-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FEwFwwCGL9B4t0HwkWs5YPUYDnH5XNQVqjzZduKybbEBz7fjwYQvM97LVhUL24zk sEaWM3mbwYcuBex5MEoGyQ== 0000950135-97-000736.txt : 19970222 0000950135-97-000736.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950135-97-000736 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 27 FILED AS OF DATE: 19970214 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOICETEK CORP CENTRAL INDEX KEY: 0000788862 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042752861 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-21883 FILM NUMBER: 97536374 BUSINESS ADDRESS: STREET 1: 19 ALPHA ROAD CITY: CHELMSFORD STATE: MA S-1 1 VOICETEK CORPORATION 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 1997 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ VOICETEK CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 3661 04-2752861 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
------------------------ 19 ALPHA ROAD CHELMSFORD, MA 01824 (508) 250-9393 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------ SHELDON L. DINKES Chief Executive Officer VOICETEK CORPORATION 19 Alpha Road Chelmsford, MA 01824 (508) 250-9393 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: ------------------------ ANTHONY J. MEDAGLIA, JR., ESQUIRE PHILIP P. ROSSETTI, ESQUIRE HUTCHINS, WHEELER & DITTMAR HALE AND DORR LLP A Professional Corporation 60 State Street 101 Federal Street Boston, Massachusetts 02109 Boston, Massachusetts 02110 (617) 526-6000 (617) 951-6600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are to be offered pursuant to a dividend or interest reinvestment plan, please check the following box. [ ] 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, other than securities offered only in connection with dividend or interest reinvestment plans, 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 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 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. [ ] CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE - ------------------------------------------------------------------------------------------------- Common Stock, $.01 par value per share................ 2,875,000 shares $12.00 $34,500,000 $10,455 - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
(1) Includes an aggregate of 375,000 shares which the Underwriters have the option to purchase from the Selling Stockholders solely to cover over-allotments, if any. See "Underwriting." (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended. 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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 VOICETEK CORPORATION CROSS-REFERENCE SHEET (PURSUANT TO ITEM 501 OF REGULATION S-K SHOWING THE LOCATION IN THE PROSPECTUS OF THE RESPONSES TO THE ITEMS IN PART I OF THE FORM S-1)
ITEM NUMBER AND HEADING ON FORM S-1 LOCATION IN PROSPECTUS ------------------------------------------ -------------------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus.... Outside Front Cover Page of Prospectus 2. Inside Front Cover and Outside Back Cover Pages of Prospectus....................... Inside Front Cover and Outside Back Cover Pages of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges........ Prospectus Summary; Risk Factors 4. Use of Proceeds........................... Prospectus Summary; Use of Proceeds 5. Determination of Offering Price........... Outside Front Cover Page of Prospectus; Underwriting 6. Dilution.................................. Risk Factors; Dilution 7. Selling Security Holders.................. Principal and Selling Stockholders 8. Plan of Distribution...................... Outside Front Cover Page; Underwriting 9. Description of Securities to be Registered................................ Capitalization; Description of Capital Stock 10. Interests of Named Experts and Counsel.... Not Applicable 11. Information with Respect to the Registrant................................ Outside Front Cover Page of Prospectus; Prospectus Summary; Risk Factors; The Company; Use of Proceeds; Dividend Policy; Capitalization; Dilution; Selected Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Transactions; Principal and Selling Stockholders; Description of Capital Stock; Shares Eligible for Future Sale; Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities............................... Not Applicable
3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED FEBRUARY 14, 1997 2,500,000 SHARES LOGO COMMON STOCK ------------------------ Of the 2,500,000 shares of Common Stock offered hereby, 2,000,000 shares are being sold by Voicetek Corporation ("Voicetek" or the "Company") and 500,000 shares are being sold by certain stockholders of the Company (the "Selling Stockholders"). The Company will not receive any proceeds from the sale of shares by the Selling Stockholders. See "Principal and Selling Stockholders." Prior to this offering, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price will be between $10.00 and $12.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Company has applied for quotation of the Common Stock on the Nasdaq National Market under the symbol "VCTK." THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROCEEDS TO PRICE TO UNDERWRITING PROCEEDS TO SELLING PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS - ------------------------------------------------------------------------------------------------------- Per Share.............................. $ $ $ $ Total(3)............................... $ $ $ $ - -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- (1) See "Underwriting" for information concerning indemnification of the Underwriters and other information. (2) Before deducting offering expenses payable by the Company, estimated at $750,000. (3) The Selling Stockholders have granted an option to the Underwriters exercisable within 30 days of the date hereof, to purchase up to 375,000 additional shares of Common Stock solely for the purpose of covering over- allotments, if any. If the Underwriters exercise such option in full, the total Price to Public, Underwriting Discount and Proceeds to Selling Stockholders will be $ , $ and $ , respectively. See "Underwriting." ------------------------ The shares of Common Stock are offered severally by the Underwriters when, as and if delivered to and accepted by them, subject to their right to withdraw, cancel or reject orders in whole or in part and subject to certain other conditions. It is expected that delivery of the certificates representing the shares of Common Stock will be made against payment on or about , 1997, at the office of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281. ------------------------ OPPENHEIMER & CO., INC. FIRST ALBANY CORPORATION The date of this Prospectus is , 1997 4 [ARTWORK DEPICTING: 1. Various phrases referencing certain aspects of telecommunications services; 2. Four photographs depicting people using telecommunications devices; 3. "Interactive communications for Business and its Customers. Voicetek develops, markets and supports interactive communications systems. The Company's products enable telecommunications service providers to rapidly deploy value added services and commercial organizations to extend the automation of information access, improve service, lower operating costs and differentiate their service offerings to their customers." 4. The Voicetek logo 5. Nine photographs depicting people using business solutions and network services with telecommunications devices, and corporate enterprise communications systems. 6. Schematic diagram representing the Company's interactive communications system. 7. "Generations provides the software development tools and deployment platform which permit rapid deployment, prototyping and development of interactive communications applications in AIN, corporate enterprise and call center environments. Interactive communications systems, integrated with the AIN, have given Telcos the ability to deploy new product and service offerings which leverage their installed customer and network infrastructure base. Interactive communications systems are increasingly being employed by organizations to provide broad, convenient and efficient access to their enterprise information while helping to differentiate their products and services and reduce costs."] IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Generations(R) and VTK(R) are registered trademarks of the Company, and the Voicetek logo is a trademark of the Company. This prospectus contains other product names and trade names and trademarks of the Company and of other organizations. 2 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and the notes thereto appearing elsewhere in this Prospectus. Unless otherwise indicated, or the context otherwise requires, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option, (ii) reflects the two-for-three stock split of the Common Stock to be effected on March , 1997 and (iii) assumes the conversion in full of the Company's outstanding Preferred Stock into shares of Common Stock immediately prior to the consummation of this offering. Voicetek Corporation ("Voicetek" or the "Company") develops, markets and supports interactive communications systems. The Company's products enable telecommunication service providers ("Telcos") to rapidly deploy value added services and commercial organizations to extend the automation of information access, improve service, lower operating costs and differentiate their service offerings to their customers. The Company's Generations(R) software is a scalable, client server platform which is open and fault resilient and provides customers, employees and business partners with access to information, products and services by using a variety of methods, including telephone, fax, electronic mail, paging and Web browsers. Generations permits rapid development and deployment of interactive communications applications for use in wireless and wireline environments, Advanced Intelligent Networks ("AIN") and corporate enterprise and call center environments. The Company integrates Generations with its VTK family of telephony servers, or third-party servers, to support medium to large-scale system deployments. Voicetek also provides consulting, training and maintenance services for application development and on-going support of the Company's products. Interactive communications systems are increasingly being employed by organizations to provide broad, convenient and efficient access to their enterprise information while helping to differentiate their products and services and reduce costs. At the same time, Telcos are facing a more competitive and dynamic marketplace. New interactive communications systems integrated with the AIN have given Telcos the ability to deploy new product and service offerings which leverage their installed customer and network base. To effectively provide automated access to an organization's broad information infrastructure and maximize revenue generating potential, interactive communications systems must (i) be scalable to support large volumes of inquiries (both voice and data), (ii) be open to permit integration with a wide variety of telephony and computing technologies, (iii) employ a wide range of access methods and (iv) be flexible to adapt to the needs of the enterprise. Voicetek employs a strategy of leveraged selling primarily through original equipment manufacturers ("OEMs") (e.g., Open Development Corporation and Microlog Corporation), telephone switch manufacturers (e.g., Rockwell International), computer system vendors (e.g., Digital Equipment Corporation), selected systems integrators and value added resellers ("VARs") (e.g., Andersen Consulting and Logica) as well as direct selling to large organizations. Representative applications include automated directory assistance, voice dialing, personal number service, bank by phone, discount stock trading, stock quotes, account inquiry order fulfillment, fax-on-demand, product information, scheduling, labor reporting, service ordering and dispatch. Voicetek was founded in 1981. The Company's address is 19 Alpha Road, Chelmsford, Massachusetts 01824 and its telephone number is (508) 250-9393. 3 6 THE OFFERING Common Stock offered by the Company..................... 2,000,000 shares Common Stock offered by the Selling Stockholders........ 500,000 shares Common Stock to be outstanding after the offering....... 7,028,885 shares(1) Use of proceeds......................................... To repay an aggregate of approxi- mately $3.1 million of senior indebtedness and for working capital and other general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol.................. VCTK
SUMMARY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, ----------------------------------------------- 1992 1993 1994 1995 1996 ------- ------- ------- ------- ------- STATEMENT OF OPERATIONS DATA: Total revenues................................... $ 3,285 $ 4,769 $10,056 $15,721 $22,101 Income (loss) from operations.................... (1,983) (1,574) 886 1,301 922 Net income (loss)................................ (1,997) (1,588) 854 2,392 4,063 Pro forma net income (loss) per share(2)......... $ 0.72 Pro forma shares used in per share calculation... 5,680
DECEMBER 31, 1996 ---------------------------- ACTUAL AS ADJUSTED(2)(3) ------ ----------------- BALANCE SHEET DATA: Cash and cash equivalents.......................................... $ -- $ 16,618 Working capital.................................................... 4,596 24,070 Total assets....................................................... 16,015 32,633 Redeemable convertible preferred stock............................. 11,297 -- Total stockholders' equity (deficit)............................... (3,126) 27,881
- --------------- (1) Excludes (i) 1,091,034 shares of Common Stock reserved for issuance under the Company's 1992 Equity Incentive Plan (of which options to purchase 721,109 shares of Common Stock were outstanding and options to purchase 459,631 shares of Common Stock were exercisable at December 31, 1996); (ii) 333,333 shares of Common Stock reserved for issuance under the Company's 1996 Stock Option Plan (none of which was been granted at December 31, 1996); (iii) 60,000 shares of Common Stock reserved for issuance under the Company's 1996 Stock Option Plan for Non-Employee Directors and Clerk (of which options to purchase 38,666 shares of Common Stock have been granted, none of which was exercisable at December 31, 1996); and (iv) 166,666 shares of Common Stock reserved for issuance under the Company's 1997 Employee Stock Purchase Plan. Includes 1,125 shares which were acquired upon the exercise of options during January 1997. See "Management--Stock Option Plans." (2) Gives effect to the conversion of all outstanding shares of Preferred Stock into an aggregate of 4,576,844 shares of Common Stock upon the consummation of this offering. (3) Adjusted to give effect to the issuance and sale of the 2,000,000 shares of Common Stock offered hereby by the Company at an assumed initial public offering price of $11.00 per share, less the underwriting discount and estimated offering expenses payable by the Company, and the application of the net proceeds therefrom. See "Use of Proceeds." 4 7 RISK FACTORS An investment in the Common Stock offered hereby is speculative in nature and involves a high degree of risk. In addition to the other information contained in this Prospectus, the following factors should be considered carefully in evaluating the Company and its business before purchasing the Common Stock offered hereby. This Prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act. Discussions containing such forward-looking statements may be found in the material set forth under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business -- Strategy," "Business -- Sales and Marketing," and "Business -- Engineering, Research and Product Development," as well as the Prospectus generally. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, the risk factors set forth below and the matters set forth in the Prospectus generally. Fluctuations in Quarterly Operating Results. The Company's quarterly operating results may fluctuate due to a variety of factors, including the timing of new product announcements and introductions by the Company, its major customers or its competitors, delays in new product introductions by the Company, market acceptance of new or enhanced versions of the Company's products, changes in the product or customer mix of sales, delay, cancellation or acceleration of customer orders, changes in the level of operating expenses, competitive pricing pressures, the gain or loss of significant customers, increased research and development and sales and marketing expenses associated with new product introductions, the mix of distribution channels through which the Company's products are sold, purchasing patterns of OEMs, VARs, system integrators and distributors and the hiring and training of additional staff as well as general economic conditions. In addition, the Company has often recognized a substantial portion of its revenues in the last month of a quarter. As a result, product revenues in any quarter are substantially dependent on orders booked and shipped in that quarter, and revenues for any future quarter are not predictable with any degree of certainty. Any significant deferral of purchases of the Company's products could have a material adverse effect on the Company's business, financial condition and results of operations in any particular quarter and, to the extent significant sales occur earlier than expected, operating results for subsequent quarters may be adversely affected. In addition, most of the Company's sales are in the form of large orders with short delivery times and the Company's ability to determine the timing of individual customer orders is limited. All of the above factors are difficult for the Company to forecast and these and other factors can materially adversely affect the Company's business, financial condition and results of operations for one quarter or a series of quarters. The Company's expense levels are based in part on its expectations regarding future sales and are fixed in the short term to a large extent. Therefore, the Company may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in sales. Any significant decline in demand relative to the Company's expectations or any material delay of customer orders could have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company is typically able to deliver a standard interactive communications system within 14 days of receipt of the order and, therefore, does not customarily have a significant long-term backlog. To achieve its sales objective, the Company is dependent upon obtaining orders in a quarter for shipment in that quarter. Furthermore, the Company's agreements with its OEMs, VARs, system integrators and distributors typically provide that they may change delivery schedules and cancel orders within specified timeframes, typically up to 30 days prior to the scheduled shipment date, without significant penalty. The Company's OEMs, VARs, system integrators and distributors have in the past built, and may in the future build, significant inventory for a