAGE> 1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS AND
ENCLOSED BY BRACKETS. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.16
MASTER SUPPORT AGREEMENT
This Master Support Agreement is made this 28th day of June, 1999, (the
"Effective Date"), by and between MCK Communications, Inc. ("MCK"), located at
313 Washington Street, Newton, MA 02458 and VITAL NETWORK SERVICES, L.L.C.
("VITAL") 6 Rubber Avenue, Naugatuck, CT 06770.
WHEREAS, MCK markets certain equipment and services to Customers worldwide, and
in connection therewith offers on-site installation, maintenance and value-add
services to such Customers;
WHEREAS, VITAL provides on-site installation, maintenance and value-add
servicing of communications equipment worldwide;
WHEREAS, VITAL has a worldwide infrastructure to perform on-site installation,
maintenance and value-add services and desires to provide such services for MCK;
and
WHEREAS, MCK desires to engage VITAL as an independent contractor in performing
global on-site installation, maintenance and value-add services;
NOW, THEREFORE, in consideration of the mutual promise and covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, MCK and VITAL hereby agree as
follows:
1. DEFINITIONS.
1.1 "Affiliate" shall mean any entity worldwide, which directly or
indirectly controls, is controlled by or under common control with
VITAL.
1.2 "Advance Replacement" means a process to ship replacement Product
components in advance of receipt of failed/defective Product
components.
1.3 "Authorized Service Area" means an area within one hundred (100)
miles of a VITAL Service City.
1.4 "Customer" means the final end-user, purchaser or licensee who has
acquired Product(s) for their own internal use and not for resale,
remarketing, or redistribution, whether directly from MCK or through
other sources, and of whom MCK has received notification of and who is
entitled to support and maintenance services for such Products.
1.5 "First Level Support" means the ability to provide general Product
information and configuration support; collect relevant technical
problem identification information; perform base problem
determination; provide basic support on the standard protocols and
features; go on-site at Customer location to obtain information if
situation requires.
1.6 "Response" means the time period commencing upon MCK's or a
Customer's request for service hereunder and ending when the VITAL
Field Engineer is on-site.
1.7 "Hardware" means tangible Product made available to VITAL.
1.8 "Maintenance Release" or "Patch" means an incremental release of
MCK Software that provides maintenance fixes.
1.9 "Parts Depot" means MCK Parts Depot which provides support
required for this program.
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1.10 "Product" means both Hardware and/or Software listed in Appendix
A, which VITAL may support under the terms of this Agreement. Products
include Service Parts.
1.11 "RMA" means Return Material Authorization.
1.12 "Second Level Support" means First Level Support plus the ability
to support problem isolation and Product specification defect
determination; provide lab simulation and interoperability testing;
define an action plan; analyze traces; provide support on all
protocols and features; reproduce problems in a lab, diagnose problems
remotely and provide MCK with complete steps to reproduce a problem.
1.13 "Service(s)" means support provided by VITAL that includes but is
not limited to installation, maintenance and value-add programs.
1.14 "Service Part" means a component or sub-assembly of a Product,
excluding cables and/or all software, and is also referred to as Field
Replaceable Unit (FRU).
1.15 "Site" means and includes the premises where the Product is to be
installed or is located.
1.16 "Software" means the machine-readable object code software
programs licensed by MCK.
1.17 "Standard Business Hours" means 8:00 AM to 5:00 PM Local Standard
Time, Monday through Friday, excluding VITAL observed holidays.
1.18 "Third Level Support" means fixing or generating workarounds for
Hardware and Software bugs and troubleshooting bugs that were not
diagnosed during Second Level Support.
1.19 "Unrelated Services" means any other Service, in addition to the
Services authorized by MCK and provided by VITAL to a Customer.
1.20 "Update" means Maintenance Releases, Version Releases and/or
Major Releases which contain the same configuration as originally
acquired.
1.21 "Primary Provider" means MCK will promote VITAL internally and to
its Customers for worldwide service deliveries.
1.22 Valued- Added Services means Help Desk and telephone support
services.
2. SCOPE, SERVICE ORDERS AND TERM.
2.1 Authorization. MCK hereby appoints VITAL as a non-exclusive,
primary provider of on-site services to MCK's Customers located
throughout the world.
2.2 Support Services. MCK support services specified below at Section
4 are provided to VITAL as backup to the support staff of VITAL. VITAL
is primarily responsible for providing on-site support and telephone
support Services to MCK's Customers for whom VITAL receives a purchase
order hereunder.
2.3 MCK shall issue a purchase order to order Services. Such order
requires a Services schedule and/or Statement of Work for the specific
Customer or site location signed by MCK.
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2.4 Obligation to Customers. Other than the Services agreed to in this
document, neither VITAL nor MCK will make any obligation to Customers
on behalf of the other, nor commit the resources of the other to
Customers without the other's consent.
2.5 Implementation. MCK and VITAL will implement the terms of this
Agreement worldwide.
2.6 Term. This Agreement shall be effective as of the Effective Date
and shall remain in full force and effect for an initial term of
twenty-four (24) months, unless sooner terminated pursuant to Section
7. This Agreement shall be automatically renewed for additional
successive twelve (12) month terms unless either party gives the other
party at least ninety (90) days written notice of its intention not to
renew prior to the anniversary date of the Agreement.
2.7 Relationship of Parties. It is understood by the parties hereto
that VITAL is an independent contractor and not an employee or agent
of MCK and MCK is not an agent of VITAL. MCK will not provide fringe
benefits or insurance coverage on behalf of VITAL except for sales tax
payable by MCK as provided in Section 7.2. VITAL shall be responsible
for the withholding and/or payment, as required by law, of all
federal, state and local taxes imposed on VITAL and its employees due
to the performance of Services or any other obligation under this
Agreement.
3. VITAL OBLIGATIONS. VITAL shall provide the following Services to MCK:
3.1 On-site Support.
3.1.1 Services. VITAL shall provide on-site installation,
maintenance and value-add Services to MCK Customers during
contracted local business hours. Available Services, response
times and hours are identified in VITAL supplements provided
under separate cover.
3.1.2 On-site service includes: 1-800 number access,
round-the-clock travel to the Customer site, on-site labor,
problem diagnosis, fault isolation, equipment adjustment,
equipment replacement and on-line testing with VITAL standard
test equipment.
3.1.3 Special test equipment. Special test equipment
requirements identified by MCK will be provided by MCK to VITAL
prior to development of VITAL price calculations.
3.2 Technical Support.
3.2.1 VITAL will provide first and second Level Support.
VITAL shall establish problem priorities with MCK consistent with
problem priority definitions as described below. All problems
reported to VITAL technical support will be prioritized and
escalated to MCK based on such guidelines set forth by MCK.
(Reference Attachment C)
3.2.2 VITAL shall report unresolved cases to MCK within the
following time frames beginning at such time that a problem is
given a priority as defined below:
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Priority 1. No later than four (4) hours from initial
MCK notification to VITAL. Priority 1 calls defined as
responding to MCK / End Users while in a troubleshooting
mode.
Priority 2. No later than eight (8) business hours from
initial MCK notification to VITAL. Priority 2 call defined
as responding to MCK / End User configuration questions
during normal network operation.
Priority 3. No later than three (3) business days from
initial MCK notification to VITAL. Priority 3 calls defined
as responding to MCK / End User general technical questions
during normal network operation.
3.3 Software Distribution Rights. VITAL may distribute, on a
non-exclusive basis, MCK provided Updates and Patches to Customers.
3.4 Service Parts Inventory
3.4.1 MCK will consign local spare parts kits to VITAL
Logistics per VITAL recommendations and/or mutually agreed to
spare ratio. Repair of such consigned Product will be at MCK
expense.
3.4.2 VITAL will use all consigned service parts kits only
for the remedial maintenance of MCK Product. VITAL will not
resell service parts to Customers for upgrades, system expansion
or any other reason outside the scope of remedial maintenance.
3.4.3 A Logistics Management fee will be applied by VITAL to
the Customer only if there is not a contract arrangement in place
that requires VITAL to provide the consigned part. (See
Attachment B).
3.5 Consigned Product Receipt/Return; Notification.
3.5.1 VITAL is responsible for the following when receiving
consigned spare parts and/or Advance Replacements and returning
replaced Product under Section 4.1.3:
3.5.1.1 When receiving consigned spare parts,
Advance Replacements and/or returning replaced product under
Section 4.1.3, VITAL is responsible for the following:
VITAL Logistics will inspect all parts received from MCK to
verify any damage in transit. Damaged and/or mis-shipments
will be reported to MCK immediately but not longer than five
(5) business days of receipt.
3.5.1.2 Returns Coordination.
3.5.1.2.1 VITAL shall return all
defective Product(s) within ten (10) days of the
receipt of the replacement Product.
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3.5.1.2.2 VITAL shall coordinate the
return of all failed Product, freight and insurance
prepaid, to the MCK designated repair center.
3.5.1.2.3 VITAL shall comply with the
following RMA procedure:
i. VITAL will ensure all Products are properly
packaged prior to being shipped, and will include
a description of the failure and written
specification of any changes or alterations made
to the Product. Product returned to MCK will
conform in quantity and to the RMA request.
ii. VITAL shall tag each Product returned with a
transaction number and a brief description of the
problem.
3.5.2 For consigned products utilized during remedial
maintenance service as defined in Section 4.1.3, VITAL will be
responsible for the following:
3.5.2.1 Accountability. VITAL will provide and
retain records for all operational activities for MCK
Customers supported under this Agreement, including the
location(s) and hardware configuration of that
Customer.
3.5.2.2 Technical Assistance. Isolate product
problems to the Service Parts level, including
providing technical assistance to VITAL's field support
engineers which includes, at a minimum, hardware
problem identification and resolution.
3.5.2.3 Repackaging/Return of Service Parts. VITAL
will comply with the following return procedure.
i. VITAL will return defective Service Parts per
MCK's instructions.
ii. VITAL will repackage defective Service parts
and deliver to central pick-up location at the
Customer site.
iii. VITAL will inform MCK of pick-up location and
site contact/focal point for defective Service
Parts retrieval.
3.6 Help Desk Coordination. VITAL will represent MCK in answering and
coordinating a toll free customer service number. (See Attachment E)
3.7 Product Inspection. If required by MCK prior to putting previously
installed product under support, VITAL will visit the Customer to
ensure Product has been maintained in adherence to the maintenance
procedures as detailed in the applicable user information (supplied
with product upon initial sale/resale). Each Site visit will be
charged at current Time and Material rates in effect or pre-agreed to
price schedule.
3.8 Significant New Products. For significant new Products added to
the price list and/or not directly listed in Appendix A of this
Agreement, including Products which become MCK Products as a result of
an acquisition by MCK of another entity, MCK may require certain
certification, installation, or training requirements be completed by
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VITAL, as MCK would for all other MCK service providers, prior to
allowing VITAL to support such Products from MCK.
3.9 Focal Points. VITAL will identify at least one (1) individual to
manage the implementation of this Agreement, serve as focal point for
MCK's monitoring of support services provided under this Agreement,
and act as the focal point for day-to-day service issues.
3.10 Records. VITAL will maintain electronic records of Product under
coverage at all Customer sites.
3.11 Direct Customer Services Option. VITAL may resell its own brand
of services for Products directly to MCK customers under the following
circumstances: 1) In a multi-vendor environment where the MCK
installation base is less than 50% of the network and 2) if there is
not an existing service agreement directly with MCK in the first
twelve months after the initial installation. It is not the intention
of VITAL to directly solicit existing or potential Customers of MCK
for service of Products without prior approval of MCK. Under every
circumstance, VITAL will not solicit any such business unless MCK
gives prior approval. If VITAL is granted permission by MCK to quote
and support a customer as the prime to the extent permitted by law,
VITAL 1) will resell services at a higher rate than the published
prices in MCK's service offering and 2) guarantee MCK at least
comparable service revenue as detailed in the terms of Schedule B.
3.12 Personnel. VITAL shall select, employ, pay, supervise, direct and
discharge all VITAL personnel providing Services hereunder. VITAL
shall be solely responsible for the payment of all fringe benefits and
any other direct and indirect compensation for VITAL personnel
assigned to perform Services under this Agreement, as well as be
responsible for their worker's compensation insurance, employment
taxes, and other employer liabilities relating to such personnel as
required by law to be provided.
3.13 Staffing of Personnel. VITAL shall be solely responsible for
assigning personnel to perform the Services, which personnel will be
instructed by VITAL to perform the Services in a timely, efficient and
workmanlike manner. MCK shall have the right to request that personnel
not performing Services properly and in accordance with reasonable
technical or general work standards who do not promptly correct such
performance be replaced by VITAL with competent and suitable
personnel.
4. MCK OBLIGATIONS. MCK will provide the following services to VITAL:
4.1 Support for VITAL includes technical support, training, and
software support and hardware/spare support as follows:
4.1.1 Technical Support.
4.1.1.1 MCK shall provide 24-hour 7- day a week
access to MCK Engineering Resources. MCK will respond
to VITAL within one half (1/2) hour to all calls
received during Standard Local Business hours and to
Priority 1 and 2 calls received outside Standard Local
Business Hours. For Priority 3 calls received outside
Standard Local Business Hours, MCK will respond no
later than the next business day. (Reference 3.2.2 for
Priority definitions)
4.1.1.2 MCK will provide Third Level Support to
VITAL.
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4.1.1.3 Once a problem is reported by MCK or a
Customer, MCK and VITAL will work closely together to
resolve the Customer problem. It is VITAL's
responsibility to log the incoming fault report
received by VITAL and to provide the necessary local
on-site and headquarters technical resources to resolve
problems reported by MCK within the scope of this
Agreement.
4.1.1.4 If a problem is escalated back to MCK,
VITAL will assign a local technical support person to
work the resolution of the problem with MCK. MCK will
supply the appropriate level of technical resources,
based on problem priority and elapsed time, to assist
VITAL with problem resolution and to ensure adherence
to MCK's Problem Prioritization and Escalation
Guideline as described in Attachment C. During such
problem escalation, if it is mutually agreed that MCK
on-site technical resources are required for final
resolution, MCK will dispatch the necessary level of
technical support to assist VITAL at no charge. VITAL
will ensure a local technical support person is
available to work with MCK on-site. VITAL, with the
assistance of MCK, will be responsible for providing
the Customer with the necessary updates for resolution
of the problem.
4.1.2 Software and Software Support
4.1.2.1 Software Releases. MCK will provide
Updates and one (1) paper copy of supporting
documentation for Product supported under this
Agreement as identified in Attachment A for VITAL lab
use. For Product noted by an asterisk, only Maintenance
Releases are available. MCK shall also provide
supporting documentation on Disk/CD ROM, upon request,
and if available. Additional paper copies of supporting
documentation may be reproduced by VITAL.
4.1.2.2 Release Support. MCK, in meeting support
obligations, may require VITAL to upgrade its Customer
to a supported release which may be charged at VITAL's
current Time and Material rates or agreed to price
schedule to MCK.
4.1.2.3 Software Patches. When required to fix a
fault, MCK will provide new Software to VITAL to
initiate corrective action or provide a
network-bootable Software image, as VITAL and MCK
agree.
4.1.2.4 Software Updates and/or Patches will be
provided to VITAL for distribution only on Product for
which Customer is licensed to use the Software and
pursuant to a current maintenance agreement for such
Product.
4.1.3 Hardware Support. MCK shall provide the following
hardware replacement service at no charge for Product supported
by VITAL and identified in Appendix A.
4.1.3.1 Product used for replacement may be new or
equivalent to new, at MCK's discretion.
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4.1.3.2 Product used for replacement will be
repaired by MCK at no charge to VITAL.
4.1.3.3 Product documentation will be provided to
VITAL at no charge.
4.1.3.4 End of Life. For the duration of this
Agreement, MCK agrees to provide Hardware replacement
support for three (3) years following the date of
announced end of life of the Product.
4.2 Training and Education
4.2.1 As part of the initial training, MCK shall train a
minimum of four (4) VITAL central technical support persons with
MCK recommended training course(s). Up to four training course(s)
will be provided by MCK at no cost to VITAL. Training will be
held at VITAL's headquarters in Naugatuck, Connecticut and/or
regional offices throughout the world; dates and locations to be
determined by mutual agreement. Employee expenses will be borne
by VITAL. VITAL agrees to have at least eight (8) trained
regional technical support employees within two (2) months from
the effective date of this Agreement.
4.2.2 MCK shall train additional employees as mutually
agreed necessary to support Customer contract obligations covered
under contracted VITAL support programs. Additional training for
field staff will be the responsibility of VITAL based on
like/same hardware and software.
4.2.3 If requested by VITAL, MCK will provide a
Train-the-Trainer Program at no charge that allows VITAL
instructors to train internal staff on MCK's Products.
4.2.4 Alternative Training. Videos, CD-ROM's or diskettes,
if available by MCK, will be provided to VITAL at no charge to
train field personnel and will be returned to MCK upon completion
of training.
4.3 Alternative Provisioning Purchase of Product to VITAL
4.3.1 MCK will permit purchase of Service Parts for VITAL to
provide support to VITAL direct Customers. MCK will sell to VITAL
Service Parts at MCK's then current published list price, less a
[***] discount.
4.3.2 To assist VITAL in setting up a working laboratory for
network simulation and integration analysis, MCK agrees to
consign VITAL an appropriate number of laboratory units per year.
VITAL agrees to use such units solely for support purposes under
the terms of this agreement and not for resale purposes.
4.4 Record Keeping. Product Configuration and Location Change Notice.
MCK will provide Notice of or any change in i) the Hardware or
Software component and ii) the location of any Customer Product. If
notification is not provided to VITAL, VITAL will invoice for
additional charges due to changes in product configuration or
location, calculated from the date of installation.
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately
with the Securities and Exchange Commission.
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5. INTELLECTUAL PROPERTY
5.0 Ownership of Property. Title to and ownership of any and all
intellectual property utilizing Product information (e.g. patents,
copyrights, trademarks)), including but not limited to Hardware,
Software, Updates, Patches, reports, code and data, developed and/or
created by VITAL in connection with this Agreement shall immediately
vest in MCK and VITAL shall have no rights to such property except a
nonexclusive license to use in connection with service of Products.
6. SERVICE EXCLUSIONS
Services provided by VITAL do not include nor shall VITAL be
responsible for any of the services listed below. VITAL shall provide
MCK with a time and materials quotation to perform such services if
requested by MCK.
6.1 Any customization of Software.
6.2 Support or replacement of Product that is altered, modified,
mishandled, destroyed or damaged by natural causes or damaged during
unauthorized use.
6.3 Services to resolve Software or Hardware problems resulting from
third party product or causes beyond MCK's control.
6.4 Services for non-MCK Software installed on any MCK Product.
6.5 Any Hardware upgrade required to run new or updated Software.
6.6 Non-contract related on-site diagnostics and/or remedial services
unless authorized by MCK.
7. CHARGES AND PAYMENTS
7.1 VITAL shall invoice MCK for the Contract Price for Services, as
defined by Appendix B, performed and for any amounts due for Unrelated
Services performed according to the payment schedule described in
Attachment B. Each invoice shall include supporting documentation and
details of the Services and Unrelated Services performed. MCK shall
pay any amounts due within thirty (30) days of receipt thereof.
7.2 The stated charges, prices, fees or other amounts to be invoiced
and paid pursuant to this Agreement, do not include any applicable
Federal, State, County or local sales, use, property, excise taxes
customs, import and export duties, VAT or other tax however
designated, regardless of how or on whom the tax is levied and whether
such tax is based on any charge, price, fee or other amount, (the
Product, or service or their use) pursuant to this Agreement. Any such
taxes and interest on them (except taxes based on VITAL's or MCK' net
income) required to be paid by VITAL shall be added to the invoices.
Any taxes to be paid by MCK, but in fact paid by VITAL, shall be
reimbursed to VITAL. In the event any taxes to be paid by MCK, but
levied on VITAL, are not paid until audit, VITAL may then invoice
Customer. Customer may submit a certificate of Exemption for each
state in which it is registered to do business and exempted from
payment of any tax, and failure to do so does not imply the
responsibility as that of VITAL.
7.3 Unrelated Service. VITAL shall not perform any Unrelated Service
without the prior written or verbal consent of an authorized MCK
representative. MCK will supply a list of authorized individuals under
separate cover. If MCK agrees that such Unrelated
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Service is necessary for a Customer, VITAL shall supply such Unrelated
Service and invoice MCK therefore at the rates set forth in Attachment
B.
7.4 Invoicing. Invoices for installation and Unrelated Service shall
be rendered monthly. Invoices for maintenance and value-add contract
Services shall be rendered quarterly, in advance subject to the
minimum payments under Section 7.5.
7.5 Minimum Payments. As defined by Appendix B in consideration of
VITAL's entering into this Agreement and commitment to provide
services, MCK owes VITAL minimum quarterly payments that aggregate
[***] for Year 1 of the contract and [***] for Year 2 of the
contract. Any service revenue generated by VITAL from MCK contracts is
automatically applied against these minimum payments. Any service
revenue generated by MCK in Year 1 that is in excess of [***] is
automatically applied against MCK's Year Two minimum payment. If
revenue meets or exceeds the total twenty four (24) month commitment
of [***] anytime during the contract term, MCK has met all its
minimum revenue obligations to VITAL.
7.6 In addition to other remedies available to VITAL, overdue invoices
may bear a late payment charge at the rate of one (1) percent
commencing on the 31st day, but in no event in excess of the lawful
maximum. In the event an invoice is more than sixty (60) days past due
and such invoice has not been paid by MCK within sixty (60) days after
the receipt by MCK of written notice that such invoice is more than
sixty (60) days due, VITAL may withhold performance hereunder until
such invoice is paid.
7.7 Books and Records; Audits. VITAL shall maintain full and accurate
books, records and accounts of all Services rendered pursuant to this
Agreement in such a way as to disclose clearly and accurately the
nature and detail thereof, including without limitation such
accounting information as is necessary to support the reasonableness
of charges under this Agreement and such additional information as MCK
may reasonably request for purposes of its internal bookkeeping and
accounting operations. VITAL shall keep such books, records and
accounts insofar as they pertain to the computation of charges
hereunder available at its principal offices for audit, inspection and
copying by MCK and persons authorized by MCK during reasonable
business hours.
MCK shall have the right, on two (2) occasions per each twelve (12)
month period of this Agreement, to conduct an audit of the relevant
books, records and accounts of VITAL upon giving reasonable notice of
its intent to conduct such an audit. In the event of such audit, VITAL
shall give to the party requesting the audit its cooperation and
access to all books, records and accounts reasonably necessary to
audit. If during the course of any such audit it is determined that
the charges actually invoiced to MCK by VITAL are more than [***]
percent greater than the charges which should have been invoiced
according to such audit, then VITAL shall (1) pay to MCK the sum of
(x) the difference between such audited invoice amount and the amount
actually invoiced and (y) interest calculated from the data of the
invoice and (2) reimburse MCK for all costs associated with such audit
not to exceed the amount of the overcharge. If it is determined that
VITAL was underpaid then MCK shall pay to VITAL the amount of the
underpayment.
8. TERMINATION.
8.1 This Agreement may be terminated immediately by either party
through written Notice under any of the following conditions:
8.1.1 By either party if the other party breaches any of the
material provisions of this Agreement and fails to remedy such breach
within thirty (30) days after written notification by the other party
of such breach.
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately
with the Securities and Exchange Commission.
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8.1.2 By VITAL if MCK fails to pay any amount when due and such
failure continues for sixty (60) days after written notification by
VITAL of such past due amount except for quarterly advance payments
under Section 7.4 if such failure continues for sixty (60) days after
the quarterly due date.
8.2 Provisions after Termination of the Agreement.
8.2.1 Upon termination of this Agreement (i) each party shall
immediately return to the other all Confidential Information (as
defined below) of the other party in its possession and (ii) VITAL
shall return to MCK immediately after the effective date of
termination all MCK-owned consigned spare parts
9. SOFTWARE LICENSE AND PROPRIETARY RIGHTS.
VITAL acknowledges that it may receive Software as a result of
services provided under this Agreement. VITAL agrees that it is
licensed to distribute such Software only on Product covered under the
Services. Except as otherwise specified, VITAL shall not: (i) copy, in
whole or in part, Software or documentation; (ii) reverse compile or
reverse assemble all or any portion of the Software; or (iii) rent,
lease, distribute, sell, or create derivative works of the Software.
10. CONFIDENTIAL INFORMATION.
10.1 As used in this Agreement, "Confidential Information" means any
business or technical information disclosed, either written or orally,
by one party to the other under this Agreement provided, that if the
information disclosed is in writing, it must be clearly labeled as
"Confidential", "proprietary" or with a similar legend, and if the
information is disclosed orally, it must be i) identified as
Confidential Information at the time of disclosure by the disclosing
party.
10.2 Confidential Information does not include any information which:
10.2.1 is, or subsequently becomes, legally and publicly
known or readily ascertainable by the public, and through no
wrongful act of the receiving party;
10.2.2 is rightfully obtained and received by receiving
party from a third party without any obligation of
confidentiality;
10.2.3 is independently developed by the receiving party or
for the receiving party without access to or benefit from the
Confidential Information; or
10.2.4 is disclosed to a third party by the disclosing party
without restriction on disclosure.
10.3 Each party agrees to hold the other party's Confidential
Information in strict confidence and not to disclose such Confidential
Information to any third party except as specifically authorized by
this Agreement or by the other party in writing. Each party may
disclose the other's Confidential Information to its employees who are
under confidentiality obligations to it and who have a bona fide need
to know such Confidential Information, but only to the extent
necessary to carry out the purposes of this Agreement.
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10.4 Both parties acknowledge and agree that both parties list of
employees is confidential and shall prevent the unauthorized
disclosure of this Confidential Information. Each party shall use at
least the same degree of care to protect such information as it uses
to protect its own confidential or proprietary information of a
similar nature but in no event less than reasonable care. Each party
shall use such information solely for the purposes contained in this
Agreement, and shall make no other use of such information.
10.5 All Confidential Information disclosed hereunder is and shall
remain the property of the disclosing party. No right or license is
granted other than as expressly set forth in this Agreement. These
Section 10 obligations shall survive the expiration or termination of
this Agreement.
11. MCK LIABILITY AND INDEMNIFICATION.
11.1 MCK agrees to defend and indemnify VITAL, its officers, employees
and Affiliates from and against all claims, damages, liabilities,
awards, judgments and settlements against them of whatever nature for
damage to tangible personal property and bodily injury (including
death) arising out of or resulting from the authorized use of the
Product as provided to the Customer or VITAL by MCK in accordance with
the terms of this Agreement.
11.2 MCK, at its own expense, shall defend and indemnify VITAL and its
Affiliates against claims that the authorized repair, installation and
possession of a Product by VITAL in accordance with the terms of this
Agreement infringes a U.S. patent or copyright or misappropriates
trade secrets of a third party provided VITAL (i) gives MCK prompt
notice of such claim, (ii) gives MCK sole control of any defense and
settlement of such claims and (iii) provides any and all reasonably
required assistance requested by MCK at MCK's expense.