number of reasons. Decisions by such OEMs, VARs, system integrators and distributors to reduce their inventory levels could lead to reductions in purchases from the Company. These reductions, in turn, could cause fluctuations in the Company's operating results and could have a material adverse effect on the Company's business, financial condition and results of operations in the periods in which the inventory is reduced. There can be no assurance that the Company will be able to grow its level of revenues or sustain its level of profitability, or even maintain profitability, in the future. Increases in operating expenses are expected to 5 8 continue and, together with pricing pressures, may result in a decrease in operating income. In addition, it is possible that, in some future quarter, the Company's operating results will be below the expectations of public market analysts and investors. In such event the price of the Company's Common Stock would likely be materially and adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Reliance on Indirect Distribution. The Company markets and sells products domestically and internationally primarily through resellers, such as OEMs, VARs, systems integrators and distributors. The number of qualified resellers in certain countries is limited. Resellers typically are not effective at selling the Company's products until they have been trained and have successfully completed several sales. The Company's performance depends in part on attracting, retaining and motivating such resellers. Certain of the Company's resellers may also act as resellers for competitors of the Company and could devote greater effort and resources to marketing competitive products. The Company's resellers are generally provided discounts and occasionally are entitled to special pricing or distribution arrangements, the effect of which is to decrease the Company's gross margins. Although the Company has contractual relationships with many of its resellers, these agreements do not require the resellers to purchase the Company's products and can generally be terminated on short notice by the reseller. There can be no assurance that resellers will continue to market the Company's products or devote the resources necessary to provide effective sales and marketing support to the Company. In addition, the Company is dependent on the continued viability and financial stability of its resellers, many of which are small organizations with limited capital. The loss of any key reseller could adversely affect the Company's business. The Company's sales through OEMs, VARs, systems integrators and distributors for the year ended December 31, 1996 accounted for approximately 50% of the Company's net sales. In addition, for the year ended December 31, 1996, sales to five customers accounted for approximately 58.9% of the Company's net sales. Because of the Company's sales and marketing approach, these percentages may not decrease in the near future. The Company, therefore, depends on receiving large orders from large customers and there can be no assurance that such sales will continue. Accordingly, there can be no assurance that these factors will not materially adversely affect the Company's business, financial condition and results of operations. See "Business -- Sales and Marketing." Management of Growth. The Company has recently experienced and may continue to experience growth in the number of its employees and scope of its operations. In particular, the Company intends to increase its sales, marketing, engineering and support staff. These increases will result in increased responsibilities for management. To manage potential future growth effectively, the Company must improve its operational, financial and management information systems and must hire, train, motivate and manage a growing number of employees. There can be no assurance that the Company will be able to effectively achieve or manage any such growth, and failure to do so could delay product development cycles or otherwise have a material adverse effect on the Company's business, financial condition and results of operations. Reliance on Key Personnel. The Company's success during the foreseeable future will depend largely upon the continued services of its executive officers, each of whom has entered into an employment agreement with the Company. None of the employment agreements contains non-competition covenants. The Company does not have key-man life insurance on its executive officers. Although the Company's executive officers and key personnel have extensive experience in the industry, the length of employment of certain employees at the Company is relatively short. The Company's success will also depend in part on its ability to attract and retain qualified managerial, technical and sales and marketing personnel, for whom competition is intense. In particular, the current availability of qualified sales and engineering personnel is limited. The Company has recently hired a significant number of sales and marketing personnel and the Company's success will depend in part on the Company's ability to train and integrate new hires into the Company's business. The Company's business, financial condition and results of operations could be materially adversely affected if the Company were unable to attract, hire, assimilate and train these personnel in a timely manner. See "Management." Highly Competitive Market Environment. The market for interactive communications systems is highly competitive. Certain of the Company's competitors have substantially greater financial, technical, marketing 6 9 and sales resources than the Company. There can be no assurance that the Company's present or future competitors will not exert increased competitive pressures on the Company. In particular, the Company may in the future experience pricing pressures as the markets in which it competes mature, as new technologies are introduced or for other reasons, and such price competition could materially and adversely affect the Company's market share, business, financial condition and results of operations. In addition, many suppliers of voice mail systems and telecommunications suppliers have added interactive communications capabilities to some of their product offerings and offer interactive communications systems as a component or add-on of an overall sale of a voice mail system or a telecommunications switch. The Company expects that the average sales prices of its products will decline in the future primarily due to increased competition and the introduction of new technologies. Accordingly, the Company's ability to maintain or increase net sales and gross margins will depend in part upon its ability to reduce its cost of sales, to increase unit sales volumes of existing products and to introduce and sell new products. Although the Company believes it has certain marketing, technical and other advantages over many of its competitors, maintaining such advantages will require continued investment by the Company in product innovation and development as well as in sales, marketing and customer support. There can be no assurance that the Company will be successful in such efforts. If the Company is unable to maintain such advantages, it may have a material adverse effect on the Company's business, financial condition and results of operations. See "Business - -- Competition." Technological Change, Changing Markets and New Products. The market in which the Company operates is characterized by rapid continual technological change and improvements in hardware and software technology. The Company believes that its future success will depend, in part, upon its ability to expand and enhance the features of its existing products and to develop and introduce new products designed to meet changing customer needs on a cost-effective and timely basis. Failure by the Company to respond on a timely basis to technological developments, changes in industry standards or customer requirement or the introduction or development of superior or alternative technologies could render the Company's existing products, as well as products currently under development, obsolete and unmarketable. There can be no assurance that the Company will respond effectively to technological changes or new product announcements by others or that the Company will be able to successfully develop and market new products or product enhancements and that any new product or product enhancement will gain market acceptance. The Company's software products, as with software programs generally, may contain undetected errors or "bugs" when introduced or as new versions are released. Although the Company's current products have not experienced post-release software errors that have had a significant financial or operational impact on the Company, there can be no assurance that such problems will not occur in the future, particularly as the Company's software systems continue to become more complex and sophisticated. Such defective software may result in loss of or delay in market acceptance of the Company's products, warranty liability or product recalls. The Company budgets research and development expenditures based on planned product introductions and enhancements; however, actual expenditures may significantly differ from budgeted expenditures. Inherent in the product development process are a number or risks. The development of new, technologically advanced products and product enhancements is a complex and uncertain process requiring high levels of innovation, as well as the accurate anticipation of technological and market trends. There can be no assurance that the Company will successfully identify, develop or introduce new products or product enhancements. In addition, modifications by the Company of its products to comply with unique customer specifications may detract from its ongoing product development efforts. Future delays in the introduction of new or enhanced products, the inability of such products to gain market acceptance or problems associated with new product transitions could adversely affect the Company's operating results, particularly on a quarterly basis. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Lengthy Sales Cycle. The sales cycle for the Company's products (particularly to Telcos) is lengthy and can range from approximately one month to over one year, averaging six to nine months, and is subject to a number of significant risks, including customers' budgetary constraints and internal acceptance reviews, over which the Company has little or no control. Consequently, if sales forecasted from a specific customer for a particular quarter are not realized in that quarter, the Company may not be able to generate revenue from 7 10 alternate sources in time to compensate for the shortfall. As a result, a lost or delayed sale could have a material adverse effect on the Company's quarterly operating results. Moreover, to the extent that significant sales occur earlier than expected, operating results for subsequent quarters may be adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." International Sales. Sales to customers outside the United States accounted for approximately 11% of the Company's total sales for the year ended December 31, 1996. The Company intends to expand its operations outside of the United States and to enter additional international markets, which will require significant management attention and financial resources. The Company expects to commit additional time and development resources to customizing its products for selected international markets and to developing international sales and support channels. There can be no assurance that such efforts will be successful. International operations are subject to a number or risks, including costs of customizing products for foreign countries, dependence on independent resellers, multiple and conflicting regulations regarding telecommunications, longer payment cycles, unexpected changes in regulatory requirements, import and export restrictions and tariffs, difficulties in staffing and managing foreign operations, greater difficulty or delay in accounts receivable collection, potentially adverse tax consequences, the burdens of complying with a variety of foreign laws, the impact of possible recessionary environments in economies outside the United States and political and economic instability. The Company's export sales are currently denominated predominantly in United States dollars. An increase in the value of the United States dollar relative to foreign currencies could make the Company's products more expensive and, therefore, potentially less competitive in foreign markets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Reliance on Component Availability and Key Suppliers. In certain instances, despite the availability of multiple supply sources, the Company elects to procure certain components or parts from a single source to maintain quality control or to develop a strategic relationship with a supplier. In particular, Dialogic Corporation ("Dialogic") is the primary supplier of voice boards for the Company's products. Although the Company has entered into supply contracts with Dialogic and certain of its other vendors, the Company has no assurance that components and parts will be available as required, or that prices of such components and parts will not increase. If the Company were to experience significant delays, interruptions or reductions in the supply of certain components and parts purchased from such vendors, the Company's business, financial condition and results of operations could be materially adversely affected. See "Business -- Manufacturing." Purchase orders from the Company's customers frequently require delivery quickly after placement of the order. Because the Company does not maintain significant component inventories, when purchase orders include hardware deliverables, delay in shipment by a supplier could lead to lost sales. The Company uses internal forecasts to determine its general materials and components requirements. Lead times for materials and components may vary significantly and depend on factors such as specific supplier performance, contract terms and general market demand for components. If orders vary from forecasts, the Company may experience excess or inadequate inventory of certain materials and components. From time to time, the Company has experienced shortages and allocations of certain components, resulting in delays in fulfillment of customer orders. Such shortages and allocations could have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Third-Party Claims of Infringement; Limited Protection of Proprietary Rights. The industry in which the Company competes is characterized by a significant level of use of proprietary technology and frequent litigation based on allegations of infringement of such proprietary technologies. From time to time, third parties may assert exclusive copyright, trademark and other intellectual property rights to technologies that are important to the Company. The Company is aware that certain segments of the voice processing industry, particularly voice mail/voice messaging systems, are affected by active and costly litigation, and there can be no assurance that as the Company's interactive communications systems evolve (possibly to include certain voice mail/voice messaging features), the Company will not be required to enter into license agreements or become involved in, or otherwise be affected by, litigation which may or may not be meritorious. In its distribution agreements, the Company typically agrees to indemnify its customers for any expenses or liabilities, generally without limitation, resulting from claimed infringements of patents, trademarks or 8 11 copyrights of third parties. In the event of litigation to determine the validity of any third-party claims, such litigation, whether or not determined in favor of the Company, could result in significant expense to the Company and divert the efforts of the Company's technical and management personnel from productive tasks. In the event of an adverse ruling in such litigation, the Company might be required to discontinue the use and sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses from third parties. There can be no assurance that licenses from third parties would be available on acceptable terms, if at all. In the event of a successful claim against the Company and the failure of the Company to develop or license a substitute technology, the Company's business, financial condition and results of operations would be materially adversely affected. The Company relies on a combination of patent, copyright, trademark and trade secret laws, employee confidentiality and third-party nondisclosure agreements and license agreements to protect its proprietary software technology. Nonetheless, there can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to prevent misappropriation of such rights or that third parties will not independently develop functionally equivalent or superior software technology. The laws of certain foreign countries in which the Company's products are or may be developed, manufactured or sold may not protect the Company's products or intellectual property rights to the same extent as do the laws of the United States and thus make the possibility of misappropriation of the Company's technology and products more likely. See "Business -- Patents and Other Proprietary Rights." Substantial Control By Insiders. After the sale of the shares of Common Stock offered hereby, the Company's officers, directors and principal stockholders will retain voting control of approximately 60.2% of the Company's Common Stock (55.3% if the Underwriters' over-allotment option is exercised in full) and, therefore, will be able to exercise substantial control over the Company's affairs. Accordingly, if such persons act together, they will be able to elect all directors and exercise control over the business policies and affairs of the Company. See "Management -- Executive Officers and Directors" and "Principal and Selling Stockholders." Absence of Prior Trading Market; Potential Volatility of Stock Price. Prior to this offering, there has been no public market for the Company's Common Stock and there can be no assurance that following this offering an active trading market will develop or be maintained. The initial public offering price of the Common Stock will be determined by negotiations between the Company and the Representatives of the Underwriters and may not be indicative of the market price of the Common Stock in the future. For a description of the factors to be considered in determining the initial public offering price, see "Underwriting." The market price of the shares of the Company's Common Stock may be highly volatile. Factors such as fluctuations in the Company's quarterly operating results, announcements of technological innovations or new commercial products by the Company or its competitors, and conditions in the markets in which the Company and its customers compete, may have a significant effect on the market price and marketability of the Common Stock. Furthermore, the stock market historically has experienced volatility, which has particularly affected the market prices of securities of many high technology companies and which sometimes has been unrelated to the operating performances of such companies. See "Underwriting." Shares Eligible for Future Sale. Sales of the Company's Common Stock in the public market following this offering could adversely affect the prevailing market price of the Common Stock. Immediately after completion of the offering, the Company will have 7,028,885 shares of Common Stock outstanding, of which the 2,500,000 shares offered hereby will be freely tradeable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), unless purchased by "affiliates" of the Company as that term is defined under Rule 144. The Company, its executive officers, directors and certain current stockholders, who in the aggregate own beneficially 4,468,571 of the remaining outstanding shares of Common Stock and stock options exercisable for an additional 431,998 shares of Common Stock have agreed pursuant to lock-up agreements that they will not sell or otherwise dispose of any shares of Common Stock beneficially owned by them for a period of 180 days from the date of this Prospectus. Such agreements provide that Oppenheimer & Co., Inc. may, in its sole discretion and at any time without notice, release all or a portion of the shares subject to these lock-up agreements. Upon the expiration of these lock-up agreements, 4,900,569 of such shares, including shares issuable pursuant to the exercise of stock options, will become immediately 9 12 eligible for sale in the public market, subject in some cases to the volume and other restrictions of Rule 144 or Rule 701 under the Securities Act. As soon as practicable after the date of this Prospectus, the Company intends to register on one or more registration statements on Form S-8 all shares of Common Stock subject to outstanding stock options and Common Stock issuable pursuant to the Company's stock and employee stock purchase plans that do not qualify for an exemption under Rule 701 from the registration requirements of the Securities Act. Shares covered by such registration statement will be eligible for sale in the public market after the effective date of such registration. In addition, the holders of 4,193,791 shares of Common Stock are entitled to certain registration rights with respect to such shares. If such holders, by exercising their registration rights, cause a large number of shares to be registered and sold in the public market, such sales may have an adverse effect on the market price for the Common Stock. In addition, if the Company is required to include in a Company-initiated registration shares held by such holders pursuant to the exercise of their "incidental" registration rights, such sales may have an adverse effect on the Company's ability to raise needed capital. See "Management," "Principal Stockholders," "Shares Eligible for Future Sale" and "Underwriting." Immediate and Substantial Dilution. The initial public offering price is substantially higher than the net tangible book value per share of Common Stock. Investors purchasing shares of Common Stock in this offering will, therefore, incur immediate substantial dilution in net tangible book value per share. See "Dilution." No Expectation of Dividends. The Company currently intends to retain any future earnings in its business and does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. See "Dividend Policy." Anti-Takeover Provisions; Possible Issuance of Preferred Stock. The Company's Restated Articles of Organization ("Articles of Organization") and Amended and Restated By-laws ("By-laws") contain provisions that might diminish the likelihood that a potential acquiror would make an offer for the Common Stock, impede a transaction favorable to the interest of the stockholders or increase the difficulty of removing members of the Board of Directors or management. After the consummation of this offering, the Board of Directors will have the authority, without further stockholder approval, to issue up to 1,000,000 shares of Preferred Stock in one or more series and to determine the price, rights, preferences and privileges of those shares. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any Preferred Stock that may be issued in the future. The issuance of shares of Preferred Stock, while potentially providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company. The Company has no present plans to issue shares of Preferred Stock. Furthermore, certain provisions of the Articles of Organization, including provisions that provide for the Board of Directors to be divided into three classes to serve for staggered three-year terms, may have the effect of delaying or preventing a change in control of the Company, which could adversely affect the market price of the Common Stock. In addition, the Company is subject to Chapters 110D and 110F of the Massachusetts General Laws, which prohibit the Company from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The application of such provisions also could have the effect of delaying or preventing a change of control in the Company. See "Description of Capital Stock -- Certain Articles of Organization, By-law and Statutory Provisions Affecting Stockholders." Discretion as to Use of Proceeds. The principal purposes of this offering are to increase the Company's equity capital, to create a public market for the Company's Common Stock, to increase the visibility of the company in the marketplace and to facilitate future access to public equity markets. As of the date of this Prospectus, the Company has no specific plans to use the net proceeds from this offering other than for working capital and general corporate purposes, including repayment of bank indebtedness. Accordingly, the Company's management will retain broad discretion as to the allocation of the net proceeds from this offering. Pending any such uses, the Company plans to invest the net proceeds in the investment grade, interest-bearing securities. See "Use of Proceeds." 10 13 USE OF PROCEEDS The net proceeds to the Company from the sale of the 2,000,000 shares of Common Stock offered by the Company hereby, based upon an assumed initial offering price of $11.00 per share, after deducting underwriting discount and estimated offering expenses payable by the Company, are expected to be $19,710,000. The Company will not receive any proceeds from the sale of Common Stock by the Selling Stockholders. See "Principal and Selling Stockholders." The Company expects to use the net proceeds from this offering to repay all of its indebtedness under the Company's Credit Facility with Fleet Bank and for working capital and other general corporate purposes. Under the term portion of the Credit Facility, the Company may borrow up to $1 million, which is due and payable on September 1, 1999, with interest payable quarterly at a fluctuating rate equal to Fleet Bank's prime rate plus one percent. In addition, the Credit Facility allows the Company to borrow up to $5 million on a revolving basis. The revolving portion of the Credit Facility expires, and all outstanding borrowings thereunder are due and payable on September 1, 1997 with interest payable quarterly at a fluctuating rate equal to Fleet Bank's prime rate plus three-quarters of one percent. At December 31, 1996, $377,000 was outstanding under the term portion, and $2.7 million was outstanding under the revolving portion, of the Credit Facility. After giving effect to the application of proceeds of this offering, the Company will have no outstanding long-term indebtedness. The Company may also use a portion of the net proceeds to fund acquisitions of complementary businesses, products or technologies. Although the Company has in the past reviewed potential acquisition opportunities, there are no current agreements or negotiations with respect to any such transactions. Pending such uses, the net proceeds of this offering will be invested in short-term investment grade, interest-bearing instruments. DIVIDEND POLICY The Company has never declared or paid any cash dividends on its Common Stock and currently intends to retain all available funds for use in the operation and expansion of its business. The Company does not, therefore, anticipate that any cash dividends will be declared or paid in the foreseeable future. The Company's current loan agreement prohibits the payment of cash dividends without the bank's consent. 11 14 CAPITALIZATION The following table sets forth (i) the Company's actual capitalization as of December 31, 1996, (ii) the Company's capitalization as adjusted to give effect to the sale of the 2,000,000 shares of Common Stock offered by the Company hereby, at an assumed initial public offering price of $11.00 after deducting the underwriting discount and estimated offering expenses payable by the Company and the anticipated application of the net proceeds therefrom, and (iii) after giving effect to the conversion of the Preferred Stock. See "Use of Proceeds."
DECEMBER 31, 1996 -------------------------- (IN THOUSANDS) ACTUAL AS ADJUSTED -------- ----------- Short-term debt..................................................... $ 2,841 $ -- ======== ========= Long-term debt...................................................... $ 236 $ -- -------- Redeemable Convertible Preferred Stock, $.01 par value; 10,000,000 shares authorized, 6,865,274 shares issued and outstanding actual; 10,000,000 shares authorized, no shares issued or outstanding as adjusted.......................................................... 11,297 -- -------- Stockholders' equity (deficit): Common Stock, $.01 par value; 20,000,000 shares authorized; 450,916 shares issued and outstanding actual; 30,000,000 shares authorized, 7,027,760 shares issued and outstanding as adjusted....................................................... 5 70 Additional paid-in capital........................................ 7,087 38,029 Accumulated deficit............................................... (10,218) (10,218) -------- ----------- Total stockholders' equity (deficit).............................. (3,126) 27,881 -------- ----------- Total capitalization...................................... $ 8,407 $ 27,881 ======== =========
12 15 DILUTION As of December 31, 1996, the Company's pro forma net tangible book value was approximately $8.1 million or approximately $1.62 per share. Pro forma net tangible book value per share represents the total amount of tangible assets of the Company reduced by the amount of total liabilities and divided by the total number of shares of Common Stock outstanding after giving effect to the conversion of all Preferred Stock. After giving effect to the sale by the Company of 2,000,000 shares of Common Stock in this offering at an assumed initial public offering price of $11.00 per share after deducting the underwriting discount and estimated offering expenses payable by the Company, the pro forma net tangible book value of the Company as of December 31, 1996 would have been approximately $27.9 million or $3.96 per share. This represents an immediate increase in net tangible book value of $2.34 per share to existing stockholders and an immediate dilution of $7.04 per share to new investors. The following table illustrates this per share dilution in net tangible book value to new investors. Assumed initial public offering price per share................ $11.00 Pro forma net tangible book value per share at December 31, 1996................................................ $ 1.62 Increase per share attributable to new investors.......... 2.34 ------ Pro forma net tangible book value per share after this offering..................................................... 3.96 ------ Pro forma net tangible book value dilution per share to new investors.................................................... $ 7.04 ======
The following table sets forth, as of December 31, 1996, the number of shares purchased from the Company, the total consideration paid to the Company and the average price per share paid by existing stockholders and new investors purchasing Common Stock in this offering:
SHARES PURCHASED TOTAL CONSIDERATION --------------------- ----------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE --------- ------- ----------- ------- ------------- Existing stockholders(1)............ 5,027,760 71.5% $14,136,498 39.1% $ 2.81 New investors(1).................... 2,000,000 28.5 22,000,000 60.9 $ 11.00 --------- ----- ----------- ------ Total.......................... 7,027,760 100.0% $36,136,498 100.0% ========= ===== =========== ======
- --------------- (1) Assumes no exercise of outstanding options after December 31, 1996. As of December 31, 1996, options to purchase 759,775 shares of Common Stock were outstanding, and an additional 397,262 shares were reserved for issuance under the Company's stock option plans. Additionally, the Company has reserved 166,666 shares for issuance under the Company's 1997 Employee Stock Purchase Plan. See "Management -- Stock Option Plans" and Note 5 of Notes to Financial Statements. The issuance of Common Stock under these plans could result in further dilution to new investors. 13 16 SELECTED FINANCIAL DATA The selected financial data set forth below as of and for the years ended December 31, 1994, 1995 and 1996 are derived from the financial statements of the Company, included elsewhere in this Prospectus which have been audited by Coopers & Lybrand L.L.P., independent public accountants. The selected financial data as of and for the years ended December 31, 1992 and 1993 are derived from audited financial statements of the Company not included in this prospectus. The historical results are not necessarily indicative of the results of operations to be expected in the future. The following selected financial data should be read in conjunction with the Financial Statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1992 1993 1994 1995 1996 ------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues: Systems............................... $ 2,779 $ 3,626 $ 7,746 $11,477 $16,239 Services.............................. 506 1,143 2,310 4,244 5,862 ------- ------- ------- ------- ------- Total revenues................... 3,285 4,769 10,056 15,721 22,101 Cost of revenues: Systems............................... 911 1,618 2,393 3,704 5,183 Services.............................. 199 604 1,276 2,234 3,161 ------- ------- ------- ------- ------- Total cost of revenues........... 1,110 2,222 3,669 5,938 8,344 ------- ------- ------- ------- ------- Gross profit............................... 2,175 2,547 6,387 9,783 13,757 Operating expenses: Research and development.............. 1,922 1,660 2,340 3,361 5,771 Sales and marketing................... 1,622 1,590 2,163 3,806 5,435 General and administrative............ 614 871 998 1,315 1,629 ------- ------- ------- ------- ------- Total operating expenses......... 4,158 4,121 5,501 8,482 12,835 ------- ------- ------- ------- ------- Income (loss) from operations.............. (1,983) (1,574) 886 1,301 922 Other income (expense), net................ (9) (14) (9) (70) (218) ------- ------- ------- ------- ------- Income (loss) before provision for income taxes.................................... (1,992) (1,588) 877 1,231 704 Provision for (benefit from) income taxes.................................... 5 -- 23 (1,161) (3,359) ------- ------- ------- ------- ------- Net income (loss).......................... $(1,997) $(1,588) $ 854 $ 2,392 $ 4,063 ======= ======= ======= ======= ======= Pro forma net income per share............. $ 0.72 ======= Pro forma weighted average number of shares outstanding.............................. 5,680
DECEMBER 31, ----------------------------------------------------- 1992 1993 1994 1995 1996 ------- ------- ------- ------- ------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital............................ $ (819) $(3,420) $ 1,170 $ 3,103 $ 4,596 Total assets............................... 1,742 1,911 3,383 7,271 16,015 Long-term debt, less current portion....... 115 -- -- -- 236 Redeemable convertible preferred stock..... 4,586 5,085 9,205 10,201 11,297 Total stockholders' equity (deficit)....... (4,776) (8,111) (7,663) (6,253) (3,126)
14 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that could cause or contribute to such a difference include, but are not limited to, those discussed in "Risk Factors." The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Company's Financial Statements and Notes thereto, and the other financial information included in this Prospectus. OVERVIEW The Company recognizes product and license revenues upon execution of a contract and shipment to customers provided that no significant vendor obligations remain outstanding and collection of the resulting receivable is deemed probable by management. If insignificant vendor obligations remain after shipment of the product, the Company accrues for the estimated costs of such obligations. Additionally, the Company accrues the warranty costs upon shipment. Revenue from post-customer support (maintenance) contracts is recognized ratably over the life of the contract, generally one year. Revenue from training and consulting is recognized as the services are provided. For certain contracts eligible under AICPA Statement of Position No. 81-1, revenue is recognized using the percentage-of-completion accounting method based upon an efforts-expended method. In all cases, changes to total estimated costs and anticipated losses, if any, are recognized in the period in which such changes are determined. The percentage-of-completion method requires estimates of costs to complete which may differ from actual costs. In accordance with Statement of Financial Accounting Standards (SFAS) No. 86, the Company has carefully evaluated the establishment of technological feasibility of its various products during the development phase. Based on the Company's product development process, technological feasibility is established upon completion of a working model. The time period during which costs could be capitalized from the point of reaching technological feasibility until the time of general product release is very short and, consequently, the amounts that could be capitalized are not material to the Company's financial position or results of operations. Therefore, the Company charges all research and development expenses to operations in the period incurred. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax asset to a level which, more likely than not, will be realized. Management of the Company has evaluated the positive and negative evidence impacting the realizability of its deferred tax assets as required by Statement of Financial Accounting Standards No. 109. Management has considered its history of profitable operations and concluded that it is more likely than not that it will generate sufficient taxable income prior to the expiration of these items. Management re-evaluates the positive and negative evidence on a quarterly basis and therefore the amount of the deferred tax asset could be reduced in future periods. 15 18 RESULTS OF OPERATIONS The following table sets forth certain items from the Company's statements of operations data as a percentage of total revenues for the periods indicated.