11.3 MCK's obligations under this Section 11 shall not extend to
liabilities of VITAL, VITAL officers, employees, or VITAL Affiliates
which are caused by VITAL's negligence or intentional misconduct in
performance of its obligations under this Agreement.
11.4 VITAL shall give MCK prompt notice of any suit or other
proceeding against VITAL for which VITAL may wish to seek
indemnification hereunder. In addition, the parties agree not to
settle or compromise any claim or cause of action, which may affect an
interest of the other party, without the prior written approval of the
other party, providing such approval shall not be unreasonably
withheld.
11.5 MCK shall have full control of the defense of any claim or cause
of action for which it is obligated to indemnify VITAL, and for all
negotiations for its settlement or compromise. VITAL shall reasonably
cooperate with MCK, at MCK's expense, in the defense of the action.
11.6 [***]
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately
with the Securities and Exchange Commission.
12
<PAGE> 13
11.7 IN NO EVENT SHALL MCK OR ANY MCK AFFILIATE BE LIABLE FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS, OR LOST
DATA, OR ANY OTHER INDIRECT DAMAGES EVEN IF MCK HAS BEEN INFORMED OF
THE POSSIBILITY THEREOF OR WHETHER SUCH EXPENSES OR DAMAGES ARE
SUFFERED INTERNALLY BY VITAL OR ARE PAID BY VITAL TO A THIRD PARTY.
12. VITAL LIABILITY AND INDEMNIFICATION.
12.1 VITAL agrees to defend and indemnify MCK and its directors,
stockholders, officers and employees from and against all claims,
damages, liabilities, awards, judgments, and settlements against them
of whatever nature for damage to tangible property and bodily injury
(including death) arising out of VITAL's negligence, willful
misconduct or breach with respect to the performance of its or its
obligations under this Agreement.
12.2 IN NO EVENT SHALL VITAL OR ANY VITAL AFFILIATE BE LIABLE FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS, OR LOST
DATA, OR ANY OTHER INDIRECT DAMAGES EVEN IF VITAL HAS BEEN INFORMED OF
THE POSSIBILITY THEREOF OR WHETHER SUCH EXPENSES OR DAMAGES ARE
SUFFERED INTERNALLY BY MCK OR ARE PAID BY MCK TO A THIRD PARTY.
12.3 VITAL's obligations under this Section shall not extend to
liabilities of MCK and its officers and employees which arise out of
MCK's negligence or intentional misconduct or breach of third party
intellectual property rights in the design, manufacture, distribution,
installation or servicing of the Product.
12.4 MCK shall give VITAL prompt notice of any suit or other
proceeding instituted against MCK for which MCK may wish to seek
indemnification hereunder. The parties agree to cooperate in the
defense of any such action or proceeding. In addition, the parties
agree not to settle or compromise any claim or cause of action, which
may affect an interest of the other party, without the prior written
approval of the other party.
12.5 THE ENTIRE CUMULATIVE LIABILITY OF EITHER PARTY's EXCLUSIVE
REMEDY FOR DAMAGES FROM ANY CAUSE related to or arising out of this
Agreement, its making, performance or interpretation, including claims
of Customers related to performance of Services by VITAL, regardless
of the form of action, whether in contract or tort and including
negligence, shall not exceed the actual amount paid by MCK for
Services directly related to the specific claim, during the twelve
(12) month period immediately prior to MCK's written notice of a
claim.
12.6 Non-Solicitation. During the term of this Agreement and for one
(1) year thereafter, VITAL shall not, without the prior written
consent of MCK, directly or indirectly solicit, recruit, hire or use
the services of any MCK employee whose identity is learned hereunder
so long as such employee is employed by MCK and for sixty (60) days
thereafter. In the event of breach of this obligation VITAL shall
promptly pay to MCK, as liquidated damages and not as a penalty, an
amount equal to two (2) times such employee's total annual
compensation determined as of the date of the breach.
13. INSURANCE
13.1 VITAL shall maintain during the term of this Agreement at VITAL's
expense, commercial general liability insurance including Property
Damage insurance and
13
<PAGE> 14
Personal Injury insurance in such amounts and upon such terms which
are reasonably satisfactory to MCK and with MCK named as an additional
insured for purposes of this Agreement.
13.2. Workers Compensation: VITAL will maintain Workers Compensation
insurance to the statutory amount and Employer's Liability of at least
$1,000,000.
14. GENERAL
14.1 Assignments. Neither this Agreement nor any rights under this
Agreement, other than monies due or to become due, shall be assigned
or otherwise transferred by either party (by operation of law or
otherwise) without the prior written consent of the other party. This
Agreement may be transferred or otherwise assigned to any entity which
owns or acquires all or substantially all of the assets of either
party or to any Affiliate with the prior written approval of the other
party, which approval shall not be unreasonably withheld. This
Agreement shall bind and inure to the benefit of the successors and
permitted assigns of the parties.
14.2 Warranty.
14.2.1 VITAL shall not make any warranty commitment, whether
written or oral, on MCK' behalf.
14.2.2 VITAL warrants that the Services provided shall be
performed in a competent manner by qualified, trained maintenance
personnel and shall be free from defects in workmanship for
thirty (30) days following its provision.
14.3 Modifications. This Agreement may not be changed or modified in
any way subsequent to the first date of execution except by an
instrument in writing cosigned by authorized representatives of both
parties. No contract or agreement entered into after the Effective
Date shall amend by implication any provision of this Agreement.
14.4 Severability. If any provision of this Agreement is or becomes
illegal, invalid or void under any applicable state or federal law
under which performance hereunder is required, such provision shall be
considered severable, and the remaining provisions hereof shall not be
impaired, and this Agreement shall be interpreted as far as possible
so as to give effect to its stated purpose.
14.5 Defined Relationship. Other than the services agreed to in this
document, neither party is hereby designated nor appointed an agent to
the other and neither party shall have any authority, either express
or implied, to create or assume any agency or obligation on behalf of
or in the name of the other. The relationship of VITAL and MCK shall
be that of independent contractors and, except as expressly set forth
herein, neither party shall have any responsibility for or obligations
to the employees of the other.
14.6 Disclosure of Agreement. VITAL acknowledges and agrees that in no
event shall any of the information contained in this Agreement be
disclosed to anyone other than VITAL's employees with a need to know.
Neither party shall disclose, advertise, or publish the terms and
conditions of or transactions under this Agreement without the prior
written consent of the other party, which will not be unreasonably
withheld.
14.7 Trademarks. Neither VITAL or MCK will use each other's trademark
or trade name in any manner except as mutually agreed upon. Neither
VITAL or MCK have any right, title or interest in each other's
trademark or trade name. Both parties agree to allow
14
<PAGE> 15
the other party to use their name and logo on the other parties
respective web site upon such terms and conditions as the parties
hereto may agree upon.
14.8 Force Majeure. Neither party shall be deemed to be in default nor
be responsible for delays or failures in performance resulting from
acts beyond the reasonable control of such party. Such acts shall
include, but not be limited to, acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental action or inaction, trade
embargoes, fire, communication line failures, power failures,
earthquakes, or other disasters.
14.9 Notices. Any Notices required or authorized to be given shall be
deemed to have been given when received via certified or registered
first-class mail, postage prepaid, or via any other public or private
delivery service providing for written acknowledgment of receipt to
the address set forth on the signature page of this Agreement.
14.10 Waiver. No delay, failure or refusal on behalf of either party
to require or demand any performance or obligation hereunder, or to
exercise any right or remedy to which it may be or become entitled,
shall constitute or be deemed a waiver or relinquishment thereof, or
of any other right, demand or obligation, and shall not prejudice
either party's right to demand or insist upon any other prior or
subsequent performance or obligation hereunder.
14.11 Disputes and Governing Law. The rights and obligations of the
parties and all interpretations and performance of this Agreement
shall be governed in all respects by the laws of the Commonwealth of
Massachusetts except for its rules with respect to the conflict of
laws.
14.12 Paragraph Headings. Paragraph headings contained in this
Agreement are for ease of reference only and shall not affect the
interpretation or meaning of this Agreement.
14.13 Integration. This agreement, including the attached Exhibits,
and any amendments as may from time to time be agreed and integrated
is intended to be the sole and complete statement of the obligations
of the parties and supersedes any other negotiation, agreement or
understanding, whether written or oral, that may have been made or
entered into with regard to the subject matter hereof by MCK or VITAL
or by any officer or other representative of either party. This
Agreement and the performance of the parties pursuant to it shall not
affect any other Agreement between them which relates to matters
extraneous hereto.
14.14 Conflicts. In the event that any specific wording of this
Agreement shall conflict with any provision or wording of any printed
terms and conditions contained on Purchase Orders, acceptance forms,
procurement and functional specifications, the wording of this
Agreement shall prevail.
14.15 Survival. Sections 8, 10, 11 and 12, shall survive termination
of this Agreement.
15
<PAGE> 16
MCK COMMUNICATIONS, INC. VITAL NETWORK SERVICES, L.L.C.
By: /s/ Woody Benson By: /s/ Philip John Woods
------------------------------ -------------------------------
Name: Woody Benson Name: Philip John Woods
---------------------------- -------------------------------
Title: CEO Title: President
---------------------------- -------------------------------
Address: 313 Washington Street Address: 6 Rubber Avenue
Newton, Ma 02458 Naugatuck, Ct 06770
Date: 6/28/99 Date: 6/29/99
---------------------------- -------------------------------
16
<PAGE> 17
APPENDIXES
Appendix A: MCK Product List (Accelerated to provide Hard/Soft version)
Appendix B: VITAL Payment Schedule/Minimum Commitments (provided in prior
e-mail)
Appendix C: MCK Escalation/Priority Schedule- TBD
Appendix D: MCK Support Services - TBD
Appendix F: VITAL Installation & Maintenance Service Descriptions
17
<PAGE> 18
APPENDIX A: MCK PRODUCT LIST
<TABLE>
<CAPTION>
SWITCH UNIT REMOTE UNIT
<S> <C> <C>
Branch Office EXTender 6000 E-6000-SLM08 E-6000-RLM08
(Definity Compatible)
Branch Office EXTender 6000 E-6000-SNM08 E-6000-RNM08
(Meridian/Norstar Compatible)
Branch Office EXTender 6000 E-6000-SEM08 E-6000-REM08
(Neax Compatible)
</TABLE>
18
<PAGE> 19
[VITAL NETWORK LOGO]
APPENDIX B - REVENUE SPLITS & PRICING SCHEDULE
NOTE: VITAL NETWORK SERVICES CHARGES MCK THE PERCENTAGE OF END-USER LIST PRICE
OR FLAT RATE AS INDICATED.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TOLL FREE/ HELP DESK CHARGE TO MCK
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I. 8 X 5 HELP DESK [***] (annual)
24 X 7 HELP DESK [***] (annual)
(OPTIONAL - DOES NOT INCLUDE COST OF LINE)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
SECTION SERVICE DESCRIPTION CHARGE TO MCK
- --------------------------------------------------------------------------------------------------------------------------
I. LOGISTICS MANAGEMENT
NON MAINTENANCE CUSTOMERS
PRICE PER STOCKING LOCATION [***]
- --------------------------------------------------------------------------------------------------------------------------
SECTION SERVICE DESCRIPTION END USER PRICE MCK VITAL
(% OF PRODUCT LIST)
- --------------------------------------------------------------------------------------------------------------------------
II. HARDWARE INSTALLATION SERVICES
(PRICING REFLECTS ZONE A & B ONLY)
BUSINESS DAY (1ST UNIT) TBD [***] [***]
ADDITIONAL UNITS* TBD
NON BUSINESS DAY (1ST UNIT) TBD
ADDITIONAL UNITS* TBD
SITE SURVEY **(PER REQUEST)
*ADDITIONAL UNIT PRICING APPLIES IF
INSTALLED AT THE SAME SITE. MINIMUM
INSTALLATION CHARGE IN $[***].
**FEE IS WAIVED IF INSTALLATION IS [***]
PURCHASED AT TIME OF SITE SURVEY REQUEST
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
III. SOFTWARE INSTALLATION (ON-SITE) SERVICES
LOAD S/W, CONFIGURE & TEST
BUSINESS DAY [***] [***] [***]
NON BUSINESS DAY [***] [***] [***]
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
IV. REMOTE SERVICES
TS/SOFTWARERELEASE (NO LABOR) /ADVANCED [***] [***] [***]
REPLACEMENT
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
V. MAINTENANCE SERVICES
(PRICING REFLECT ZONE A & B ONLY)
BASIC 8 X 5 (M-F) [***] [***] [***]
PREMIUM 7 X 24 (PENDING AVAIL)
ALL MAINTENANCE SERVICES LISTED ABOVE CARRY [***]
FOUR (4) HOUR RESPONSE FROM ZONE A
LOCATIONS TO THE END-USER, LOGISTICS
MANAGEMENT INCLUDED.
MCK IS RESPONSIBLE FOR CONSIGNMENT OF
SPARING.
- --------------------------------------------------------------------------------------------------------------------------
SECTION SERVICE DESCRIPTION END USER MCK VITAL
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately
with the Securities and Exchange Commission.