YEARS ENDED DECEMBER 31, --------------------------- 1994 1995 1996 ----- ----- ----- Revenues: Systems.............................................................. 77.0% 73.0% 73.5% Services............................................................. 23.0 27.0 26.5 ----- ----- ----- Total revenues.................................................. 100.0 100.0 100.0 Cost of revenues: Systems.............................................................. 23.8 23.6 23.5 Services............................................................. 12.7 14.2 14.3 ----- ----- ----- Total cost of revenues.......................................... 36.5 37.8 37.8 ----- ----- ----- Gross profit............................................................. 63.5 62.2 62.2 Operating expenses: Research and development............................................. 23.3 21.4 26.1 Sales and marketing.................................................. 21.5 24.2 24.6 General and administrative........................................... 9.9 8.4 7.4 ----- ----- ----- Total operating expenses........................................ 54.7 54.0 58.1 ----- ----- ----- Income (loss) from operations............................................ 8.8 8.2 4.1 Other income (expense), net.............................................. (0.1) (0.4) (1.0) ----- ----- ----- Income (loss) before provision for income taxes.......................... 8.7 7.8 3.1 Provision for (benefit from) income taxes................................ 0.2 (7.4) (15.2) ----- ----- ----- Net income (loss)........................................................ 8.5% 15.2% 18.3% ===== ===== =====
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 Total Revenues. Total revenues increased 40.6% to $22.1 million in 1996 from $15.7 million in 1995. The increase in revenue was due to a 39.9% increase in domestic sales and a 46.9% increase in international sales. Systems revenue increased 41.5% to $16.2 million in 1996 from $11.5 million in 1995. The increase in systems revenue was primarily due to the increase in unit sales volume. Service revenues consist of customization of software, maintenance, installations, repairs and training. Service revenues increased 38.1% to $5.9 million in 1996 from $4.2 million in 1995, primarily due the addition of more units to the service base, as well as an increase in the deployment of customer applications. Gross Profit. The Company's gross profit increased $4.0 million to $13.8 million in 1996 from $9.8 million in 1995. Gross margin was unchanged at 62.2% in 1995 and 1996. Gross profit on system sales increased 42.2% to $11.1 million in 1996 from $7.8 million in 1995. Gross margin on system sales increased to 68.1% in 1996 from 67.7% in 1995. This increase in gross margin percentage on system sales was attributed to increased software license revenues on third party platforms. Gross profit on service revenues increased 34.4% to $2.7 million in 1996 from $2.0 million in 1995. Gross margin on service revenues decreased to 46.1% in 1996 from 47.4% in 1995. This decrease is primarily attributable to increased costs related to continued investment by the Company in application engineers to support growth resulting from increased sales of customer applications. Research and Development. Research and development expenses increased 71.1% to $5.8 million in 1996 (26.1% of total revenues) from $3.4 million in 1995 (21.4% of total revenues). Research and development expenses consist primarily of salaries, consultants and other related expenses for research and development personnel, including the cost of facilities and depreciation of capital equipment. The increase in the dollar amount of research and development expenses reflects the continued expansion of the Company's research and development staff which increased to 57 on December 31, 1996 from 41 on December 31, 1995. The increase in research and development expenses as a percentage of total revenues was primarily due to incremental investment in the development of software products for the Telco marketplace. The Company believes that significant investments in product development are required to remain competitive. As a 16 19 consequence, the Company expects that product development expenses will increase in absolute dollars in the future. Sales and Marketing. Sales and marketing expenses increased 42.8% to $5.4 million in 1996 (24.6% of total revenues) from $3.8 million in 1995 (24.2% of total revenues). Sales and marketing expenses consist primarily of salaries, commissions earned by sales personnel, travel and promotional expenses. The increase in the dollar amount of the sales and marketing expenses was due primarily to the expansion of the sales staff, which increased to 43 on December 31, 1996 from 26 on December 31, 1995. The increase in sales and marketing expenses as a percentage of total revenues was due primarily to the establishment of a separate Telco sales force. The Company expects to continue to expand its field sales and marketing efforts, its third party distribution channels and its operations outside the United States and, therefore, anticipates that sales and marketing expenditures will increase in absolute dollars in the future. General and Administrative. General and administrative expenses increased 23.9% to $1.6 million in 1996 (7.4% of total revenues) from $1.3 million in 1995 (8.4% of total revenues). General and administrative expenses consist primarily of salaries and other related expenses of administrative, executive and financial personnel and outside professional fees. The increase in the dollar amount of the general and administrative expenses was primarily due to the addition of staff to support the growth of the Company's business. The reduction in general and administrative expenses as a percentage of total revenues was due primarily to the growth in total revenues. The Company expects that its general and administrative expenses will increase in absolute dollars in the future as the Company expands its staffing, information systems and other items related to infrastructure and incurs additional costs associated with being a public company. Other Income (Expense), Net. Other expenses increased 211.4% to approximately $218,000 in 1996 (1.0% of total revenues) from approximately $70,000 in 1995 (0.4% of total revenues). Interest expense increased 175.9% to approximately $229,000 in 1996 (1.0% of total revenues) from approximately $83,000 in 1995 (0.5% of total revenues). Provision for (Benefit from) Income Taxes. The net benefit from income taxes increased to $3.4 million in 1996 from $1.2 million in 1995. This was primarily due to the elimination of the remaining valuation allowance against deferred tax assets of $3.8 million as compared to the partial reduction in the valuation allowance against deferred tax assets of $1.2 million in 1995. Management has considered its history of cumulative income and concluded, in accordance with the applicable accounting standards, that it is more likely than not that these deferred tax assets will be realized. The Company re-evaluates the positive and negative information impacting the realizability of the deferred tax assets on a quarterly basis and, accordingly, the deferred tax asset could be reduced in future periods. As of December 31, 1996, the Company had approximately $9.7 million of net operating loss carryforwards for federal income tax purposes which expire in the years 2004 through 2009. The Company had approximately $4.1 million of state operating losses which expire in the years 1997 through 2009. The Company has research and development credits for federal and state income tax purposes of approximately $600,000 and $500,000, respectively, which begin to expire in 1999. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Total Revenues. Total revenues increased 56.3% to $15.7 million in 1995 from $10.1 million in 1994. Systems revenue increased 48.2% to $11.5 million in 1995 from $7.7 million in 1994. The increase in system revenue was due to increased unit volume which reflects the expansion of the Company's domestic customer base and the development of the Company's OEM distribution channel. Service revenues increased 83.7% to $4.2 million in 1995 from $2.3 million in 1994, primarily due to the addition of units and software licenses to the service base and the deployment of customer applications. International revenues increased 123.1% to $1.6 million in 1995 from approximately $719,000 in 1994. The Company hired its first international salesman in May 1995. Gross Profit. The Company's gross profit increased $3.4 million to $9.8 million in 1995 from $6.4 million in 1994. Gross margin decreased to 62.2% in 1995 from 63.5% in 1994. Gross profit on system sales increased 45.2% to $7.8 million in 1995 from $5.4 million in 1994. Gross margin on systems sales decreased to 17 20 67.7% in 1995 from 69.1% in 1994. This decrease was attributed to increased revenues at lower margins from the Company's OEM distribution channel. Gross profits on service revenues increased 94.4% to approximately $2.0 million in 1995 from approximately $1.0 million in 1994. Gross margin on service revenues increased to 47.4% in 1995 from 44.8% in 1994. This increase is primarily attributable to increased efficiencies of scale as a result of the growth in systems added to the service base. Research and Development. Research and development expenses increased 43.6% to $3.4 million in 1995 (21.4% of total revenues) from $2.3 million in 1994 (23.3% of total revenues). The increase in the dollar amount of research and development expenses reflects the continued expansion of the Company's research and development staff which increased to 41 on December 31, 1995 from 25 on December 31, 1994. The reduction in research and development expenses as a percentage of total revenues was due primarily to the growth in total revenues. Sales and Marketing. Sales and marketing expenses increased 76.0% to $3.8 million in 1995 (24.2% of total revenues) from $2.2 million in 1994 (21.5% of total revenues). The increase in the dollar amount of the sales and marketing expenses was due primarily to the addition of the international field sales force, the expansion of the domestic field sales operations and increased marketing activities. The increase in sales and marketing expenses as a percentage of total revenues can be attributed to the addition of the international field sales force. General and Administrative. General and administrative expenses increased 31.8% to $1.3 million in 1995 (8.4% of total revenues) from $1.0 million in 1994 (9.9% of total revenues). The increase in the dollar amount of the general and administrative expenses was primarily due to the addition of staff and the increased costs associated with expansion of information systems to support the growth of the Company's business. The reduction in general administrative expenses as a percentage of total revenues was due primarily to the growth in total revenues. Other Income (Expense), Net. Other expenses increased to approximately $70,000 in 1995 (0.4% of total revenues) from approximately $10,000 in 1994 (0.1% of total revenues). Interest expense increased to approximately $83,000 in 1995 (0.5% of total revenues) from approximately $18,000 in 1994 (0.1% of total revenues). The increase in interest expense was primarily due to increased borrowings. Provision for (Benefit from) Income Taxes. The net benefit from income taxes was approximately $1.2 million in 1995 compared to a provision for income taxes of approximately $23,000 in 1994. This was primarily due to a $1.2 million reduction in the Company's valuation allowance for deferred tax assets. The Company determined that it was more likely than not that $1.2 million of deferred tax assets would be realized under the applicable accounting standards. Accordingly, a valuation allowance of $4.3 million was applied against deferred tax assets at December 31, 1995. 18 21 QUARTERLY RESULTS OF OPERATIONS The following tables set forth certain unaudited statement of operations data for each of the past eight quarters as well as the percentages of the Company's total revenues represented by each item. The following selected quarterly information includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation. The Company believes that quarter-to-quarter comparisons of its financial results are not necessarily meaningful and that such comparisons should not be relied upon as an indication of future performance.
QUARTERS ENDED ------------------------------------------------------------------------------------------------ MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, 1995 1995 1995 1995 1996 1996 1996 1996 --------- -------- --------- -------- --------- -------- --------- -------- (IN THOUSANDS) Revenues: Systems................... $ 2,040 $2,404 $ 2,984 $ 4,049 $ 3,153 $3,168 $ 4,646 $5,272 Services.................. 1,117 1,166 1,043 918 1,285 1,077 1,441 2,059 ------ ------ ------ ------- ------ ------ ------ ------ Total revenues........ 3,157 3,570 4,027 4,967 4,438 4,245 6,087 7,331 Cost of revenues: Systems................... 649 878 1,082 1,095 986 918 1,440 1,839 Services.................. 461 472 530 771 695 647 831 988 ------ ------ ------ ------- ------ ------ ------ ------ Total cost of revenues............ 1,110 1,350 1,612 1,866 1,681 1,565 2,271 2,827 ------ ------ ------ ------- ------ ------ ------ ------ Gross profit.................. 2,047 2,220 2,415 3,101 2,757 2,680 3,816 4,504 Operating expenses: Research and development............. 742 823 765 1,031 1,146 1,382 1,570 1,673 Sales and marketing....... 859 841 921 1,185 1,026 1,144 1,466 1,799 General and administrative.......... 263 311 328 413 344 416 413 456 ------ ------ ------ ------- ------ ------ ------ ------ Total operating expenses............ 1,864 1,975 2,014 2,629 2,516 2,942 3,449 3,928 ------ ------ ------ ------- ------ ------ ------ ------ Income (loss) from operations.................. 183 245 401 472 241 (262) 367 576 Other income (expense), net... (1) (11) (42) (16) (31) (42) (59) (86) ------ ------ ------ ------- ------ ------ ------ ------ Income (loss) before provision for income taxes............ 182 234 359 456 210 (304) 308 490 Provision for (benefit from) income taxes................ 8 18 24 (1,211) 12 12 15 (3,398) ------ ------ ------ ------- ------ ------ ------ ------ Net income (loss)............. $ 174 $ 216 $ 335 $ 1,667 $ 198 $ (316) $ 293 $3,888 ====== ====== ====== ======= ====== ====== ====== ======
QUARTERS ENDED ------------------------------------------------------------------------------------------------ MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, 1995 1995 1995 1995 1996 1996 1996 1996 --------- -------- --------- -------- --------- -------- --------- -------- Revenues: Systems................... 64.6% 67.3% 74.1% 81.5% 71.0% 74.6% 76.3% 71.9% Services.................. 35.4 32.7 25.9 18.5 29.0 25.4 23.7 28.1 ----- ----- ----- ----- ----- ----- ----- ----- Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Cost of revenues: Systems................... 20.6 24.6 26.9 22.0 22.2 21.7 23.6 25.0 Services.................. 14.6 13.2 13.1 15.5 15.7 15.2 13.7 13.5 ----- ----- ----- ----- ----- ----- ----- ----- Total cost of revenues............ 35.2 37.8 40.0 37.5 37.9 36.9 37.3 38.5 ----- ----- ----- ----- ----- ----- ----- ----- Gross profit.................. 64.8 62.2 60.0 62.5 62.1 63.1 62.7 61.5 Operating expenses: Research and development............. 23.5 23.0 19.0 20.8 25.8 32.6 25.8 22.9 Sales and marketing....... 27.2 23.6 22.9 23.9 23.1 26.9 24.1 24.5 General and administrative.......... 8.3 8.7 8.1 8.3 7.8 9.8 6.8 6.2 ----- ----- ----- ----- ----- ----- ----- ----- Total operating expenses............ 59.0 55.3 50.0 53.0 56.7 69.3 56.7 53.6 ----- ----- ----- ----- ----- ----- ----- ----- Income (loss) from operations.................. 5.8 6.9 10.0 9.5 5.4 (6.2) 6.0 7.9 Other income (expense), net... 0.0 (0.3) (1.1) (0.3) (0.7) (1.0) (1.0) (1.2) ----- ----- ----- ----- ----- ----- ----- ----- Income (loss) before provision for income taxes............ 5.8 6.6 8.9 9.2 4.7 (7.2) 5.0 6.7 Provision for (benefit from) income taxes................ 0.3 0.5 0.6 (24.4) 0.3 0.3 0.2 (46.4) ----- ----- ----- ----- ----- ----- ----- ----- Net income (loss)............. 5.5% 6.1% 8.3% 33.6% 4.4% (7.5)% 4.8% 53.1% ===== ===== ===== ===== ===== ===== ===== =====