<PAGE> 20
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
VI. DEDICATED FIELD ENGINEER
ONE (1) YEAR (40 HOURS PER WEEK)* [***] [***] [***]
*PRICE BASED ON LEVEL OF ENGINEER REQUIRED
- --------------------------------------------------------------------------------------------------------------------------
ZONES TO END USER TO END USER
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VII. TIME AND MATERIAL SERVICES (TO END USER) TRAVEL (FIXED LABOR(PER HOUR)
(CONTRACT CUSTOMERS OUTSIDE SCOPE OF RATE)
CONTRACT)
ZONE A [***]
ZONE B [***]
BUSINESS DAY* ZONE C [***]
[***]
ZONE A [***]
ZONE B [***]
NON BUSINESS DAY ZONE C [***]
[***]
[***]
HOLIDAYS & WEEKENDS
[***]
NON- CONTRACT CUSTOMER RATES
ZONE A [***]
ZONE B [***]
BUSINESS DAY ZONE C [***]
[***]
ZONE A [***]
ZONE B [***]
NON BUSINESS DAY ZONE C [***]
[***]
HOLIDAYS & WEEKENDS [***]
ZONE A = 50 MILE RADIUS OF VITAL SERVICE
CENTER
ZONE B=51-100 MILE RADIUS OF VITAL SERVICE
CENTER
ZONE C=100+ RADIUS OF VITAL SERVICE CENTER
*ALL TYPE CALLS CARRY A [***]
MINIMUM EXCEPT WHERE SPECIFIED
- --------------------------------------------------------------------------------------------------------------------------
DISCOUNT TO MCK LIST PRICES NOTE:
- --------------------------------------------------------------------------------------------------------------------------
VIII. BLOCK OF HOURS (TO MCK)
- TIME & MATERIAL [***] [***] [***]
- PROJECT MANAGEMENT [***] [***]
- PROFESSIONAL SERVICES [***]
- CUSTOMER SERVICE [***] [***]
- OTHER [***]
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately
with the Securities and Exchange Commission.
20
<PAGE> 21
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
END USER MCK VITAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IX. PROFESSIONAL SERVICES/ PROJECT MANAGEMENT CUSTOM QUOTE REQUIRED [***] [***]
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately
with the Securities and Exchange Commission.
21
<PAGE> 22
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SECTION SERVICE DESCRIPTION MCK CHARGE TO MCK
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
X. TECHNOLOGY TRAINING
TRAIN THE TRAINER (PROVIDED BY MCK) [***] [***]
INITIAL CONSULTATION/COURSE INVESTIGATION -----------------> [***]
COURSE DEVELOPMENT* -----------------> [***]
COURSE OFFERING IN NAUGATUCK#
-----------------> [***]
COURSE OFFERING ON CUSTOMER OR MCK PREMISES* [***]
----------------->
*TRAVEL & EXPENSES, SHIPPING WILL BE CHARGED AT ACTUAL
COSTS. SET UP WILL BE BILLED AT [***]
#DEPENDENT ON SUBJECT- PLAN FOR 3-5 DAY COURSE OFFERINGS.
MINIMUM REQUIREMENT, (4) STUDENTS PER CLASS.
(1) BUDGETARY ONLY-EACH PROJECT TO BE REVIEWED ON MERIT.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with
the Securities and Exchange Commission.
22
<PAGE> 23
VITAL NETWORK SERVICES / MCK
START UP FEES, CONDITIONS & PAYMENT SCHEDULES
Contract Commencement is JULY 1, 1999. The initial contract term is TWENTY-FOUR
(24) MONTHS.
PAYMENT SCHEDULE (1999-2001)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEAR 1 YEAR 2
(PAYMENT IS QUARTERLY IN ARREARS) (PAYMENT IS QUARTERLY FOR ACTUAL SERVICES RENDERED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
QTR 1 July, Aug, SEPT 1999 [***] QTR 1
- --------------------------------------------------------------------------------------------------------------------------
QTR 2 Oct, Nov, DEC 1999 [***] QTR 2
- --------------------------------------------------------------------------------------------------------------------------
QTR 3 Jan, Feb, MAR 2000 [***] QTR 3
- --------------------------------------------------------------------------------------------------------------------------
QTR 4 Apr, May, JUN 2000 [***] QTR 4
- --------------------------------------------------------------------------------------------------------------------------
July 2000- June 2001
- --------------------------------------------------------------------------------------------------------------------------
Total [***] 12 Month Target [***]
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONDITIONS:
1. MCK MINIMUM COMMITMENT TO VITAL NETWORK SERVICES IS [***] IN YEAR 1 AND
[***] IN YEAR 2.
2. PRICING WILL BE REVIEWED EVERY [***] AND IS SUBJECT TO CHANGE UPON
MUTUAL AGREEMENT.
3. IF ACTUAL REVENUE EXCEEDS QUARTERLY TARGETS IN YEAR 1, THE NEXT QUARTERS
INVOICE WILL BE ADJUSTED ACCORDINGLY. THE GOAL FOR THE FIRST TWELVE (12)
MONTH PERIOD IS TO EQUAL OR EXCEED [***]. IN YEAR 2, PAYMENT WILL BE
QUARTERLY IN ARREARS FOR ACTUAL SERVICES RENDERED. IF THERE IS A SHORTFALL
OF THE TWELVE (12) MONTH TARGET, THE FINAL BILLING WILL INCLUDE THE
SHORTFALL AMOUNT.
4. REVENUE MINIMUM'S ONLY APPLY TOWARDS SERVICES HIGHLIGHTED IN SECTIONS I
(A&B), II, III, IV, VIII AND IX ONLY.
5. IF REVENUE MEETS OR EXCEEDS THE TOTAL TWENTY-FOUR (24) MONTH COMMITMENT OF
[***] ANYTIME DURING THE CONTRACT TERM, MCK HAS MET THEIR REVENUE MINIMUMS
TO VITAL NETWORK SERVICES.
[***] Confidential treatment has been requested for the bracketed portions. The
confidential redacted portion has been omitted and filed separately with
the Securities and Exchange Commission.
23
<PAGE> 1
EXHIBIT 10.17
- --------------------------------------------------------------------------------
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT BANKBOSTON, N.A.
- --------------------------------------------------------------------------------
Date: July 1, 1999
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made between
BANKBOSTON, N.A. (hereinafter, the "LENDER"), a national banking
association with offices at 100 Federal Street, Boston, Massachusetts 02110
and
MCK COMMUNICATIONS, INC. (THE "AGENT" OR "MCK COMMUNICATIONS"), a
Nevada corporation with its principal executive offices at 313 Washington
Street, Newton, Massachusetts, and MCK TELECOMMUNICATIONS INC. ("MCK
TELECOMMUNICATIONS"), a Canadian company with its principal executive
offices at 130 Bownes Centre, Northwest, Calgary, Alberta, Canada T3B5M5
(hereinafter, MCK Communications and MCK Telecommunications shall be
referred to herein, individually and collectively, as the "BORROWER")
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom. This Amended and Restated Loan and Security Agreement amends
and restates a certain Loan and Security Agreement dated February 23, 1998
between Borrower and Lender, as amended by a certain First Amendment to Loan and
Security Agreement dated as of April 30, 1999. All capitalized terms shall have
the meaning ascribed to them in EXHIBIT 9-13 hereto.
W I T N E S S E T H:
ARTICLE 1 - AGENTED LOAN ARRANGEMENT
1-1. DESIGNATION OF AGENT. Each Borrower hereby designates MCK
Communications as the agent of that Borrower to discharge the duties and
responsibilities of the Agent as provided herein.
1-2. OPERATION OF LOAN ARRANGEMENT. (a) Except as otherwise provided in
this Article, loans and advances hereunder shall be requested solely by the
Agent as agent for each Borrower.
(b) Confirmatory assignments of accounts and accounts receivable and
remittances on accounts and accounts receivable for each Borrower shall be
provided to the Lender or otherwise directed in accordance with the Lender's
reasonable instructions given from time to time to the Agent.
- 1 -
<PAGE> 2
(c) Any advance which may be made by the Lender under the Loan
Arrangement and which is directed to the Agent is received by the Agent in trust
for that Borrower who is intended to receive such advance. The Agent shall
distribute the proceeds of any such advances solely to the Borrower. Each
Borrower shall be directly indebted to the Lender for each advance distributed
to that Borrower by the Agent, together with all accrued interest thereon, as if
that amount had been advanced directly by the Lender to that Borrower (whether
or not the subject advance was based upon the accounts and/or inventory or other
assets of the Borrower which actually received such distribution), in addition
to which each Borrower shall be obligated to the Lender in that amount on
account of that Borrower's respectively having guarantied the Liabilities.
(d) The Lender shall have no responsibility to inquire as to the
distribution of loans and advances made by the Lender through the Agent as
described herein.
1-3. LOANS DIRECTLY TO BORROWER. (a) If, for any reason, and at any time
during the term of the within Agreement,
(i) any Borrower, including the Agent, as agent for the
Borrowers, shall be unable to, or prohibited from carrying out the terms
and conditions of the within Agreement (as determined by the Lender in the
Lender's sole and absolute discretion); or
(ii) the Lender deems it inexpedient (in the Lender's sole and
absolute discretion) to continue making loans and advances to or for the
account of any particular Borrower, or to channel such loans and advances
through the Agent,
then the Lender may make loans and advances directly to such Borrower as the
Lender determines to be expedient, which loans or advances may be made without
regard to the procedures otherwise included in this Article 1.
(b) In the event that the Lender determines to forgo the procedures
included herein pursuant to which loans and advances are to be channeled through
the Agent, then the Lender may designate one or more Borrower to fulfil the
financial and other reporting requirements otherwise imposed herein upon the
Agent.
- 2 -
<PAGE> 3
(c) Each Borrower shall remain liable to the Lender for the payment and
performance of all Liabilities (which payment and performance shall continue to
be secured by all collateral security granted by each Borrower) notwithstanding
any determination by the Lender to cease making loans or advances to or for the
benefit of any Borrower.
1-4. CONTINUATION OF AUTHORITY OF AGENT. The authority of the Agent to
request loans on behalf of, and to bind, the Borrowers, shall continue unless
and until the Lender acts as provided in Section 1-3, above, or the Lender
actually receives:
(a) written notice of: (i) the termination of such authority, and
(ii) the subsequent appointment of a successor Agent, which notice is
signed by the respective Presidents of each Borrower (other than the
President of the Agent being replaced) then eligible for borrowing under
the within Agreement; and
(b) written notice from such successive Agent (i) accepting such
appointment; (ii) acknowledging that such removal and appointment has been
effected by the respective Presidents of such Borrowers eligible for
borrowing under the within Agreement; and (iii) acknowledging that from and
after the date of such appointment, the newly appointed Agent shall be
bound by the terms hereof, and that as used herein, the term "Agent" shall
mean and include the newly appointed Agent.
1-5. INDEMNIFICATION. The Agent and each Borrower respectively shall
indemnify, defend, and save and hold the Lender harmless from and against any
liabilities, claims, demands, expenses, or losses made against or suffered by
the Lender on account of, or arising out of, the Loan Arrangement, the Lender's
reliance upon loan requests made by the Agent, or any other action taken by the
Lender hereunder or under any of the Lender's various agreements with the Agent
and/or any Borrower and/or any other person arising under the loan arrangement
contemplated herein except for any liability, claim, demand, expense, or loss as
to which a final judicial determination is made and from which no appeal is
available (in a proceeding in which the Lender has had an opportunity to be
- 3 -
<PAGE> 4
heard) that the Lender had acted in a grossly negligent manner or in actual bad
faith.
ARTICLE 2 - THE LINES OF CREDIT.
2-1. ESTABLISHMENT OF REVOLVING CREDIT. (a) The Lender hereby establishes a
Two Million Dollar revolving line of credit (hereinafter, the "REVOLVING
CREDIT") in the Borrower's favor pursuant to which the Lender, subject to,
and in accordance with, the within Agreement, shall make loans and advances
and otherwise provide financial accommodations to and for the account of
the Borrower. The amount of the Revolving Credit shall be determined by the
Lender by reference to Availability (as defined herein). All loans made by
the Lender under this Agreement, and all of the Borrower's other
Liabilities (as defined below) to the Lender under or pursuant to this
Agreement, are payable as provided herein.
(b) Availability shall be based upon Borrowing Base Certificates
furnished as provided in Section 5-3, below.
(c) The proceeds of borrowings under the Revolving Credit shall be
used solely for working capital purposes and the issuance of letters of
credit on behalf of Borrower.
2-2. ESTABLISHMENT OF EQUIPMENT LINE. (a) The Lender hereby establishes a
non-revolving line of credit (hereinafter, the "EQUIPMENT LINE") in the
Borrower's favor pursuant to which the Lender, subject to and in accordance
with the within Agreement, shall make loans and advances and otherwise
provide financial accommodations to and for the account of the Borrower.
The amount of the Equipment Line shall be equal to the Equipment Line
Availability (as defined below), as determined by the Lender from time to
time hereafter.
- 4 -
<PAGE> 5
(b) As used herein, the term "EQUIPMENT LINE AVAILABILITY" refers at
any time to the lesser of (i) or (ii), below:
(i) Five Hundred Thousand Dollars ($500,000.00).
(ii) Eighty percent (80%) of Equipment approved from time to time
by Lender, excluding taxes, shipping, warranty charges, freight discounts,
installation expense, and software.
(c) At the time of each advance request under the Equipment Line,
Agent shall deliver to Lender, an invoice for the Equipment to be
purchased.
(d) The proceeds of borrowings under the Equipment Line shall be used
solely to purchase Equipment to be used in the operation of Borrower's
business.
(e) The Lender shall not be required to make any loans or advances
under the Equipment Line after September 30, 1999 (the "EQUIPMENT LINE
AVAILABILITY END DATE"). The outstanding balance of the Equipment Line on
the Equipment Line Availability End Date shall be repaid as provided in
Sections 2-5 and 2-6.
2-3. PROCEDURES UNDER REVOLVING CREDIT AND EQUIPMENT LINE. The Agent may
request loans and advances under the Revolving Credit and the Equipment Line
from time to time hereunder, in each instance in accordance with such procedures
as may from time to time be acceptable to the Lender.
2-4. THE MASTER NOTES. The obligation to repay loans and advances under the
Revolving Credit and the Equipment Line, with interest as provided herein, shall
be evidenced by certain notes (hereinafter, collectively referred to as the
"MASTER NOTE", and individually as the "REVOLVING CREDIT MASTER NOTE" and the
"EQUIPMENT LINE MASTER NOTE", respectively) in the form executed by the Borrower
this date. Neither the original nor a copy of the Master Note shall be required,
however, to establish or prove any Liability. In the event that the Master Note
is ever lost, mutilated, or destroyed, the Borrower shall execute a replacement
- 5 -
<PAGE> 6
thereof and deliver such replacement to the Lender upon execution by Lender of
the Lender's standard lost note indemnity agreement.
2-5. PAYMENT OF LOAN ACCOUNTS.
(a) REVOLVING CREDIT. The Borrower may repay all or any portion of
the principal balance of the Revolving Credit from time to time prior to
the termination of the Revolving Credit (as to which, see Article 8,
below). The Borrower, without notice or demand from the Lender, shall pay
the Lender that amount, from time to time, which is necessary so that the
principal balance of the Revolving Credit does not exceed Availability. The
Borrower shall pay interest accruing on the principal balance of the
Revolving Credit in accordance with Section 2-6 hereof. The Borrower shall
repay the then entire unpaid balance of the Revolving Credit on the
Revolving Credit Termination Date (as to which, see Article 8 below).
(b) EQUIPMENT LINE. Beginning on the first day of the month following
the Equipment Line Availability End Date, and continuing on the first day
of every calendar month thereafter, the Borrower shall make thirty-six (36)
monthly payments of (i) principal, which payments shall be computed by the
Lender based upon (A) the then outstanding principal balance of the
Equipment Line, and (B) an amortization schedule of thirty-six (36) months,
plus (ii) interest on the outstanding principal balance. The Borrower,
without notice or demand from the Lender, shall pay the Lender that amount,
from time to time, which is necessary so that the principal balance of the
Equipment Line does not exceed the Equipment Line Availability. The final
payment shall be equal to the principal amount outstanding, together with
all other amounts outstanding under the Equipment Line. Any principal
prepayments shall be applied to principal payments due under the Equipment
Line in the inverse order of maturity. Notwithstanding the foregoing, the
Borrower shall repay all then outstanding amounts under the Equipment Line
on the Equipment Line Termination Date (as to which, see Article 8 below).
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2-6. INTEREST.
(a) REVOLVING CREDIT. The unpaid principal balance of the Revolving
Credit shall bear interest, until repaid (calculated based upon a 360-day
year and actual days elapsed), at the Lender's Base Rate (defined below).
Following the occurrence of any Event of Default (and whether or not the
Lender exercises the Lender's rights on account thereof), all loans and
advances made under the Revolving Credit shall bear interest at a rate
which is the aggregate of that provided for above, plus three (3.0%)
percent per annum. Accrued interest under the Revolving Credit shall be
payable (i) monthly in arrears on the first day of each month, or, if such
day is not a business day, then the first business day of such month, and
(ii) on the Revolving Credit Termination Date (defined below).
(b) EQUIPMENT LINE. The unpaid principal balance of the Equipment
Line shall bear interest, until repaid (calculated based upon a 360-day
year and actual days elapsed), at the per annum rate equal to the aggregate
of Lender's Base Rate (defined below), PLUS One-Half of One percent
(0.50%). Following the occurrence of any Event of Default (and whether or
not the Lender exercises the Lender's rights on account thereof), all loans
and advances made under the Equipment Line shall bear interest at a rate
which is the aggregate of that provided for above, plus three (3.0%)
percent per annum. Accrued interest under the Equipment Line shall be
payable (i) monthly in arrears on the first day of each month, or, if such
day is not a business day, then the first business day of such month, and
(ii) on the Equipment Line Termination Date (defined below).
2-7. FACILITY FEE. The Lender shall have earned an Facility Fee
(hereinafter, the "FACILITY FEE") in an amount equal to Five Thousand and 00/100
Dollars ($5,000.00). The Borrower shall not be entitled to any credit, rebate or
repayment of the Facility Fee notwithstanding any termination of this Agreement
or suspension or termination of the Lender's obligation to make loans and
advances hereunder.
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ARTICLE 3 - GRANT OF SECURITY INTEREST
3-1. GRANT OF SECURITY INTEREST. To secure the Borrower's prompt, punctual,
and faithful performance of all and each of the Borrower's Liabilities, the
Borrower hereby grants to the Lender a continuing security interest in and to,
and assigns to the Lender, the following, and each item thereof, whether now
owned or now due, or in which the Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which the Borrower obtains an
interest, and all products, Proceeds, substitutions, and accessions of or to any
of the following (all of which, together with any other property in which the
Lender may in the future be granted a security interest, is referred to herein
as the "COLLATERAL"):
(a) All Accounts and Accounts Receivable.
(b) All Inventory.
(c) All Contract Rights.
(d) All General Intangibles.
(e) All Equipment.
(f) All Goods.
(g) All Fixtures.
(h) All Chattel Paper.
(i) All books, records, and information relating to the Collateral
and/or to the operation of the Borrower's business, and all rights of
access to such books, records, and information, and all property in which
such books, records, and information are stored, recorded, and maintained.
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<PAGE> 9
(j) All Instruments, Documents of Title, Documents, policies and
certificates of insurance, Securities, deposits, deposit accounts,
impressed accounts, compensating balances, money, cash, or other property;
(k) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of
such proceeds, refunds, and premium rebates arise out of any of the
foregoing ((a) - (j)) or otherwise.
(l) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing including the right of stoppage in
transit.
3-2. EXTENT AND DURATION OF SECURITY INTEREST. The within grant of a
security interest is in addition to, and supplemental of, any security interest
previously granted by the Borrower to the Lender and shall continue in full
force and effect applicable to all Liabilities until all Liabilities have been
paid and/or satisfied in full and the security interest granted herein is
specifically terminated in writing by a duly authorized officer of the Lender.
ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Lender to establish the loan arrangement contemplated herein
and to make loans and advances and to provide financial accommodations under the
Revolving Credit and the Equipment Line each of which loans shall be deemed to
have been made in reliance thereupon the Borrower, in addition to all other
representations, warranties, and covenants made by the Borrower in any other
Loan Document, makes those representations, warranties, and covenants included
in the within Agreement.
4-1. DUE ORGANIZATION - CORPORATE AUTHORIZATION - NO CONFLICTS. (a) MCK
Communications presently is and shall hereafter remain in good standing as
a Nevada corporation and is and shall hereafter remain duly qualified and
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<PAGE> 10
in good standing in every other State in which, by reason of the nature or
location of MCK Communications' assets or operation of MCK Communications'
business, such failure to qualify or be in good standing may have a
material adverse affect on MCK Communications' business.
(b) MCK Telecommunications presently is and shall hereafter remain in
good standing as a corporation formed under the laws of the Province of
Alberta, Canada and is and shall hereafter remain duly qualified and in
good standing in every other State in the United States in which, by reason
of the nature or location of MCK Telecommunications' assets or operation of
MCK Telecommunications' business, such failure to qualify or be in good
standing may have a material adverse affect on MCK Telecommunications'
business.
(c) The Borrower has all requisite corporate power and authority to
execute and deliver to the Lender all and singular the Loan Documents to
which the Borrower is a party and has and will hereafter retain all
requisite corporate power to perform all and singular the Liabilities.
(d) The Loan Documents have been duly executed and delivered by
Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.
4-2. MAINTAIN ACCOUNTS. To permit the Lender to monitor the Borrower's
financial performance and condition, the Borrower shall maintain at all times
all of the Borrower's primary depository and operating accounts with the Lender.
4-3. INTELLECTUAL PROPERTY. (a) The Borrower owns and possesses, or has the
right to use, all patents, industrial designs, trademarks, trade names,
trade styles, brand names, service marks, logos, copyrights, trade secrets,
know-how, confidential information, and other intellectual or proprietary
property of any third Person necessary for the Borrower's conduct of the
Borrower's business.
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<PAGE> 11
(b) The conduct by the Borrower of the Borrower's business does not,
to the knowledge of the Borrower, infringe on the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, or
other intellectual or proprietary property of any third Person.
(c) All patents, trademarks, copyrights, and other intellectual
property owned or used by the Borrower are listed on EXHIBIT 4-3, annexed
hereto.
4-4. INSURANCE POLICIES. (a) EXHIBIT 4-4, annexed hereto, is a schedule of
all insurance policies owned by the Borrower or under which the Borrower is the
named insured. Each of such policies is in full force and effect. Neither the
issuer of any such policy (to the Borrower's knowledge) nor the Borrower is in
default or violation of any such policy.
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<PAGE> 12
(b) The Borrower shall have and maintain at all times insurance
covering such risks, in such amounts, containing such terms, in such form, for
such periods, and written by such companies as may be reasonably satisfactory to
the Lender. All insurance carried by the Borrower shall provide for a minimum of
thirty (30) days' written notice of cancellation to the Lender and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Lender, which endorsement shall provide that the insurance, to the extent of
the Lender's interest therein, shall not be impaired or invalidated, in whole or
in part, by reason of any act or neglect of the Borrower or by the failure of
the Borrower to comply with any warranty or condition of the policy. In the
event of the failure by the Borrower to maintain insurance as required herein,
the Lender, at its option, may obtain such insurance, provided, however, the
Lender's obtaining of such insurance shall not constitute a cure or waiver of
any Event of Default occasioned by the Borrower's failure to have maintained
such insurance. The Borrower shall furnish to the Lender certificates or other
evidence satisfactory to the Lender regarding compliance by the Borrower with
the foregoing insurance provisions.
(c) The Borrower shall advise the Lender of each claim or claims in
excess of $250,000.00, in the aggregate, made by the Borrower under any policy
of insurance which covers the Collateral and will permit the Lender, at the
Lender's option in each instance, to the exclusion of the Borrower, to conduct
the adjustment of each such claim The Borrower hereby appoints the Lender as the
Borrower's attorney in fact to obtain, adjust, and settle any insurance
described in this section and to endorse in favor of the Lender any and all
drafts and other instruments with respect to such insurance. The within
appointment, being coupled with an interest, is irrevocable until this Agreement
is terminated by a written instrument executed by a duly authorized officer of
the Lender. The Lender shall not be liable on account of any exercise pursuant
to said power except for any exercise in actual willful misconduct and bad
faith. Prior to the occurrence of an Event of Default, the Lender may apply any
insurance proceeds in excess of $500,000.00 against the Liabilities, whether or
not such have matured, in such order of application as the Lender may determine.
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<PAGE> 13
After the occurrence of an Event of Default, the Lender may apply insurance
proceeds of any amount against the Liabilities.
(d) The Borrower shall maintain at all times those policies of
insurance now or hereafter obtained by the Borrower and assigned to the Lender.
4-5. LICENSES. EXHIBIT 4-5, annexed hereto, is a schedule of all material
license, distributor, franchise, and similar agreements issued to, or to which
the Borrower is a party, with the exception of any licenses conveyed in
connection with goods sold by the Borrower in the ordinary course of business.
Each of such agreements is in full force and effect. The Borrower is not in
default or violation of any such agreement and the Borrower has not received any
notice or threat of cancellation of any such agreement.
4-6. LITIGATION. There is not presently pending or threatened by or against
the Borrower any suit, action, proceeding, or investigation which, if determined
adversely to the Borrower, would have a material adverse effect upon the
Borrower's financial condition or ability to conduct its business as such
business is presently conducted or is contemplated to be conducted in the
foreseeable future. The Borrower shall promptly notify the Lender of the
commencement of any suit, action, proceeding, or investigation brought against
the Borrower.
4-7. ADDITIONAL ASSURANCES. The Borrower shall execute and deliver to the
Lender such instruments, documents, and papers, and shall do all such things
from time to time hereafter as the Lender may request to carry into effect the
provisions and intent of this Agreement and to comply with all applicable
statutes and laws.
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<PAGE> 14
4-8. ADEQUACY OF DISCLOSURE. (a) All financial statements furnished to the
Lender by the Borrower have been prepared in accordance with GAAP
consistently applied and present fairly the condition of the Borrower at
the date(s) thereof and the results of operations and cash flows for the
period(s) covered. There has been no change in the financial condition,
results of operations, or cash flows of the Borrower since the date(s) of
such financial statements, other than changes in the ordinary course of
business, which changes have not been materially adverse, either singularly
or in the aggregate.
(b) No document, instrument, agreement, or paper now or hereafter
given the Lender by or on behalf of the Borrower or any guarantor of the
Liabilities in connection with the Lender's execution of the within
Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make
the statements therein not misleading. There is no fact known to the
Borrower which has, or which, in the foreseeable future could have, a
material adverse effect on the financial condition of the Borrower or any
such guarantor which has not been disclosed in writing to the Lender.
ARTICLE 5 - FINANCIAL AND OTHER REPORTING REQUIREMENTS/ FINANCIAL COVENANTS.
5-1. MAINTAIN RECORDS. The Borrower shall at all times:
(a) Keep proper books of account, in which full, true, and accurate
entries shall be made of all of the Borrower's transactions, all in
accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its
results of operations for, the periods in question.