19 22 The Company's quarterly operating results may fluctuate due to a variety of factors, including the timing of new product announcements and introductions by the Company, its major customers or its competitors, delays in new product introductions by the Company, market acceptance of new or enhanced versions of the Company's products, changes in the product or customer mix of sales, delay, cancellation or acceleration of customer orders, changes in the level of operating expenses, competitive pricing pressures, the gain or loss of significant customers, increased research and development and sales and marketing expenses associated with new product introductions, the mix of distribution channels through which the Company's products are sold, purchasing patterns of OEMs, VARs, system integrators and distributors and the hiring and training of additional staff as well as general economic conditions. In addition, the Company has often recognized a substantial portion of its revenues in the last month of a quarter. As a result, product revenues in any quarter are substantially dependent on orders booked and shipped in that quarter, and revenues for any future quarter are not predictable with any degree of certainty. Any significant deferral of purchases of the Company's products could have a material adverse effect on the Company's business, financial condition and results of operations in any particular quarter and, to the extent significant sales occur earlier than expected, operating results for subsequent quarters may be adversely affected. LIQUIDITY AND CAPITAL RESOURCES The Company's principal cash requirement to date has been to fund working capital and capital expenditures in order to support the growth of revenues. The Company has financed this requirement primarily through bank borrowings, trade credit and the private sale of preferred stock. Cash flow from (used in) operations was approximately $900,000, ($800,000) and ($500,000) in 1994, 1995 and 1996, respectively. At December 31, 1996, the Company had working capital of $4.6 million. The Company expects its working capital needs to increase along with future revenue growth. Current assets and current liabilities at December 31, 1996 increased $8.7 million and $4.3 million, respectively, compared to December 31, 1995. Current assets increased principally as a result of an increase in accounts receivable due to higher operating levels and a trend towards transactions being booked late in the quarter. Current liabilities increased primarily due to increased short-term borrowings to support the growth in capital purchases. In August 1996, the Company entered into a revolving credit agreement with Fleet Bank to increase its revolving line of credit to $5.0 million. Interest on borrowings under this credit facility is calculated at a fluctuating rate equal to Fleet Bank's prime rate plus three-quarters of one percent. This credit facility expires on September 1, 1997 . The Credit agreement requires the Company to maintain minimum level of earnings and a minimum net worth ratio. As of December 31, 1996, the Company had borrowed $2.7 million under this line of credit. In addition, in August 1996, the Company entered into an equipment line of credit of $1.0 million at a fluctuating interest rate equal to Fleet Bank's prime rate plus one percent. As of December 31, 1996, the Company had borrowed $377,000 under this line of credit. The Company intends to pay down its existing indebtedness with the net proceeds of this offering. The Company had capital expenditures totaling approximately $300,000, $700,000 and $1.8 million during 1994, 1995 and 1996, respectively. The Company's capital budget for 1997 is $2.5 million, which includes additional computer equipment utilized for the development and testing of the Company's products and leasehold improvements to support the Company's growth. The Company believes the net proceeds from this offering, together with funds generated from operations will be sufficient to fund its operations and capital expenditures for at least 18 months following the consummation of this offering. 20 23 BUSINESS Voicetek develops, markets and supports interactive communications systems. The Company's products enable Telcos to rapidly deploy value added services and commercial organizations to extend the automation of information access, improve service, lower operating costs and differentiate their service offerings to their customers. The Company's Generations software is a scalable, client server platform which is open and fault resilient and provides customers, employees and business partners with access to information, products and services by using a variety of methods, including telephone, fax, electronic mail, paging and Web browsers. Generations permits rapid development and deployment of interactive communications applications for use in wireless and wireline environments, AIN and corporate enterprise and call center environments. The Company integrates Generations with its VTK family of telephony servers, or third party servers, to support medium to large-scale system deployments. Voicetek also provides consulting, training and maintenance services for application development and on-going support of the Company's products. Voicetek employs a strategy of leveraged selling primarily through OEMs (e.g., Open Development Corporation and Microlog Corporation), telephone switch manufacturers (e.g., Rockwell International), computer system vendors (e.g., Digital Equipment Corporation), selected system integrators and VARs (e.g., Andersen Consulting and Logica) as well as direct selling to large organizations. Representative applications include automated directory assistance, voice dialing, personal number service, bank by phone, discount stock trading, stock quotes, account inquiry, order fulfillment, fax-on-demand, product information, scheduling, labor reporting, service ordering and dispatch. INDUSTRY BACKGROUND In today's competitive global marketplace, organizations are investing in and relying on information technology to maintain and enhance their competitive position. Interactive communications systems are increasingly being employed to provide broad, convenient and efficient access to the information technology infrastructure by customers, employees and business partners. Interactive communications systems have become mission critical components of an organization's business, differentiating its products and services from those of their competition while increasing the quality and types of services provided and reducing costs. Commercial enterprises initially sought to improve access to information and to better control costs by using trained representatives or agents located in call centers. However, the growth in demand for convenient and continuous access to information highlighted the inefficiency, expense and lack of reliability which results from reliance on a labor force to perform many functions. Traditional automation systems, including many interactive voice response systems, tend to be proprietary, problem-specific solutions and provide limited access (such as the keypad of touch tone telephone) and limited interaction. These proprietary stand-alone systems (i) do not leverage the price/performance characteristics inherent to open systems, (ii) are difficult to develop, deploy and maintain in a rapidly evolving operating environment, (iii) are not easily integrated with products provided by other vendors and (iv) are not able to be modified and expanded as a company's business grows. The trend towards the privatization and deregulation of the global telecommunications sector, since the breakup of AT&T in 1984, has heightened the competition in the telecommunications marketplace. Long distance companies, local exchange carriers and competitive access providers now compete with new entrants such as cable television operators, wireless carriers and Internet service providers in many segments, dramatically increasing the number of new networks for voice and data traffic. Decreased telecommunications regulations have given these companies the opportunity to utilize new technologies to deploy the next generation network architecture, commonly referred to as the AIN. The AIN provides the backbone to support and define services, which allow any type of information (including voice, data and video) to pass through the telephone network without special circuitry or long installation cycles. New interactive communications systems integrated with the AIN have given Telcos the ability to deploy new product and service offerings, such as voice activated dialing and unified messaging, which leverage their installed customer and network infrastructure base. To protect their installed base of customers and to generate new customers, 21 24 Telcos must be able to provide integrated products and services which differentiate them from their competition while being more responsive to the needs and requests of their customers. To leverage automated access to an organization's broad information infrastructure and maximize revenue generating potential, enterprise organizations and Telcos require an interactive communications system that (i) is scalable to support large volumes of inquiries (both voice and data), (ii) is open to permit integration with a wide variety of telephony and computing technologies, (iii) permits multiple service applications to be deployed and run on the same system simultaneously, (iv) employs a wide range of access methods, including telephones, Web browsers, fax, electronic mail and speech recognition and (v) is flexible to adapt to the needs of the enterprise while allowing information to be processed and disseminated efficiently and accurately. The systems also need to be cost effective to operate and maintain, provide end-user integration with the information technology infrastructure (including SQL and legacy databases) and create a robust software development environment for the rapid development and deployment of mission critical applications. THE VOICETEK SOLUTION Voicetek has developed an interactive communications system built on an open architected software-based platform that is scalable, modular and flexible. The software platform, Generations, together with the Company's VTK system or third-party hardware, provide customers with an interactive communications system designed for sophisticated operating environments. These products integrate with the systems used by many of the major telephone switch manufacturers and computer system vendors and provide end-users with a strong integrated system solution. Generations, which is available on multiple operating systems and computer vendor hardware platforms, runs and manages mixed media applications, allowing customers to choose the computer and operating system that best suits their requirements. The software platform integrates industry standard technologies such as network interfaces, host communications and SQL databases, enabling Generations to provide access to information through mixed media technologies (such as DTMF, pulse or ADSI (screen phone) telephones, fax, Web Browsers, voice processing or speech recognition). Generations is extensible, easily incorporating new technologies such as Web integration, large vocabulary speech recognition, text-to-speech and simple network management protocols ("SNMP") technologies. Generations is flexible and allows the user to extend the platform by creating special processing functions required by an application. Additionally, the Generations client server architecture is scalable, enabling systems with as few as 24 ports up to many thousands of ports. This architecture allows end users to offer multiple applications and services simultaneously and provides companies with the ability to deploy only the capability they need while permitting new or additional capabilities to be added at a later time, instead of requiring an entirely new system. The client server architecture of Generations enables companies to scale the size of their interactive communications to meet their specific volume requirements. Voicetek systems can be deployed either centrally or over a geographically dispersed area. The Company believes that these features help end-users to lower their operating costs through more efficient use of MIS resources, improved application development and more efficient ongoing maintenance and enhancement of applications. Voicetek also provides Generations Developer, an integrated set of tools within Generations to design, create, test and deploy applications. Using object-oriented technology, Generations Developer allows customers to build applications based on knowledge of their business workflow and processes without the need for extensive computer programming skills. Using Generations Developer, the Company believes that customers can create, test and deploy applications in less time and at a lower cost than using conventional programming tools and methods. 22 25 STRATEGY Voicetek's objective is to become a leading supplier of interactive communications software platforms and applications solutions. To achieve this objective, the Company is pursuing the following strategies: Enhance Technology Leadership. Voicetek believes that it was one of the first companies to deliver an open architected software platform for the development and deployment of interactive communications applications. To accommodate an increasingly complex technology infrastructure, the Company intends to enhance its current platforms by (i) porting its software platform to other operating systems such as Windows NT and other UNIX derivatives, (ii) integrating new industry technologies such as SS7 and Internet protocols, large scale vocabulary speech recognition and text-to-speech, (iii) continuing to develop strong system management and fault resilient features in its products such as sophisticated SNMP capabilities, system management applications and additional redundancy and fail-safe features and (iv) adopting and implementing industry standards such as S.100 in its products. Voicetek intends to continue to participate in the evolution of industry standards by actively participating in industry standard committees. Focus on Mid-Range and High-End Systems. Voicetek's primary focus is to provide interactive communications systems to enterprises for which sophistication, openness, scalability and fault resilience are of paramount importance. The Company's products can be configured for mid-size (24 to 300 ports) or large scale installations (in excess of 300 ports), including networks of multiple systems to handle thousands of telephone ports. Employ Leveraged Sales Channels. Voicetek currently employs a strategy of leveraged selling primarily through a limited number of channel partners, which is complemented by direct selling to large organizations. Voicetek intends to continue to develop, market and support interactive communications systems through relationships with original equipment manufacturers and strategic partnering with telephone switch manufacturers and computer system vendors, leveraging their installed customer base, large sales forces and support organizations. The Company integrates its Generations software with the channel partner's products, creating a long term cooperative relationship and providing a strong end-to-end system solution for the end-user. The partnering of Voicetek and its channel partners requires a significant investment by the channel partners in product development, training, support and sales functions. Voicetek seeks to establish relationships with additional channel partners who will provide access to their customer bases and vertical segment expertise. Provide Enhanced Service Platforms and Applications to Telcos. Leveraging off of its existing technology base, the Company intends to implement new sales, marketing and engineering initiatives to provide enhanced services to Telcos. Voicetek has developed alliances with channel partners who deploy Generations and VTK systems to service both internal operating groups and external customers. Voicetek intends to use these alliances to develop new capabilities and applications for use by its Telco customers, such as integrating into a single product offering voice-activated dialing, personal communications services, Internet provisioning, single number service and voice-mail. Leverage Platform Capabilities into Applications Solutions. Voicetek intends to leverage its large library of Generations application software modules by packaging certain modules to address business-specific application needs in a number of markets including banking, finance, insurance and human resources. Voicetek believes that such customizable application software packages will result in more rapid implementation of end-user solutions and allow its channel partners to make multiple sales with shorter sales cycles. Increase International Revenue. The Company believes that international markets offer significant growth opportunities as the communications infrastructures in many foreign countries continue to develop. The Company seeks to take advantage of these opportunities and has established field sales offices in London, Hong Kong and Sao Paulo. In addition, the Company intends to deploy sales, support, marketing and development operations in selected areas such as Europe. The Company intends to 23 26 increase international revenues by leveraging current and new business partners and by providing a local sales and support presence. PRODUCTS The Company's products consist of a sophisticated software platform and a family of scalable telephony servers which can be configured for mid-size (24 to 300 ports) or large scale installations (in excess of 300 ports), including networks of multiple systems to handle thousands of telephone ports. The Company also provides custom application development and tools that provide various administrative, systems management and application development capabilities. Voicetek's customers can purchase an integrated system of software and hardware or can license the Generations software and customize their systems to meet specific business needs. Depending on system configuration, optional features and custom programming, prices for the Company's interactive communications system can range from $200 to $3,000 per port. An overview of the Company's products is set forth below: Generations Generations is an open and extensible graphical platform of functions, capabilities, integrated databases and shared resources. It is available on multiple computer platforms to integrate easily into MIS environments. Generations is designed to be portable and is supported on the most popular UNIX processor platforms, including SCO UNIX, Sun Solaris, IBM AIX, HP-UX and Digital UNIX. Generations applications developed on one supported processor platform can generally be copied to any other supported platform for execution without change, using the same user interfaces. Generations is also an integrated platform through which multiple, mixed-media applications can be deployed, administered and monitored. Using Generations, customers can program new applications and maintain existing applications by drawing call flows using graphical icons which represent the building blocks of telephony or computer functions.
GENERATIONS FAMILY FEATURES AND FUNCTIONS - -------------------------------------------------------------------------------------------- GENERATIONS DEVELOPER Generations Developer is a set of graphical, object-oriented tools for application design, prototyping and deployment. Generations Developer provides a system-defined palette of cells which the user "drags and drops" onto the page, laying out the call flow graphically. Each cell has an associated set of parameter values, which the developer can modify as necessary. Generations' Cell Builder is an option used to create reusable customized cells to represent special processing functions. An application test facility provides the developer with trace facilities and tools to analyze, debug and test applications prior to implementation. - -------------------------------------------------------------------------------------------- GENERATIONS RSP Generations Runtime Server Platform ("RSP") manages and supports the developed applications solutions. RSP communicates with Generations TSP to dynamically allocate resources and manage application sessions. RSP provides administration interfaces for application assignment, performance optimization and SNMP support. RSP provides a statistical reporting capability, prompt management and database subsystem. - -------------------------------------------------------------------------------------------- GENERATIONS TSP The Telephony Server Platform ("TSP") manages all available channels and controls internal processes and resources. TSP services the communications interface with the application clients, dynamically allocates requisite resources (e.g., speech recognizers) to application requests and provides the administration interface for configuring network interfaces and modifying resource configurations. TSP includes facilities for system troubleshooting, status events, usage reports and test utilities. - --------------------------------------------------------------------------------------------
24 27 LOGO Generations interfaces with technologies that provide fax, text-to-speech, a choice of speaker independent small or large scale vocabulary automatic speech recognition, relational database management systems, high performance LAN/WAN networks and network management tools through a defined set of application programming interfaces and Generations processes. Therefore, customers can select from alternative technology options to best fit their application needs. Access methods supported by Generations include technologies such as telephone (pulse detection, DTMF and ADSI), Web browsers, fax, paging and electronic mail.