(b) Retain independent certified public accountants who are
reasonably satisfactory to the Lender and instruct such accountants to
fully cooperate with, and be available to, the Lender to discuss the
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<PAGE> 15
Borrower's financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Lender.
(c) Not change the Borrower's fiscal year without the Lender's prior
written consent, which shall not be unreasonably withheld.
(d) Not change the Borrower's taxpayer identification number.
5-2. ACCESS TO RECORDS. The Borrower shall accord the Lender and the
Lender's representatives with access from time to time as the Lender and such
representatives may require to all properties owned by or over which the
Borrower has control. The Lender, and the Lender's representatives, shall have
the right, and the Borrower will permit the Lender and such representatives from
time to time as the Lender and such representatives may request, upon reasonable
notice, and during normal business hours(except after the occurrence of an Event
of Default), to examine, inspect, copy, and make extracts from any and all of
the Borrower's books, records, electronically stored data, papers, and files.
The Borrower shall make all of the Borrower's copying facilities available to
the Lender.
5-3. MONTHLY REPORTS; BORROWING BASE CERTIFICATE; ACCOUNTS RECEIVABLE
AGING. Provided that amounts are outstanding under the Revolving Credit, the
Borrower shall provide the Lender with a Borrowing Base Certificate (in such
form as the Lender may specify from time to time) together with a detailed
accounts receivable aging at such time or times as the Lender may request, but
not less frequently than monthly, within thirty (30) days of the close of the
subject month.
5-4. QUARTERLY REPORTS. Quarterly, for each fiscal quarter of the Borrower
(including the last fiscal quarter) within forty-five (45) days of the close of
the subject fiscal quarter, the Borrower shall furnish the Lender with a balance
sheet, income statement, and Statement of Cash Flow. Such financial information
shall include a comparison of the current year to date information with the
original projections for the subject period, and with the financial information
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<PAGE> 16
for the same period for the previous year. The Borrower shall also provide the
Lender, on a quarterly basis, with copies of all financial information and
materials delivered to the Board of Directors of the Borrower, which relate
primarily to the financial operations of the Borrower, during the subject fiscal
quarter.
5-5. ANNUAL REPORTS. (a) Annually, within ninety (90) days following the
end of the Borrower's fiscal year, the Borrower shall furnish the Lender
with an original signed counterpart of the Borrower's annual audited
financial statement, which statement shall have been prepared by, and bear
the unqualified opinion of, the Borrower's independent certified public
accountants (i.e. said statement shall be "certified" by such accountants).
Such annual statement shall include, at a minimum (with comparative
information for the then prior fiscal year) a balance sheet, income
statement and statement of cash flow. Upon the Lender's request, the
Borrower shall also provide the Lender with any letter delivered to the
Borrower by its certified public accountant with such certified public
accountant's recommendations to the Borrower.
(b) The Borrower shall also provide the Lender, prior to the close of
the Borrower's fiscal year end, with a management prepared pro forma
balance sheet, income statement and cash flow statement, broken down by
quarter for the following fiscal year. Such pro forma financial statement
shall also be provided to the Lender within ten (10) days of any
Board-approved change in the information provided therein.
5-6. ADDITIONAL REPORTS. The Borrower shall deliver to the Lender within
five (5) days of filing, copies of all statements, reports and notices sent or
made available generally by the Borrower to its security holders or to any
holders of Subordinated Debt.
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<PAGE> 17
5-7. OFFICERS' CERTIFICATES. The Borrower shall cause the Borrower's Chief
Financial Officer or President to provide a Certificate with those quarterly,
and annual statements to be furnished pursuant to this Agreement, which
Certificate shall:
(a) Indicate that the subject statement was prepared in accordance
with GAAP consistently applied, and presents fairly the financial condition
of the Borrower at the close of, and the results of the Borrower's
operations and cash flows for, the period(s) covered, subject, however to
usual year end adjustments.
(b) Indicate either that (i) no Event of Default has occurred or (ii)
if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrower to be taken on
account thereof.
(c) Include calculations concerning the Borrower's compliance (or
failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 5-10, below.
5-8. ADDITIONAL FINANCIAL INFORMATION. In addition to the foregoing, the
Borrower promptly shall provide the Lender with such other and additional
information concerning the Borrower, the operation of the Borrower's business,
and the Borrower's financial condition, including original counterparts of
financial reports and statements, as the Lender may from time to time request
from the Borrower.
5-9. AUDITS. The Lender may from time to time but not more often than
annually prior to the occurrence of an Event of Default, conduct commercial
finance audits of the Borrower's books and records (in each event, at the
Borrower's expense).
5-10. FINANCIAL PERFORMANCE COVENANTS; COMPLIANCE CERTIFICATE. The Borrower
shall observe and comply with those financial performance covenants set
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forth on EXHIBIT 5-10, annexed hereto, which shall be tested on a monthly or
quarterly basis (except as provided in EXHIBIT 5-10). The Borrower shall provide
the Lender with a Compliance Certificate (so referred to herein) indicating the
status of the financial performance requirements, within thirty (30) days of the
close of each month and within forty-five (45) days of the close of each fiscal
quarter, as applicable. The Compliance Certificate shall be in form of
presentation acceptable to the Lender.
ARTICLE 6 - NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the
outstanding Liabilities or for so long as Lender may have any commitment to make
any loans or advances, Borrower will not do any of the following:
6-1. DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), all or any part of its business or property, other
than Transfers: (i) of inventory in the ordinary course of business, (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower in the ordinary course of business; (iii) that constitute payment of
normal and usual operating expenses in the ordinary course of business;; or (iv)
of worn-out or obsolete equipment.
6-2. CHANGES IN BUSINESS. Engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto).
6-3. DIVIDENDS OR INVESTMENTS. The Borrower shall not, without the prior
written consent of the Lender:
(a) Pay any cash dividend or make any other distribution in respect
of any class of the Borrower's capital stock.
(b) Own, redeem, retire, purchase, or acquire any of the Borrower's
capital stock, except pursuant to Stock Purchase Agreements been the
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<PAGE> 19
Borrower and certain employees, up to a maximum amount of $250,000.00 per
year, in the aggregate.
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity.
(d) Merge or consolidate or be merged or consolidated with or into
any other corporation or other entity.
(e) Consolidate any of the Borrower's operations with those of any
other corporation or other entity.
(f) Organize or create any Related Entity.
(g) Subordinate any debts or obligations owed to the Borrower by any
third party to any other debts owed by such third party to any other
Person.
6-4. LOANS. (a) The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, other than advance payments made to the
Borrower's suppliers in the ordinary course or to the Borrower's employees for
travel and related expenses.
(b) The Borrower shall not become indebted to any Person for borrowed
money other than the Lender, except for (i) trade indebtedness incurred in
the ordinary course of business, and (ii) subordinated indebtedness
consented to by the Lender in writing.
6-5. TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
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ARTICLE 7 - EVENTS OF DEFAULT.
The occurrence of any event described in this Article 7 respectively shall
constitute an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event of
Default described in Section 7-9, any and all Liabilities shall become due and
payable at the option of Lender, without any further act on the part of the
Lender. Upon the occurrence of any Event of Default, or the entry of any order
for relief with respect to the Borrower under the Bankruptcy Code, any and all
Liabilities of the Borrower to the Lender shall become immediately due and
payable, at the option of the Lender and without notice or demand. At the option
of Lender, the occurrence of any Event of Default shall also constitute, without
notice or demand, a default under all other agreements between the Lender and
the Borrower and instruments and papers given the Lender by the Borrower,
whether such agreements, instruments, or papers now exist or hereafter arise.
7-1. FAILURE TO PAY REVOLVING CREDIT OR THE EQUIPMENT LINE. The failure by
the Borrower to pay any amount when due under the Revolving Credit or the
Equipment Line, or any other Liability.
7-2. FAILURE TO PERFORM COVENANT OR LIABILITY. The failure by the Borrower
to promptly, punctually, faithfully and timely perform or discharge, or to
comply with, any covenant to or with the Lender or any Liability.
7-3. MISREPRESENTATION. The determination by the Lender that any
representation or warranty at any time made by the Borrower to the Lender, was
not true or complete when given.
7-4. ACCELERATION OF OTHER DEBT. The occurrence of any event such that any
Indebtedness of the Borrower to any creditor other than the Lender in excess of
$25,000.00 has been accelerated.
7-5. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach or
default under any agreement (a) between the Lender and the Borrower or
instrument
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<PAGE> 21
or paper given the Lender by the Borrower, whether such agreement, instrument,
or paper now exists or hereafter arises (notwithstanding that the Lender may not
have exercised its rights upon default under any such other agreement,
instrument or paper), or (b) the occurrence of any event of default (after the
expiration of any applicable grace or cure periods) in the Borrower's agreements
with Summit Partners.
7-6. CASUALTY LOSS; NON-ORDINARY COURSE SALES. The occurrence of any (a)
uninsured loss, theft, damage, or destruction of or to any material portion of
the Borrower's assets, or (b) sale (other than sales in the ordinary course of
business) of any material portion of the Borrower's assets.
7-7. JUDGMENT; RESTRAINT OF BUSINESS. (a) The service of process upon the
Lender seeking to attach, by trustee, mesne, or other process, any of the
Borrower's funds on deposit with, or assets of the Borrower in the
possession of, the Lender.
(b) The entry of any judgment against the Borrower, which judgment is
not satisfied (if a money judgment) or appealed from (with execution or
similar process stayed) within thirty (30) days of its entry.
(c) The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain in any material
way the conduct by the Borrower of its business in the ordinary course.
7-8. BUSINESS FAILURE. Any act by, against, or relating to the Borrower, or
its property or assets, which act constitutes the application for, consent to,
or sufferance of the appointment of a receiver, trustee, or other person,
pursuant to court action or otherwise, over all, or any part of the Borrower's
property; the granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower, or the occurrence of any other
voluntary or involuntary liquidation or extension of debt agreement for the
Borrower; or the offering by or entering into by the Borrower of any
composition,
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<PAGE> 22
extension, or any other arrangement seeking relief from or extension of the
debts of the Borrower, or the initiation of any other judicial or non-judicial
proceeding or agreement by, against, or including the Borrower which seeks or
intends to accomplish a reorganization or arrangement with creditors (however,
it shall not be an Event of Default hereunder until the earlier of (x) the entry
of an order for relief against the Borrower, or (y) the expiration of thirty
(30) days without dismissal of such complaint, application, or petition if such
complaint, application or petition filed against the Borrower was not filed by
or at the direction of the Borrower or any related entity, and is being
diligently contested).
7-9. BANKRUPTCY. The failure by the Borrower to generally pay the debts of
the Borrower as they mature; adjudication of bankruptcy or insolvency relative
to the Borrower; the entry of an order for relief or similar order with respect
to the Borrower in any proceeding pursuant to The Bankruptcy Code or any other
federal bankruptcy law; the filing of any complaint, application, or petition by
or against the Borrower initiating any matter in which the Borrower is or may be
granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure (however, it shall not be an
Event of Default hereunder until the earlier of (x) the entry of an order for
relief against the Borrower, or (y) the expiration of thirty (30) days without
dismissal of such complaint, application, or petition if such complaint,
application or petition filed against the Borrower was not filed by or at the
direction of the Borrower or any related entity, and is being diligently
contested).
7-10. CHANGE IN CONTROL. Any change in the ownership of the capital stock
of the Borrower such that those Persons who, at the execution of the within
Agreement, Control the Borrower, no longer so Control the Borrower.
ARTICLE 8 - TERM OF AGREEMENT.
8-1. TERMINATION OF REVOLVING CREDIT AND EQUIPMENT LINE.
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<PAGE> 23
(a) REVOLVING CREDIT. Unless demand is sooner made by the Lender upon
or after the occurrence of an Event of Default hereunder, the term of the
Borrower's ability to request new loans or advances under the Revolving
Credit shall be terminated and all Liabilities under the Revolving Credit
shall be immediately due and payable in full upon the sooner of (the
"REVOLVING CREDIT TERMINATION DATE"): (i) the entry of any order for relief
with respect to the Borrower under the Bankruptcy Code, or (ii) April 13,
2000.
(b) EQUIPMENT LINE. Unless demand is sooner made by the Lender upon
or after the occurrence of an Event of Default hereunder, the Equipment
Line shall be terminated and all Liabilities under the Equipment Line shall
be immediately due and payable in full upon the sooner of (the "EQUIPMENT
LINE TERMINATION DATE"): (i) the entry of any order for relief with respect
to the Borrower under the Bankruptcy Code, or (ii) September 30, 2002.
8-2. All amounts borrowed or advanced upon the Revolving Credit shall be
repaid as provided in Sections 2-5 and 2-6, and as otherwise provided hereunder.
8-3. All amounts borrowed or advanced upon the Equipment Line shall be
repaid as provided in Sections 2-5 and 2-6, and as otherwise provided hereunder.
8-4. The within Agreement shall continue in full force and effect
applicable to all Liabilities until all Liabilities have been paid and/or
satisfied in full and the within Agreement is specifically terminated in writing
by a duly authorized officer of the Lender.
ARTICLE 9 - GENERAL.
9-1. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrower and the Borrower's representatives, successors, and assigns and shall
enure to the benefit of the Lender and the Lender's successors and assigns
PROVIDED, HOWEVER, no trustee or other fiduciary appointed with respect to the
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<PAGE> 24
Borrower shall have any rights hereunder. In the event that the Lender assigns
or transfers its rights under this Agreement, the assignee shall thereupon
succeed to and become vested with all rights, powers, privileges, and duties of
the Lender hereunder and the Lender shall thereupon be discharged and relieved
from its duties and obligations hereunder.
9-2. SEVERABILITY. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement.
9-3. AMENDMENTS; COURSE OF DEALING. This Agreement and the other Loan
Documents incorporate all discussions and negotiations between the Borrower and
the Lender, either express or implied, concerning the matters included herein
and in such other instruments, any custom, usage, or course of dealings to the
contrary notwithstanding. No such discussions, negotiations, custom, usage, or
course of dealings shall limit, modify, or otherwise affect the provisions
thereof. No failure by the Lender to give notice to the Borrower of the
Borrower's having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document.
9-4. POWER OF ATTORNEY. In connection with all powers of attorney included
in this Agreement, the Borrower hereby grants unto the Lender full power to do
any and all things necessary or appropriate in connection with the exercise of
such powers as fully and effectually as the Borrower might or could do, which
power of attorney SHALL ONLY BE EFFECTIVE UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement. No power of attorney set forth in this Agreement shall
be affected by any disability or incapacity suffered by the Borrower and each
shall survive the same. All powers conferred upon the Lender by this Agreement,
being coupled with an interest, shall be irrevocable until this Agreement is
terminated.
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<PAGE> 25
9-5. LENDER'S COSTS AND EXPENSES. The Borrower shall pay on demand all
Costs of Collection and all reasonable expenses of the Lender in connection with
the preparation, execution, and delivery of this Agreement, and any and all
documents, instruments and agreements delivered to the Lender in connection
herewith, whether evidencing the Liabilities, or granting the Lender certain
rights with respect to the Borrower, or its shares of stock, and of any Loan
Documents, whether now existing or hereafter arising, and all other reasonable
expenses which may be incurred by the Lender in preparing or amending this
Agreement and all other agreements, instruments, and documents related thereto,
or otherwise incurred with respect to the Liabilities. The Borrower specifically
authorizes the Lender to pay all such fees and expenses and in the Lender's
discretion, to add such fees and expenses to the Loan Account.
9-6. COPIES AND FACSIMILES. This Agreement and all documents which relate
thereto, which have been or may be hereinafter furnished the Lender may be
reproduced by the Lender by any photographic, microfilm, xerographic, digital
imaging, or other process, and the Lender may destroy any document so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business).
9-7. MASSACHUSETTS LAW. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.
9-8. CONSENT TO JURISDICTION. The Borrower agrees that any legal action,
proceeding, case, or controversy against the Borrower with respect to any Loan
Document may be brought in the Superior Court of Suffolk County Massachusetts or
in the United States District Court, District of Massachusetts, sitting in
Boston, Massachusetts, as the Lender may elect in the Lender's sole discretion.
By execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
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<PAGE> 26
9-9. INDEMNIFICATION. The Borrower shall indemnify, defend, and hold the
Lender and any employee, officer, or agent of the Lender (each, an "INDEMNIFIED
PERSON") harmless of and from any claim brought or threatened against any
Indemnified Person by the Borrower, any guarantor or endorser of the
Liabilities, or any other Person (as well as from attorneys' reasonable fees and
expenses in connection therewith) on account of the Lender's relationship with
the Borrower or any other guarantor or endorser of the Liabilities (each of
which may be defended, compromised, settled, or pursued by the Indemnified
Person with counsel of the Lender's selection, but at the expense of the
Borrower) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Lender and any other Indemnified Person has
had an opportunity to be heard), which determination includes a specific finding
that the Indemnified Person seeking indemnification had acted in a grossly
negligent manner or in actual bad faith. The within indemnification shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Lender in favor of the Borrower.
9-10. AGREEMENT CONTROLLING. The Loan Documents shall be construed and
interpreted in a harmonious manner, provided, however, in the event of any
inconsistency between the provisions of the within Agreement and any other Loan
Document, the provisions of the within Agreement shall govern and control.
9-11. CONFIDENTIALITY. Lender shall maintain the confidentiality of any
non-public information received pursuant to this Agreement, provided, however,
that disclosure of such information may be made: (i) to the subsidiaries or
affiliates of Lender, (ii) to prospective transferees or purchasers of the
Loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Lender, and (v) as may be appropriate in connection
with the exercise of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
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<PAGE> 27
knowledge or possession of Lender when disclosed to Lender, or becomes part of
the public domain after disclosure to Lender through no fault of Lender; or (b)
is disclosed to Lender by a third party, provided Lender does not have actual
knowledge that such third party is prohibited from disclosing such information.
9-12. RIGHT OF SET-OFF. Any and all deposits or other sums at any time
credited by or due to the undersigned from the Lender and any cash, securities,
instruments or other property of the undersigned in the possession of the
Lender, whether for safekeeping or otherwise (regardless of the reason the
Lender or the Participant had received the same) shall at all times constitute
security for all Liabilities and for any and all obligations of the undersigned
to the Lender, and may be applied or set off against the Liabilities and against
the obligations of the undersigned to the Lender including, without limitation,
those arising hereunder, at any time after such are then due.
9-13. WAIVERS. (a) The Borrower (and all guarantors, endorsers, and
sureties of the Liabilities) make each of the waivers included in Subsection
(b), below, knowingly, voluntarily, and intentionally, and understands that the
Lender, in entering into the financial arrangements contemplated hereby and in
providing loans and other financial accommodations to or for the account of the
Borrower as provided herein, whether not or in the future, is relying on such
waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby, notice of
non-payment, demand, presentment, protest and all forms of demand and
notice, both with respect to the Liabilities.
(ii) Except as otherwise specifically required hereby, the right to
notice and/or hearing prior to the Lender's exercising of the Lender's
rights upon default.
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<PAGE> 28
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN
WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE LENDER IS JOINED AS A
PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT
OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON
AND THE LENDER (AND THE LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY
TRIAL OF ANY SUCH CASE OR CONTROVERSY).
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<PAGE> 29
9-14. DEFINITIONS. All capitalized terms herein shall have the meaning
attributed thereto in EXHIBIT 9-14 herein.
("BORROWER")
MCK COMMUNICATIONS, INC.
By: /s/ Paul Zurlo
---------------------------------------
Print Name: Paul Zurlo
-------------------------------
Title: CFO
------------------------------------
MCK TELECOMMUNICATIONS INC.
By: /s/ Paul Zurlo
---------------------------------------
Print Name: Paul Zurlo
-------------------------------
Title: CFO
------------------------------------
("LENDER")
BANKBOSTON, N.A.
By: /s/ Steven C. Buzzell
---------------------------------------
Print Name: Steven C. Buzzell
-------------------------------
Title: Vice President
------------------------------------
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<PAGE> 30
EXHIBITS
The following Exhibits to this Loan and Security Agreement are respectively
described in the Section indicated below. Those schedules for which no
information has been inserted or provided shall be deemed to read "None."
Exhibit 4-3 - Intellectual Property ss.4-3
Exhibit 4-4 - Insurance Policies ss.4-4
Exhibit 4-5 - Licenses ss.4-5
Exhibit 5-10 - Financial Covenants ss.5-10
Exhibit 9-14 - Definitions ss.9-14
<PAGE> 31
EXHIBIT 5-10
FINANCIAL COVENANTS
1. LEVERAGE RATIO. The Borrower shall not permit, as of the last day of each
month, the ratio computed by dividing (A) Borrower's Unsubordinated
Liabilities (as defined herein), by (B) the Borrower's Tangible Capital
Base (as defined herein), to be greater than 0.75 to 1.0.
2. QUICK RATIO. The Borrower shall not permit, as of the last day of each
month, the ratio computed by dividing (A) Borrower's Quick Assets (as
defined herein), by (B) the Borrower's Current Liabilities (as defined
herein), to be less than 2.0 to 1.0.
3. NET INCOME/LOSS. The Borrower shall show a minimum net profit (maximum
loss) as described below: (i) during Fiscal Year 1999, a maximum cumulative
loss of $300,000.00, which shall be tested on the last day of the fourth
quarter of such fiscal year, (ii) during Fiscal Year 2000, a minimum net
profit of $1.00 for each two quarter period, which shall be tested on a
rolling consecutive quarter basis, and (iii) during Fiscal Year 2000, a
minimum net profit of $1.00 for such fiscal year, which shall be tested on
the last day of fourth quarter of such fiscal year.
4. CASH FLOW COVERAGE RATIO. The Borrower shall maintain, to be tested as of
the last day of each quarter, commencing with the last day of the third
quarter of Fiscal Year 1999, the ratio computed by dividing (A) Borrower's
EBITDA minus cash taxes (measured for the preceding two (2) quarters), by
(B) Borrower's Consolidated Total Debt Service (measured for the quarter
ending on the test date, PLUS the Borrower's projected
<PAGE> 32
Consolidated Total Debt Service for the quarter beginning after the test
date), of not less than 1.50 to 1.0.
<PAGE> 33
EXHIBIT 9-14
DEFINITIONS
As herein used, the following terms have the following meanings or are
defined in the section of the within Agreement so indicated:
"ACCEPTABLE ACCOUNTS": (a) Such of the Borrower's Accounts and Accounts
Receivable (as defined below) as arise in the ordinary course of the
Borrower's business for goods sold and/or services rendered by the
Borrower, which Accounts and Accounts Receivable have been determined
by the Lender to be satisfactory and have been earned by performance
and are owed to the Borrower by such of the Borrower's trade customers
as the Lender determines to be satisfactory, in the Lender's sole
discretion in each instance.
(b) The following is a partial listing of those types of
accounts or accounts receivable which are not Acceptable Accounts:
(i) Any which is more than 90 days past invoice date as
shown on the agings of the Borrower's accounts receivable furnished
the Lender from time to time (each of which agings shall be prepared
in accordance with generally accepted auditing standards).
(ii) Any Account with an Account Debtor, which, when
aggregated with all of the accounts of that Account Debtor, exceeds
20% of the then aggregate of Acceptable Accounts.
(iii) Any which arises out of the sale by the Borrower of
goods consigned or delivered to the Borrower or to the Account Debtor
on sale or return terms (whether or not compliance has been made with
Section 2-326 of the Uniform Commercial Code).
(iv) Any which arises out of any sale made on a basis other
than upon terms usual to the business of the Borrower.
<PAGE> 34
(v) Any which arises out of any sale made on a "bill and
hold," dating, a pre-billed basis, or delayed shipping basis.
(vi) Any which is owed by any governmental entity, or any
Account Debtor whose principal place of business is not within the
continental United States or the District of Columbia, or any which is
pre-approved by Lender in writing (other than Bell Canada).
(vii) Any which is owed by any Related Entity.
(viii) Any as to which the Account Debtor holds or is
entitled to any claim, counterclaim, set off, or chargeback, but only
up to the amount of such claim, counterclaim, set off, or chargeback.
(ix) Any which is evidenced by a promissory note.
(x) Any which is due and payable to the Borrower in more
than thirty (30) days from invoice.
(xi) Any which is owed by any person employed by, or a
salesperson of, the Borrower.
(xii) Any which is owned by non-corporate entity.
(xii) Any which the Lender in its sole discretion considers
unacceptable for any reason.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts, accounts
receivable, credit card receivables, notes, drafts, acceptances, and
other forms of obligations and receivables and rights to payment for
credit extended and for goods sold or leased, or services rendered,
whether or not yet earned by performance; all "contract rights" as
formerly defined in the UCC; all Inventory which gave rise thereto,
and all rights associated with such Inventory, including the right
<PAGE> 35
of stoppage in transit; all reclaimed, returned, rejected or
repossessed Inventory (if any) the sale of which gave rise to any
Account.
"ACCOUNT DEBTOR": has the meaning given that term in the UCC.
"AFFILIATE": means, with respect to any two Persons, a relationship in
which (a) one holds, directly or indirectly, not less than Twenty Five
Percent (25%) of the capital stock, beneficial interests, partnership
interests, or other equity interests of the other; or (b) one has,
directly or indirectly, Control of the other; or (c) not less than
Twenty Five Percent (25%) of their respective ownership is directly or
indirectly held by the same third Person.
"AGENT": means MCK Communications.
"AVAILABILITY": refers at any time to the lesser of (i) or (ii), below,
where:
(i) Is up to the result of the following:
(A) Two Million Dollars and No Cents ($2,000,000.00).
MINUS
(B) The then unpaid principal balance of the Revolving Credit.
MINUS
(C) The aggregate amounts then undrawn on all outstanding
Letters of Credit issued or incurred, or caused to be issued
or incurred, by the Lender for the account and/or the
benefit of the Borrower.
(ii) Is up to the result of the following:
<PAGE> 36
(A) 80.0% of the face amount (determined by the Lender in the
Lender's sole discretion) of each of the Borrower's
Acceptable Accounts (as defined below), all as determined by
the Lender in its sole discretion
MINUS
(B) The then unpaid principal balance of the Revolving Credit.
MINUS
(C) The aggregate amounts then undrawn on all outstanding
Letters of Credit issued or incurred, or caused to be issued
or incurred, by the Lender for the account and/or the
benefit of the Borrower, or advanced under corporate credit
cards.
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BASE RATE": The higher of (a) the annual rate of interest announced from
time to time by the Lender at its head office in Boston, Massachusetts
as its "Base Rate" and (b) one half of one percent (1/2%) above the
overnight federal funds effective rate as published by the Board of
Governors of the Federal Reserve System, as in effect from time to
time. Any change in such Base Rate shall be effective, for purposes of
the calculation of interest due hereunder, when made effective
generally by the Lender.
"BORROWER": is defined in the Preamble.
"BUSINESS DAY": any day other than (a) a Saturday, Sunday; (b) a day on
which the Lender is not open to the general public to conduct
business; or (c) a day on which banks in Boston, Massachusetts
<PAGE> 37
generally are not open to the general public for the purpose of
conducting commercial banking business.