EXTENDED FAMILIES FUNCTIONALITIES - -------------------------------------------------------------------------------------------- LINK FAMILY Provides connectivity to legacy host environments (SNA 3270, 5250, LU6.2 and VT100) and principal SQL databases. - -------------------------------------------------------------------------------------------- SPEECH FAMILY Provides interfaces to automatic speech recognition and text-to-speech solutions by leading vendors. - -------------------------------------------------------------------------------------------- MIXED-MEDIA FAMILY Provides media interfaces to fax, ADSI, paging and Internet. - -------------------------------------------------------------------------------------------- TELEPHONY FAMILY Provides support for both analog (Loopstart and DID) and digital (T1, E1, ISDN Pri and ISDN Bri) telephony network interfaces and supports hardware interface cards and drivers. - -------------------------------------------------------------------------------------------- CTI FAMILY Provides integration to SMDI and computer telephony integration middleware products. - -------------------------------------------------------------------------------------------- AIN FAMILY Provides the necessary protocols (SS7) allowing Generations to be deployed on an intelligent peripheral on the AIN. - -------------------------------------------------------------------------------------------- MANAGEMENT FAMILY Provides for centralized and distributed Generations systems to be managed from an open, industry standard SNMP management platform. - --------------------------------------------------------------------------------------------
25 28 Generations Developer provides an integrated set of tools within Generations for designing, creating, testing and deploying applications. Using object-oriented technology, Generations Developer allows customers to build applications based on knowledge of their business workflow and processes without the need for extensive computer programming skills. Using Generations Developer, programming new service applications is accomplished by drawing call flows using graphical icons. These graphical icons or "cells" are presented on a cell palette, and represent the functional building blocks or required computer or telephony services. These cells provide the interface to standard call process functions such as DTMF detection, prompt playback and message recording. Additionally, the cells provide computer telephony integration links such as ANI, DNIS, SS7 and various switch integrations. Existing applications can be modified by inserting new functions in the appropriate location in the flow or deleting unneeded cells. The integrity and reliability of a newly created or modified application can be confirmed with debugging tools. Generations has a complete set of management features which reduce system maintenance efforts over widely dispersed networks. Administrative interfaces provide the flexibility and control to configure and manage the Company's interactive communications systems for optimal performance. Through this interface, Generations can be directed to load, run or unload an application. New versions of applications can be brought on-line or ports reassigned to a different application without interrupting the system. Generations allows the scheduling of multiple applications on a single platform. Statistics are gathered and reported on the number of calls received by day, hour, and trunk, as well as the events on all or any of the trunks. Prompts can be recorded and then loaded into the telephony server platform without interrupting service. VTK Family The Company's VTK family of telephony servers employs a client server architecture and is designed to support medium to large-scale system deployments supporting configurations of many thousands of ports distributed over large geographical regions or centrally located within a call center or corporate enterprise environment. These servers are designed for reliability and include features such as Network Equipment Building System compliance, redundant components, alarms, AC or DC power, remote diagnostics and ease of maintenance. The VTK servers provide all the necessary telephone company interfaces for analog (Loopstart and DID) and digital (T1, E1, ISDN Pri and ISDN Bri) communication, as well as other application resources such as fax, automatic speech recognition and text-to-speech functions.
INTEGRATED SYSTEMS FAMILY FEATURES AND FUNCTIONS - -------------------------------------------------------------------------------------------- VTK ONE An entry-level system for development and test environments, low port density deployments and moderate traffic runtime applications. The "Development" version of the product provides a turn-key system with the Generations software necessary to begin developing interactive communications applications. VTK One can support up to 24 ports and can be networked with additional VTK systems. - -------------------------------------------------------------------------------------------- VTK 2000 This system is deployed in high traffic corporate facilities, mid-sized call centers and small distributed networks. It has a space saving tower, can support up to 48 ports and can be networked to provide additional capacity. - -------------------------------------------------------------------------------------------- VTK 3000 A high-end fault resilient system that is deployed in demanding sites such as high volume call centers and Telco central office environments. Scalable, a single VTK 3000 can provide 120 ports of network connectivity and multiple units can be supported by a single application server. - --------------------------------------------------------------------------------------------
26 29 Custom Application Development Voicetek provides application development, project management and consulting services for its large customers that desire turn-key solutions. The Company's consultants, who have a working knowledge of host connectivity, database design, client server architectures and the latest mixed media technologies, provide customers with specialized development assistance. Consulting offerings include project management, product requirements and call flow specifications, application design specifications, design reviews, custom programming, external interface development, prompt creation and test plan development. CUSTOMERS AND APPLICATIONS Customers Some of the representative market, end-users and applications of Voicetek's products are set forth below: - --------------------------------------------------------------------------------
MARKET END-USERS REPRESENTATIVE APPLICATIONS - --------------------------------------------------------------------------------------------- Financial Services Coast Federal Bank, Commerce Bank-by-phone, securities quotes and Bank, First USA, Fleet Bank, trading orders, funds transfer, Group Health Inc., Interactive current interest rates, loan Transaction Partners, National application status, retirement plan Discount Brokers, Oxford Health performance and status, account Plans, Santa Monica Bank, VISA inquiry, plan eligibility verification, claims status, cardholder services - --------------------------------------------------------------------------------------------- Government Interstate Commerce Commission, Emergency heating service, tax New York Housing Authority, U.S. filing Patent and Trademark Office and refund status, classification inquiry, labor reporting, transportation rates and schedules - --------------------------------------------------------------------------------------------- Consumer Products Great Woods Institute for the Customer service hotline, event and Services Performing Arts, Long Island ticket purchasing, billing and Lighting Company, NEXT service inquiries, prescription Ticketing, Packard Bell, Perrier refills, outbound telemarketing, utility outage reporting, order fulfillment - --------------------------------------------------------------------------------------------- Other Business Andersen Consulting, Comcast Employment opportunities, order Cablevision, Digital Equipment fulfillment, seminar registration, Corporation, Lockheed, Microlog fax-on- demand, product information, Corporation, Rail Europe, Remedy scheduling, labor reporting, travel Corporation, Rockwell route planning, employment services, International, Sun Microsystems, product information, pay-per-view Teletech, Softbank, University ordering, trouble reporting, of Kentucky, Volt Delta installation/repair service Resources scheduling, paging - --------------------------------------------------------------------------------------------- Telecommunications Bell Atlantic, GTE, Hong Kong Personal number service, audiotext, Telecom, Pacific Bell Info account inquiry, repair scheduling, Services, Southwestern Bell, service ordering, and disptach U.S. West directory assistance, collect calling, trouble reporting, fax back service - ---------------------------------------------------------------------------------------------
27 30 Applications Financial Services: - A discount brokerage company sought to increase the effectiveness of its customer service operations and to control service costs. Voicetek's Generations and VTKs were deployed with applications that offer online trading services including account history, stock quotes and securities trading. The Company believes this system improved the range of the brokerage's customer service while limiting the need to hire additional operators or stock brokers. The Company believes Generations has helped the organization maintain its position as a low cost broker. Other Business: - A leading supplier of personal computers and accessories needed to streamline customer service and sales operations, manage a rapidly growing business and control costs by limiting the number of new hires required to support growth. This organization deployed Generations software platform and VTK voice response servers to answer requests for information about new products, upgrade existing products and distribution channels and route service calls. The Generations system responds to customer inquiries by making the appropriate person accessible to the customer, promptly providing them with information they need through a fax-back system and providing timely callbacks and resolution of problems. - A leading health insurance provider desired to automate a number of its customer service processes as a means of lowering its operational expenses and managing its rapid growth. The insurance company deployed the Company's Generations software and VTK voice response servers with applications which intelligently route calls to the appropriate customer service representatives, indicating to the caller the number of calls already in queue, offering the caller the option of waiting for an available customer service representative or leaving a message informing when to expect a return call. These processes are used to provide a range of services to customers including claims status, patient eligibility and endorsements. The Company believes that the Generations system has provided the customer the opportunity to expand business without having to hire additional staff and enabling some current staff to be redeployed to focus on more complex business problems. Telecommunications: - A large telecommunications company sought to improve its competitive position by using interactive communications systems to increase the breadth and quality of services to control the cost of service delivery and increase customer satisfaction. The Telco deployed a Generations system with applications such as long-distance pre-subscription, billing and payment inquiries, user assistance, calling card and directory orders, service dispatch and custom calling services. The Company believes that the customer used Generations to integrate existing applications, provide an extensible platform on which it could create new services, control operating costs, reduce headcount and increase the capacity of its existing system. - A significant part of an international cellular provider's customer retention strategy is to increase its calling services. The cellular company used Generations and VTKs to build a unique message storage architecture and custom application. The Generations system allows end user customers to realize the convenience and efficiency of a network-based voice messaging system. SALES AND MARKETING Voicetek employs a strategy of leveraged selling primarily through a limited number of channel partners such as OEMs, VARs, systems integrators and distributors, as well as through direct selling to large organizations. Voicetek leverages the installed customer base and large sales force of its channel partners to sell directly to Telcos. Voicetek actively supports its channel partners with a dedicated account manager and access to Voicetek's direct sales and sales engineering resources. Voicetek's account managers work with representatives of the Company's channel partners to coordinate the sales process. The Company's sales representatives sell directly to end users and also assist the channel partners with technical sales assistance. 28 31 The Company has a network of sales and support personnel in North America, Europe, Asia and South America. The Company's OEMs include Nortel, Rockwell International, Digital Equipment Corporation, Volt Delta, Group 2000 and Microlog Corporation and its VARs include Andersen Consulting, Logica, Open Development Corporation and digiTrade. The Company supports its sales and distribution efforts with a marketing organization. This organization is responsible for traditional marketing functions such as product management, market and competitive research, industry marketing, sales and marketing programs, advertising and public relations. Voicetek's marketing efforts focus on further penetrating its target markets and expanding its presence in vertical markets, such as Telcos. Additionally, the Company seeks to complement its existing channel partner relationships by developing new strategic relationships that will allow it to expand its market presence. CUSTOMER SERVICE AND SUPPORT Voicetek relies on its sales channel partners to provide the first level of customer support to end users. End users rely primarily on the OEM or VAR for the initial service call. If necessary, Voicetek provides service and support to its customers and end users on a timely basis through its network of service and support staff. The Company's technical support engineers, based at its headquarters in Chelmsford, Massachusetts and its field service engineers are experienced with all aspects of interactive communications systems, including telecommunications, data communications and mixed media technologies. The Company believes that the ease-of-use and comprehensive feature/function attributes of Generations minimize ongoing system maintenance. The Company offers customer support and services, including direct support and remote access diagnostic testing. Voicetek technicians have the ability to access a customer's system remotely to activate trace and diagnostic functions. This allows technicians to assess and remedy a system failure for customers in diverse locations. In addition, technicians provide support with installation and maintenance when needed. Voicetek provides education and training for all of its products at its headquarters, customer sites or specified locations worldwide. Comprehensive training programs are offered in system installation and support, basic Generations capabilities, application development, advanced development and other specific technologies. The cost for training programs is not included in the purchase price of a system and is a fee option for customers. ENGINEERING, RESEARCH AND PRODUCT DEVELOPMENT The Company has made, and intends to continue to make, a substantial investment in research and product development. For the year ended December 31, 1996, the Company spent $5.7 million on research and product development, which is equal to 26.1% of total revenues for such period. The Company's growth and future financial performance will depend in part upon its ability to (i) enhance the Generations platform and existing applications to further solidify acceptance in the Telco and commercial markets, (ii) develop and introduce new applications which add value to the target markets and keep pace with technological advances, (iii) meet changing customer requirements, (iv) respond to competitive products and (v) achieve market acceptance. The Company works with its customers to determine their requirements and to design enhancements into new products and services to meet their needs. The Company believes that the strength of its product is derived primarily from its sophistication, combined with ease-of-use, openness and technology integration. To maintain this technological advantage, the Company has several product development efforts underway which it hopes will further its interactive communications systems. The Company is developing a suite of packaged applications for enhanced services for Telcos. Building upon its custom application development expertise, the Company intends to release pre-packaged applications targeted at the commercial market. Voicetek hopes that these applications will allow customers to utilize the expertise and functionality which the Company developed for specific proprietary customers while avoiding the expenses associated with customer specific full scale development. Vertically targeted market applications are expected to address the financial, brokerage and health care industries, and 29 32 horizontal applications may include call routing, mail and messaging and Internet enabled call centers. See "Risk Factors -- Technological Change, Changing Markets and New Products." The Company believes that its future success is dependant in large part on its ability to continue to develop new products and enhanced services for its customers and end-users. To develop new products and services, the Company needs