"CAPITAL LEASE": any lease which may be capitalized in accordance with
GAAP.
"CHATTEL PAPER": has the meaning given that term in the UCC.
"COLLATERAL": is defined in Section 3-1.
"COMPLIANCE CERTIFICATE": is defined in Section 5-10.
"CONSOLIDATED TOTAL DEBT SERVICE": shall mean, for any fiscal period with
respect to the Borrower and its Affiliates, the sum of (a)
Consolidated Total Interest Expense for such period, PLUS (b) any and
all mandatory or required payments of principal in respect of
Indebtedness of the Borrower and its Affiliates made or required to be
made in such period.
"CONSOLIDATED TOTAL INTEREST EXPENSE": shall mean, for any period, the
aggregate amount of interest required to be paid or accrued by the
Borrower and its Affiliates during such period on all Indebtedness of
the Borrower and its Affiliates outstanding during all or any part of
such period, whether such interest was or is required to be reflected
as an item of expense or capitalized, including payments consisting of
interest in respect of any Capital Lease, and including commitment
fees, agency fees, facility fees, and other fees or expenses in
connection with the borrowing of money.
"CONTRACT RIGHTS": includes, without limitation, "contract rights" as now
of formerly defined in the UCC and also any right to payment under a
contract not yet earned by performance and not evidenced by an
instrument or Chattel Paper.
"CONTROL": Person(s) shall be deemed to Control another Person if such
Person(s) directly or indirectly possess the power to direct or
<PAGE> 38
cause the direction of the management and policies of such other
Person, whether through ownership of voting securities, by contract,
or otherwise.
"COSTS OF COLLECTION" includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by the
Lender's attorneys, and all reasonable costs incurred by the Lender in
the administration of the Liabilities and/or the Loan Documents,
including, without limitation, reasonable costs and expenses
associated with travel on behalf of the Lender, which costs and
expenses are directly related to or in respect of the Lender's:
administration and management of the Liabilities; negotiation,
documentation, and amendment of any Loan Document; or efforts to
preserve, protect, collect, or enforce the Liabilities, and/or the
Lender's Rights and Remedies and/or any of the Lender's rights and
remedies against or in respect of any guarantor or other person liable
in respect of the Liabilities (whether or not suit is instituted in
connection with such efforts). The Costs of Collection are
Liabilities, and at the Lender's option may bear interest at the
highest post-default rate which the Lender may charge the Borrower
hereunder as if such had been lent, advanced, and credited by the
Lender to, or for the benefit of, the Borrower.
"CURRENT LIABILITIES": the total of all indebtedness of the Borrower which
properly may be classified as current liabilities in accordance with
GAAP, plus any Liabilities under the Revolving Credit and the
Equipment Line.
"DEBT": the aggregate amount of indebtedness of the Borrower which may be
classified as "liabilities" in accordance with GAAP.
"DOCUMENTS": has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": has the meaning given that term in the UCC.
<PAGE> 39
"EBITDA": shall mean earnings before interest taxes depreciation and
amortization, as defined in accordance with GAAP.
"ENCUMBRANCE": each of the following:
(a) security interest, mortgage, pledge, hypothecation, lien,
attachment, or charge of any kind (including any agreement to give any
of the foregoing); conditional sale or other title retention
agreement; sale of accounts receivable or chattel paper; or other
arrangement pursuant to which any Person is entitled to any preference
or priority with respect to the property or assets of another Person
or the income or profits of such other Person or which constitutes an
interest in property to secure an obligation; each of the foregoing
whether consensual or non-consensual and whether arising by way of
agreement, operation of law, legal process or otherwise.
(b) The filing of any financing statement under the UCC or
comparable law of any jurisdiction.
"EQUIPMENT" includes, without limitation, "equipment" as defined in the
UCC, and also all motor vehicles, rolling stock, machinery, office
equipment, plant equipment, tools, dies, molds, store fixtures,
furniture, and other goods, property, and assets which are used and/or
were purchased for use in the operation or furtherance of the
Borrower's business, and any and all accessions, additions thereto,
and substitutions therefor.
"EQUIPMENT LINE": is defined in Section 2-2.
"EQUIPMENT LINE AVAILABILITY": is defined in Section 2-2.
"EQUIPMENT LINE AVAILABILITY END DATE": is defined in Section 2-2.
"EQUIPMENT LINE TERMINATION DATE": is defined in Article 8.
"ERISA": the Employee Retirement Security Act of 1974, as amended.
<PAGE> 40
"ERISA AFFILIATE": any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is part of a
group which includes the Borrower and which would be treated as a
single employer under Section 414 of the Internal Revenue Code of
1986, as amended.
"EVENTS OF DEFAULT": is defined in Article 7.
"FACILITY FEE": is defined in Section 2-7.
"FIXTURES": has the meaning given that term in the UCC.
"GAAP": principles which are consistent with those promulgated or adopted
by the Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to that accounting period in
respect of which reference to GAAP is being made.
"GENERAL INTANGIBLES" includes, without limitation, "general intangibles"
as defined in the UCC; and also all: rights to payment for credit
extended; deposits; amounts due to the Borrower; credit memoranda in
favor of the Borrower; warranty claims; tax refunds and abatements;
insurance refunds and premium rebates; all means and vehicles of
investment or hedging, including, without limitation, options,
warrants, and futures contracts; records; customer lists; telephone
numbers; goodwill; causes of action; judgments; payments under any
settlement or other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission;
licenses; franchises; license agreements, including all rights of the
Borrower to enforce same; permits, certificates of convenience and
necessity, and similar rights granted by any governmental authority;
patents, patent applications, patents pending, and other intellectual
property; developmental ideas and concepts; proprietary processes;
blueprints, drawings, designs, diagrams, plans, reports, and charts;
catalogs; manuals; technical data; computer software programs
(including the source and object
<PAGE> 41
codes therefor), computer records, computer software, rights of access
to computer record service bureaus, service bureau computer contracts,
and computer data; tapes, disks, semi-conductors chips and printouts;
trade secrets rights, copyrights, mask work rights and interests, and
derivative works and interests; user, technical reference, and other
manuals and materials; trade names, trademarks, service marks, and all
good will relating thereto; applications for registration of the
foregoing; and all other general intangible property of the Borrower
in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or
ideas, and any matter related to, or connected with, the design,
development, manufacture, sale, marketing, leasing, or use of any or
all property produced, sold, or leased, by the Borrower or credit
extended or services performed, by the Borrower, whether intended for
an individual customer or the general business of the Borrower, or
used or useful in connection with research by the Borrower.
"GOODS": has the meaning given that term in the UCC.
"INDEBTEDNESS": all indebtedness and obligations of or assumed by any
Person: (i) in respect of money borrowed (including any indebtedness
which is non-recourse to the credit of such Person but which is
secured by an Encumbrance on any asset of such Person) or evidenced by
a promissory note, bond, debenture or other written obligation to pay
money; (ii) for the payment, deferred for more than Thirty (30) days,
of the purchase price of goods or services (other than current trade
liabilities of such Person incurred in the ordinary course of business
and payable in accordance with customary practices); (iii) in
connection with any Letters of Credit or acceptance transaction
(including, without limitation, the face amount of all letters of
credit and acceptances issued for the account of such Person or
reimbursement on account of which such Person would be obligated);
(iv) in connection with the sale or discount of accounts receivable or
chattel paper of the Borrower; (v) on account of deposits or advances;
and (vi) as lessee under Capital Leases. "Indebtedness"
<PAGE> 42
of any Person shall also include: (x) Indebtedness of others secured
by an Encumbrance on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; (y) Any guaranty, endorsement,
suretyship or other undertaking pursuant to which that Person may be
liable on account of any obligation of any third party; and (z) the
Indebtedness of a partnership or joint venture in which such Person is
a general partner or joint venturer.
"INDEMNIFIED PERSON": is defined in Section 9-9.
"INSTRUMENTS": has the meaning given that term in the UCC.
"INVENTORY" includes, without limitation, "inventory" as defined in the UCC
and also all: packaging, advertising, and shipping materials related
to any of the foregoing, and all names or marks affixed or to be
affixed thereto for identifying or selling the same; Goods held for
sale or lease or furnished or to be furnished under a contract or
contracts of sale or service by the Borrower, or used or consumed or
to be used or consumed in the Borrower's business; Goods of said
description in transit: returned, repossessed and rejected Goods of
said description; and all documents (whether or not negotiable) which
represent any of the foregoing.
"LEASE": any lease or other agreement, no matter how styled or structured,
pursuant to which the Borrower is entitled to the use or occupancy of
any space.
"LIEN": any Encumbrance as defined herein.
"LENDER": is defined in Preamble.
"LETTERS OF CREDIT": any Letters of Credit procured by the Lender for the
account of the Borrower.
"LIABILITIES" includes, without limitation, all and each of the following,
whether now existing or hereafter arising:
<PAGE> 43
(a) Any and all direct and indirect liabilities, debts, and
obligations of the Borrower to the Lender, each of every kind, nature,
and description.
(b) Each obligation to repay any loan, advance, indebtedness,
note, obligation, overdraft, or amount now or hereafter owing by the
Borrower to the Lender (including all future advances whether or not
made pursuant to a commitment by the Lender), whether or not any of
such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, Indirect, absolute, contingent, or of any other
type, nature, or description, or by reason of any cause of action
which the Lender may hold against the Borrower.
(c) All notes and other obligations of the Borrower now or
hereafter assigned to or held by the Lender, each of every kind,
nature, and description.
(d) All interest, fees, and charges and other amounts which may
be charged by the Lender to the Borrower and/or which may be due from
the Borrower to the Lender from time to time.
(e) All costs and expenses incurred or paid by the Lender in
respect of any agreement between the Borrower and the Lender or
instrument furnished by the Borrower to the Lender (including, without
limitation, Costs of Collection, attorneys' reasonable fees, and all
court and litigation costs and expenses).
(f) Any and all covenants of the Borrower to or with the Lender
and any and all obligations of the Borrower to act or to refrain from
acting in accordance with any agreement between the Borrower and the
Lender or instrument furnished by the Borrower to the Lender.
<PAGE> 44
"LINES OF CREDIT": individually and collectively, the Revolving Credit and
the Equipment Line.
"LOAN ACCOUNT": the account maintained on Lender's books in which a record
will be kept of all loans and advances hereunder and payments thereon,
and all calculations of interest fees or other costs as provided
hereunder.
"LOAN DOCUMENTS": the within Agreement, each instrument and document
executed and/or delivered in connection with the arrangements
contemplated hereby, as each may be amended from time to time.
"MASTER NOTE": is defined in Section 2-4.
"NET INCOME": is defined as the Borrower's net profit, after taxes,
computed in accordance with GAAP.
"NET WORTH": is defined as stockholders equity (or deficit) determined in
accordance with GAAP.
"OFFICER'S CERTIFICATE": is defined in Section 5-7.
"PERSON": any natural person, and any corporation, trust, partnership,
joint venture, or other enterprise or entity.
"PROCEEDS": include, without limitation, "Proceeds" as defined in the UCC
(defined below), and each type of property described in Section 3-1,
above.
"QUICK ASSETS": shall mean Borrower's cash and cash equivalents acceptable
to the Lender, plus Accounts which are quick assets in accordance with
GAAP.
"RECEIPTS": all cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.
<PAGE> 45
"RECEIVABLES COLLATERAL": the Borrower's Accounts, Accounts Receivable,
Contract Rights, General Intangibles, Chattel Paper, Instruments,
Documents of Title, Documents, Securities, letters of credit for the
benefit of the Borrower, and bankers' acceptances held by the
Borrower, and any rights to payment.
"RELATED ENTITY": refers to (a) any Affiliate; and (b) any corporation,
trust, partnership, joint venture, or other enterprise which: is a
parent, brother-sister, subsidiary, or affiliate, of the Borrower;
could have such enterprise's tax returns or financial statements
consolidated with the Borrower's; could be a member of the same
controlled group of corporations (within the meaning of Section
1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as
amended from time to time) of which the Borrower is a member; Controls
or is Controlled by the Borrower or any Affiliate of the Borrower.
"REQUIREMENT OF LAW": as to any Person: (a)(i) all statutes, rules,
regulations, orders, or other requirements having the force of law and
(ii) all court orders and injunctions, arbitrator's decisions, and/or
similar rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims jurisdiction over
such Person, or any property of such Person, or of any other Person
for whose conduct such Person would be responsible; (b) that Person's
charter, certificate of incorporation, articles of organization,
and/or other organizational documents, as applicable; and (c) that
Person's by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"REVOLVING CREDIT": is defined in Section 2-1.
"REVOLVING CREDIT TERMINATION DATE": is defined in Article 8.
"SECURITIES": has the meaning given that term in the UCC.
<PAGE> 46
"SUBORDINATED DEBT": all Indebtedness of the Borrower to any Person other
than the Lender, which Indebtedness is specifically subordinated to
the Liabilities, and which Indebtedness is approved by the Lender.
"TANGIBLE CAPITAL BASE": is defined as Tangible Net Worth plus Subordinated
Debt, plus deferred dividends.
"TANGIBLE NET WORTH": is defined as Net Worth (as defined herein), less
capitalized software and any other asset deemed by the Lender to be
intangible.
"TRANSFER" is defined in Section 6-1.
"UCC": the Uniform Commercial Code as presently in effect in Massachusetts
(Mass. Gen. Laws, Ch. 106).
"UNSUBORDINATED LIABILITIES": shall be defined as Debt less Subordinated
Debt.