to attract, retain and motivate highly skilled computer programmers and engineers. There can be no assurance that the Company will be able to attract, retain and motivate such personnel. See "Risk Factors -- Reliance on Key Personnel." MANUFACTURING The Company's manufacturing activities, which consist primarily of material requirement planning, purchasing, testing, system assembly and quality assurance, are conducted at its Chelmsford, Massachusetts facility. Most of the components and parts used in the Company's products are available from more than one supplier. Certain components that are purchased from one source can generally be replaced with parts available from other sources. The Company currently purchases approximately 41.9% of certain components of its VTK system from Dialogic, and there can be no assurance that Dialogic will be able to continue to supply the Company with such components. Although other manufacturers produce substantially similar components, a disruption in the supply of such components from Dialogic could have a material adverse effect on the Company. See "Risk Factors -- Reliance on Component Availability and Key Suppliers." To date, when components have become unavailable, the Company has been able to obtain functionally similar substitutes and to accomplish any necessary redesign without a material interruption in production, although there can be no assurance that this will remain the case in the future. COMPETITION The market for telecommunications software products is intensely competitive and subject to rapid technological change. The Company believes that the principal competitive factors affecting its market are reputation, reliability, system features, customer service, price and the effectiveness of marketing and sales efforts. Additionally, the Company believes that to distinguish itself in this marketplace, it must have the ability to anticipate unmet customer needs and to introduce new features to address those needs on a timely basis. Although the interactive communications industry is highly competitive and certain of the Company's competitors have considerably greater financial, technical, marketing and sales resources than the Company, the Company believes that it competes favorably with respect to each of these factors. Although the Company's focus is on software based interactive communications systems, the Company believes it competes in certain instances with certain manufacturers of high end systems such as Periphonics, Inc., InterVoice Inc. and Brite Voice, Inc., which the Company believes have focused on sales of hardware-based interactive voice response systems. In addition, many suppliers of voice mail systems and telecommunications equipment have added some capabilities similar to interactive communications to some of their product offerings and generally sell these features as a component of or add-on to an overall sale of a voice mail system or a telecommunications switch. In addition to existing competitors, as the interactive communications market continues to grow and mature, the Company expects to encounter additional competition from companies which offer platforms for voice messaging, enhanced services or other types of technology. Also, as the Company enters new market segments, it may face competition from companies which have already established their position and market share. BACKLOG Backlog includes all unshipped orders for which the Company has received a firm purchase order. Orders for the Company's products are usually placed by customers on an as-needed basis and the Company has typically been able to ship a standard interactive communications system within 14 days after the customer submits a firm purchase order. Because of the possibility of customer changes in delivery schedules or 30 33 cancellation of orders, the Company's backlog as of any particular date may not be indicative of sales in any future period. See "Risk Factors -- Fluctuations in Quarterly Operating Results." PATENTS AND OTHER PROPRIETARY RIGHTS The Company relies on a combination of patent, copyright, trademark and trade secret laws, as well as employee confidentiality agreement, third-party non-disclosure agreements and license agreements to protect its proprietary rights. The Company has three patents relating to the architecture, operating methodologies and interfaces of the Company's products. Nonetheless, there can be no assurance that any patent relied upon by the Company will not be challenged, invalidated or circumvented or that rights granted thereunder will provide competitive advantages. Moreover, despite the Company's efforts, there can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to prevent misappropriation of such rights or that third parties will not independently develop functionally equivalent or superior software technology. From time to time, third parties may assert exclusive copyright, trademark and other intellectual property rights to technologies that are important to the Company. The Company is aware that certain segments of the voice processing industry, particularly voice mail/voice messaging systems, are affected by active and costly litigation and there can be no assurance that as the Company's interactive communications systems evolve (possibly to include certain voice mail/voice messaging features), the Company will not be required to enter into license agreements or become involved in, or otherwise affected by, litigation which may or may not be meritorious. See "Risk Factors -- Third-Party Claims of Infringement; Limited Protection of Proprietary Rights." The Company believes that due to the rapid pace of innovation within the telecommunications industry, factors such as technological and creative skill of personnel, knowledge and experience of management, reputation, maintenance and support and the ability to develop and enhance systems, software products and services are more important for establishing and maintaining a competitive position within the industry than are patent, copyright and other legal protections for its technology. EMPLOYEES As of January 31, 1997, the Company had 164 full time employees. As of such date, there were 81 employees in the engineering department, 50 employees in the sales and customer service area, 7 employees in the marketing department, 16 employees in the financial and administrative area and 9 employees in the purchasing and operations area. The Company considers its employee relations to be good. None of the Company's employees is covered by a collective bargaining agreement. The Company's success will also depend in part on its ability to attract and retain qualified managerial, technical and sales and marketing personnel, for whom competition is intense. In particular, the current availability of qualified sales and engineering personnel is limited. The Company has recently hired a significant number of sales and marketing personnel and the Company's success will depend in part on the Company's ability to train and integrate new hires into the Company's business. PROPERTIES The Company's headquarters are located in a 56,220 square foot leased facility in Chelmsford, Massachusetts. This facility houses the Company's management, marketing and sales personnel. The lease for this facility terminates on October 31, 2003. In addition, the Company leases a sales office in Hong Kong. The Company believes that its existing facilities are adequate to meet its current needs and that suitable additional or alternative space will be available on commercially reasonable terms as needed. LEGAL MATTERS The Company is not a party to any legal proceedings other than various claims and lawsuits arising in the ordinary course of its business which, in the opinion of the Company's management, are not individually or in the aggregate material to its business. 31 34 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company are as follows:
NAME AGE POSITION --------------------------------------- --- --------------------------------------- Sheldon L. Dinkes...................... 51 President, Chief Executive Officer and Director Paul J. Gagne.......................... 43 Executive Vice President, Engineering Roger N. Tuttle, Jr. .................. 49 Vice President, Chief Financial Officer and Treasurer Scott D. Ganson........................ 39 Vice President, Sales and Customer Service Daniel R. Poranski..................... 37 Vice President, Marketing John A. Blaeser(1)(2).................. 55 Director Sherman M. Wolf(1)..................... 70 Director Alan Voulgaris(1)...................... 62 Director Christopher W. Lynch(2)................ 46 Director
- --------------- (1) Member of Compensation Committee (2) Member of Audit Committee The Board of Directors intends to appoint at least one additional director who is not affiliated with the Company within 90 days of the consummation of this offering. SHELDON L. DINKES has served as President and Chief Executive Officer of the Company since November 1990. Prior to joining the Company, Mr. Dinkes was employed for over 12 years at Gould, Inc., a computer and electronics manufacturing company, where he held financial and general management positions, most recently serving as Vice President of Administration of Electronic Business Systems. Mr. Dinkes is a Certified Public Accountant in the State of New York, a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. PAUL J. GAGNE has served as Executive Vice President, Engineering of the Company since January 1991. Mr. Gagne joined the Company in November 1989 as Manager of Software Development. From January 1988 to October 1989, Mr. Gagne served as Vice President of Software Development of Softpert Systems, Ltd., a software development company. Mr. Gagne was employed for over five years at Wang Laboratories, where he most recently served as Department Manager, Software Research and Development. ROGER N. TUTTLE, JR. joined the Company in October 1994 as Vice President and Chief Financial Officer. From January 1993 to September 1994, Mr. Tuttle served as Chief Financial Officer of Proconics International, Inc., a supplier of semiconductor fabrication automation equipment. From October 1991 to January 1993, Mr. Tuttle served as Chief Financial Officer of Aerodyne Products Corporation. In February 1996, SI Automation, Inc., formerly Proconics International, Inc., filed Chapter 11 bankruptcy proceedings, as did its wholly-owned subsidiary, Stahl Research Laboratories, Inc., of which Mr. Tuttle was a director. SCOTT D. GANSON joined the Company as Vice President, Sales and Customer Service in May 1993. From January 1992 to April 1993, Mr. Ganson worked as Vice President of Sales for Remedy Corporation, a software development company. Prior to 1992, Mr. Ganson was employed for over five years at Informix Software, Inc., a developer and distributor of relational database management software, where he most recently served as Director of OEM Sales and Marketing. 32 35 DANIEL R. PORANSKI joined the Company in April 1996 as Vice President, Marketing. From November 1994 to March 1996, Mr. Poranski served as Director, Product Marketing with 3Com Corporation. From April 1993 to November 1994, Mr. Poranski served as Senior Product Manager with Chipcom Corporation, which was acquired by 3Com in September 1995. From January 1991 to March 1993, Mr. Poranski served as a Senior Manager of Marketing with Avatar Technologies, Inc., a networking company. JOHN A. BLAESER has served as a director of the Company since May 1989. Since April 1995, Mr. Blaeser has been the President and Chief Executive Officer of Concord Communications, a software development firm. Since January 1996, Mr. Blaeser has served as managing general partner at EG&G Venture Management, a venture capital fund focusing on high technology companies. Mr. Blaeser also serves on the Boards of Datawatch Corporation, Dynaco Corporation and Net2Net Corporation. SHERMAN M. WOLF has served as a director of the Company since he founded Voicetek in 1981. Mr. Wolf has served as Chairman of Phase One Development Corporation, a privately owned investment company, since he founded the company in July 1983. Mr. Wolf founded Great Woods Institute for the Performing Arts in Mansfield, Massachusetts in March 1985, Harborlights entertainment facility in Boston, Massachusetts in February 1994 and New England Express Ticketing, Inc. ("NEXT") in September 1995. ALAN VOULGARIS has served as a director of the Company since 1986. Mr. Voulgaris has served as the managing partner of Kearsarge Capital Fund, L.P. since August 1986, and serves on the Boards of Dynaco Corporation and True Basic, Inc. CHRISTOPHER W. LYNCH has served as a director of the Company since 1989. Mr. Lynch has served as Vice President and general partner of Pioneer Ventures Limited Partnership since February 1986. He is also a director of Corax Technologies Corporation, Medsafe, Inc. and Vibrint Technologies, Inc. COMPENSATION OF DIRECTORS During the year ended December 31, 1996, Messrs. Blaeser, Wolf, Lynch and Voulgaris each received options to purchase 8,000 shares of Common Stock at an exercise price of $7.50 per share. Other than such options, the Company paid no compensation to the directors for services rendered as a director during the year ended December 31, 1996. The Company expects that following the closing of this offering, its independent directors will be paid in a manner and at a level consistent with industry practice. 33 36 EXECUTIVE COMPENSATION The following table sets forth certain information concerning compensation for the year ended December 31, 1996 paid to the Company's Chief Executive Officer and certain other officers whose total 1996 salary and bonus exceeded $100,000 during such year (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION -------------------------------------- OTHER ANNUAL NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION(1) ----------------------------------------------- -------- ------- ---------------- Sheldon L. Dinkes.............................. $179,000 $58,500 -- President and Chief Executive Officer Paul J. Gagne.................................. 151,500 39,545 -- Executive Vice President, Engineering Roger N. Tuttle, Jr. .......................... 110,000 21,000 -- Chief Financial Officer, Treasurer Scott D. Ganson................................ 149,500 33,345 -- Vice President, Sales and Customer Service Daniel R. Poranski(2).......................... 93,750 4,687 -- Vice President, Marketing
- --------------- (1) The Company did not grant any restricted stock awards or stock appreciation rights to the Named Executive Officers during the year ended December 31, 1996. Other annual compensation in the form of perquisites and other personal benefits has been omitted because the aggregate amount of such perquisites and other personal benefits constituted less than 10% of each executive's total annual salary. (2) Mr. Poranski commenced employment with the Company in April 1996. Mr. Poranski's current Employment Agreement is described elsewhere in this Prospectus. See "Management -- Employment Agreements." The following table sets forth certain information regarding the option grants made during the year ended December 31, 1996 to each of the Named Executive Officers. OPTION GRANTS IN LAST YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED INDIVIDUAL GRANTS ANNUAL RATES OF ------------------------------------------------------------------ STOCK PRICE NUMBER OF APPRECIATION FOR SECURITIES PERCENT OF TOTAL EXERCISE OR OPTION TERM (1) UNDERLYING OPTIONS GRANTED TO BASE PRICE EXPIRATION --------------------- NAME OPTIONS GRANTED EMPLOYEES IN YEAR PER SHARE DATE 5% 10% - ------------------ --------------- ------------------ -------------- ---------- -------- -------- Daniel R. Poranski........ 16,666 12.4% $ 6.00 4/11/96(2) $135,736 $216,137
- --------------- (1) Calculated according to the difference between the exercise price of the options and the fair market value of the securities underlying the options at December 31, 1996. (2) Options become exercisable ratably over a four-year period. 34 37 The following table sets forth information concerning exercise of stock options and the number of options and value of unexercised options held at December 31, 1996 by each of the Named Executive Officers. No options were exercised during 1996 by such executives. AGGREGATE OPTION EXERCISES AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT YEAR END (#) AT YEAR END($)(1) SHARES ACQUIRED VALUE ----------------------------- --------------------------- NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ----------------------- ---------------- ------------ ------------ -------------- ----------- ------------- Sheldon L. Dinkes...... -- -- 251,500 21,833 $2,728,012 $ 179,651 Roger N. Tuttle, Jr. ................. -- -- 28,166 28,167 305,601 305,601 Paul J. Gagne.......... -- -- 39,666 28,167 420,269 268,474 Scott D. Ganson........ -- -- 84,500 28,166 923,162 307,714 Daniel R. Poranski..... -- -- -- 16,666 -- 83,330
- --------------- (1) Value is based on the difference between the option exercise price and an assumed initial public offering price of $11.00 per share multiplied by the number of shares of Common Stock underlying the option. No market existed for the Common Stock prior to this offering. EMPLOYMENT AGREEMENTS Effective January 13, 1997, the Company entered into employment agreements with each of Messrs. Dinkes, Tuttle, Ganson, Poranski and Gagne. Mr. Dinkes' employment agreement provides for employment as President and Chief Executive Officer at a base annual salary of $200,000. Mr. Tuttle's agreement provides for employment as Vice President of Finance and Chief Financial Officer at a base annual salary of $120,000. Mr. Ganson's agreement provides for employment as Vice President, Sales and Customer Service at a base annual salary of $161,500. Mr. Poranski's agreement provides for employment as Vice President, Marketing at a base annual salary of $132,000. Mr. Gagne's agreement provides for employment as Executive Vice President, Engineering at a base annual salary of $170,000. In addition, Messrs. Dinkes, Tuttle, Poranski, Ganson and Gagne are eligible to receive bonuses as determined by the Compensation Committee. Each of the employment agreements extends until January 12, 2000 and provides that in the event the Company undergoes a change of control, all options of these executive officers to purchase Common Stock of the Company which otherwise would become exercisable within one year following the date of the change of control shall become exercisable upon the change of control, and the balance of such options shall become exercisable one year earlier than provided for in the applicable option grant. STOCK OPTION PLANS 1992 Equity Incentive Plan The Company's 1992 Equity Incentive Plan (the "1992 Incentive Plan") was adopted by the Board of Directors of the Company in May 1992. The 1992 Incentive Plan provides for the grant of stock options, stock appreciation rights, performance shares and restricted stock awards to all employees of (including officers who may be members of the Company's Board of Directors) and consultants to the Company. Under the 1992 Incentive Plan, the Company could grant options intended to qualify as incentive stock options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), and options not intended to qualify as incentive stock options. A total of 1,091,034 shares of Common Stock were originally authorized for issuance under the 1992 Incentive Plan. As of December 31, 1996, options to purchase a total of 721,109 shares of Common Stock at exercise prices ranging from $0.075 to $7.50 per share were outstanding under the 1992 Incentive Plan, of which options to purchase 459,631 shares of Common Stock were exercisable. Options outstanding expire at various dates through January 2007. The 1992 Incentive Plan is administered by the Compensation Committee of the Board of Directors of the Company. Payment of the option price may be made in cash, shares of Common Stock or a combination of cash and stock. Options are not assignable or transferable except by will, under the laws of descent and 35 38 distribution or pursuant to a qualified domestic relations order. No stock appreciation rights, performance shares or restricted stock awards have been granted under the 1992 Incentive Plan. 1996 Stock Option Plan The Company's 1996 Stock Option Plan (the "1996 Option Plan") was adopted by the Board of Directors of the Company in August 1996. The 1996 Option Plan provides for the grant of stock options to key employees (including officers who may be members of the Company's Board of Directors), directors who are not employees and consultants to Company. Under the 1996 Option Plan, the Company could grant options intended to qualify as incentive stock options within the meaning of Section 422A of the Code, and options not intended to qualify as incentive stock options. A total of 333,333 shares of Common Stock were originally authorized for issuance under the 1996 Option Plan. Effective January 1, 1997 and each January 1 thereafter through January 1, 2006, the number of shares of Common Stock authorized for issuance under the 1996 Option Plan shall be increased cumulatively such that the number of shares of Common Stock subject to the 1996 Option Plan shall equal 15% of the total number of fully diluted shares of Common Stock (excluding shares of Common Stock issuable upon the exercise of options to purchase Common Stock granted under the Company's 1996 Director Option Plan, as defined below) as of the close of business on December 31 of the preceding year. As of December 31, 1996, no options were outstanding under the 1996 Option Plan. The 1996 Option Plan is administered by the Compensation Committee of the Board of Directors of the Company. Payment of the option price may be made in cash, shares of Common Stock or a combination of cash and stock. Options are not assignable or transferable except by will, under the laws of descent and distribution or pursuant to a qualified domestic relations order. Options granted to employees who subsequently cease to be employees of the Company are exercisable only to the extent of vesting as of the date such optionee ceases to be an employee of the Company. Options vest and become exercisable in accordance with the terms of the option agreement evidencing the grant thereof. The Compensation Committee has the right to accelerate the exercisability of options granted under the 1996 Option Plan. 1996 Director Option Plan The Company's 1996 Stock Option Plan for Non-Employee Directors and Clerk (the "1996 Director Option Plan") was adopted by the Board of Directors of the Company in August 1996. The 1996 Director Option Plan provides for the grant of stock options to the Clerk and directors who are not employees of the Company. Under the 1996 Director Option Plan, the Company could grant options not intended to qualify as incentive stock options within the meaning of Section 422A of the Code. A total of 60,000 shares of Common Stock were originally authorized for issuance under the 1996 Director Option Plan. As of December 31, 1996, options to purchase a total of 38,666 shares of Common Stock at an exercise price of $7.50 were outstanding under the 1996 Option Plan, none of which were exercisable. No options have been exercised to date and options outstanding expire at various dates through August 2006. The 1996 Director Option Plan is administered by the Compensation Committee of the Board of Directors of the Company. The four non-employee directors of the Company at the time of the adoption of the 1996 Director Option Plan and each new non-employee directors elected prior to August 2001 shall be granted an option to purchase 8,000 shares of Common Stock. The Clerk of the Company at the time of the adoption of the 1996 Director Option Plan was granted an option to purchase 6,666 shares of Common Stock. Effective August 1, 1997 and each August 1 thereafter during the term of the 1996 Plan, the number of shares of Common Stock available for grants of stock options under this Plan shall be increased cumulatively such that a sufficient number of shares subject to the 1996 Director Option Plan to accommodate additional annual grants of options to purchase 7,333 to each non-employee director and 6,666 to the Clerk. Payment of the option exercise price may be made in cash, shares of Common Stock or a combination of cash and stock. Options are not assignable or transferable except by will, under the laws of descent and distribution or pursuant to a qualified domestic relations order. Options are exercisable only while the optionee remains the Clerk or a director of the Company or for a short period of time thereafter (unless the Clerk or director was terminated for cause, in which case the option terminates immediately) and only to the extent of vesting as of the date such optionee ceases to be the Clerk or a director. 36 39 1997 Employee Stock Purchase Plan The Company's 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan") is to be adopted by the Board of Directors of the Company in March 1997. The 1997 Purchase Plan will provide for the issuance of a maximum of 166,666 shares of Common Stock pursuant to the exercise of nontransferable options granted to participating employees of the Company. Employees who have been employed by the Company for less than six months and those who own 5% or more of the capital stock of the Company will not be eligible to participate in the 1997 Purchase Plan. The 1997 Purchase Plan will be administered by the Compensation Committee of the Board of Directors of the Company. To participate in the 1997 Purchase Plan, an employee must authorize the Company in writing to deduct an amount (not less than 1% nor more than 10% of a participant's base compensation) from his or her pay commencing on January 1 and July 1 of each year (each a "Purchase Period"). The first Purchase Period is expected to commence on July 1, 1997. On the first day of each Purchase Period, the Company grants to each participating employee an option to purchase up to 1,333 shares of Common Stock. The exercise price for the option for each Purchase Period is the lesser of 85% of the fair market value of the Common Stock on the first or last business day of the Purchase Period. The fair market value will be the closing selling price of the Common Stock as quoted on the Nasdaq National Market. If an employee is not a participant on the last day of the Purchase Period, such employee is not entitled to exercise his or her option, and the amount of his or her accumulated payroll deduction will be refunded to the employee. An employee's rights under the 1997 Purchase Plan will terminate upon his or her voluntary withdrawal from the Plan at any time or upon termination of employment. Common Stock for the 1997 Purchase Plan will be made available either from authorized but unissued shares of Common Stock or from shares of Common Stock reacquired by the Company, including shares repurchased in the open market. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee was established on August 1, 1996 and currently consists of John A. Blaeser and Sherman M. Wolf. Mr. Dinkes participated in deliberations of the Compensation Committee regarding compensation of other executive officers, but did not participate in deliberations relating to his own compensation. 37 40 CERTAIN TRANSACTIONS In 1995, the Company sold an interactive communications system to NEXT for an aggregate purchase price of approximately $597,000. During 1996, NEXT purchased additional components for such system for an aggregate of $16,000. As of January 1, 1997, NEXT has entered into an agreement with the Company pursuant to which the Company will provide certain on-going maintenance to NEXT for approximately $57,000. The founder and a stockholder of NEXT is Sherman M. Wolf, who is a director of the Company. 38 41 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Company's Common Stock prior to and after giving effect to this offering by (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each of the Company's directors and executive officers, (iii) each Selling Stockholder and (iv) all directors and executive officers of the Company as a group.
SHARES OWNED PRIOR SHARES OWNED AFTER TO OFFERING(1) THE OFFERING(1) -------------------- NUMBER OF -------------------- BENEFICIAL OWNER(1) NUMBER PERCENT SHARES OFFERED NUMBER PERCENT - ------------------------------------- --------- -------- --------------- --------- -------- DIRECTORS AND EXECUTIVE OFFICERS: - ------------------------------------- John A. Blaeser(2)................... 2,785,587 55.4 276,684 2,508,903 35.7 Christopher W. Lynch(3).............. 576,098 11.5 31,500 544,598 7.7 Alan Voulgaris(4).................... 483,113 9.6 45,000 438,113 6.2 Sherman M. Wolf(5)................... 310,592 6.2 -- 310,592 4.4 Sheldon L. Dinkes(6)................. 251,500 4.8 -- 251,500 3.5 Paul J. Gagne(7)..................... 131,166 2.6 -- 131,166 1.9 Scott D. Ganson(8)................... 84,500 1.7 -- 84,500 1.2 Roger N. Tuttle, Jr.(9).............. 28,166 * -- 28,166 * Daniel R. Poranski................... -- -- -- -- -- SELLING AND 5% STOCKHOLDERS: - ------------------------------------- EG&G Venture Partners c/o Concord Communications 33 Boston Post Road West Marlborough, MA 01752.............. 2,785,587 55.4 276,684 2,508,903 35.7 Kearsarge Capital Fund, L.P. 41 Brook Street Manchester, NH 03104............... 483,113 9.6 45,000 438,113 7.7 Pioneer Ventures Limited Partnership 60 State Street Boston, MA 02109................... 291,623 5.8 31,500 260,123 3.7 Massachusetts Technology Development Corporation 148 State Street Boston, MA 02109................... 239,042 4.8 60,000 179,042 2.5 Geneva Partners c/o Pioneer Capital Corporation 60 State Street Boston, MA 02109................... 127,900 2.5 21,500 106,400 1.5 NYNEX Development Company c/o NYNEX Treasury 1095 Avenue of the Americas, Rm 3922 New York, NY 10036................. 65,316 1.3 65,316 -- -- All directors and executive officers as a group (9 persons)............. 4,650,722 85.6 353,184 4,297,538 57.8
- --------------- * Less than one percent 39 42 (1) Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission (the "Commission") and includes general voting power or investment power with respect to securities. Shares of Common Stock subject to options and warrants currently exercisable or exercisable within 60 days of January 31, 1997 are deemed outstanding for computing the percentage of the person holding such options, but are not deemed outstanding for computing the percentage of any other person. Except as otherwise specified below, the persons named in the table above have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them. Unless otherwise indicated, the address of each of the beneficial owners identified is 19 Alpha Road, Chelmsford, MA 01824. (2) Mr. Blaeser is the General Partner of EG&G Venture Partners and accordingly may be deemed to be the beneficial owner of the shares held by EG&G Venture Partners. Mr. Blaeser disclaims such beneficial ownership. Mr. Blaeser's address is Concord Communications, 33 Boston Post Road West, Marlborough, MA 01752. (3) Mr. Lynch is the Vice President of Pioneer Capital Corporation which has entered into a management agreement with Pioneer Ventures Limited Partnership, a partner of LPP Partners and a partner of Corning Partners II and accordingly may be deemed to be the beneficial owner of the shares held by each of Pioneer, LPP Partners and Corning Partners II. Mr. Lynch disclaims such beneficial ownership. Mr. Lynch's address is Pioneer Capital, 60 State Street, Boston, MA 02109. (4) Mr. Voulgaris is the General Partner of Kearsarge Capital Fund, L.P. and accordingly may be deemed to be the beneficial owner of the shares held by Kearsage. Mr. Voulgaris disclaims such beneficial ownership. Mr. Voulgaris' address is Kearsarge Capital Fund, 41 Brook Street, Manchester, NH 03104. (5) Represents shares owned by Mr. Wolf's three children, Scott Wolf, Julie Wolf and Steven Wolf. Mr. Wolf disclaims beneficial ownership of such shares. Mr. Wolf's address is Phase One Development, 31 Msgr. O'Brien Highway, Cambridge, MA 02141. (6) Includes 251,500 shares subject to stock options exercisable within 60 days of December 31, 1996. (7) Includes 39,666 shares subject to stock options exercisable within 60 days of December 31, 1996. (8) Includes 84,500 shares subject to stock options exercisable within 60 days of December 31, 1996. (9) Includes 28,166 shares subject to stock options exercisable within 60 days of December 31, 1996. 40 43 DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 30,000,000 shares of Common Stock, $.01 par value per share, and 10,000,000 shares of preferred stock, $.01 par value per share. As of December 31, 1996, an aggregate of 450,916 shares of Common Stock were held of record by 73 stockholders, and 6,865,274 shares of Preferred Stock were outstanding and held of record by twelve stockholders. All such shares of Preferred Stock will be converted into Common Stock upon the completion of this offering. Copies of the proposed Articles of Organization and the By-laws have been filed as exhibits to the Registration Statement and are incorporated by reference herein. COMMON STOCK All outstanding shares of Common Stock are, and the Common Stock offered hereby will be, fully paid and nonassessable. The holders of Common Stock are entitled to one vote for each share held of record on all matters voted upon by stockholders and may not cumulate votes. Subject to the rights of holders of any future series of undesignated preferred stock which may be designated, each share of the outstanding Common Stock is entitled to participate equally in any distribution of net assets made to the stockholders in the liquidation, dissolution or winding up of the Company and is entitled to participate equally in dividends as and when declared by the Board of Directors. There are no redemption, sinking fund, conversion or preemptive rights with respect to the shares of Common Stock. All shares of Common Stock have equal rights and preferences. PREFERRED STOCK After the completion of this offering, the Board of Directors will have the authority, without further stockholder approval, to issue 1,000,000 shares of preferred stock where defined in one or more series and to fix the relative rights, preferences, privileges, qualifications, limitations and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series. The issuance of preferred stock, while potentially providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control of the Company, may discourage bids for the Common Stock at a premium over the market price of the Common Stock and may adversely affect the market price of, and the voting and other rights of the holders of the Common Stock. No shares of preferred stock will be outstanding immediately following the consummation of this offering. The Company has no present plans to issue any shares of preferred stock. See "Risk Factors -- Anti-Takeover Provisions; Possible Issuance of Preferred Stock." CERTAIN ARTICLES OF ORGANIZATION, BY-LAW AND STATUTORY PROVISIONS AFFECTING STOCKHOLDERS Classified Board and Other Matters. The Board of Directors will be divided into three classes, each of which, after a transitional period, will serve for three years, with one class being elected each year. Under the Massachusetts General Laws, in the case of a corporation having a classified Board, stockholders may remove a director only for cause. For the purpose of director nominations, the By-laws require that stockholders provide the Clerk of the Company with notice 60 days prior to the date of an annual meeting or special meeting in lieu of an annual meeting and within 10 days following notice of a special meeting not in lieu of an annual meeting. The Articles of Organization provide that special meetings of stockholders of the Company may be called only by the Board of Directors, the Chairman of the Board of Directors, the President or 30% in interest of the stockholders. The Articles of Organization, as well as applicable provisions of the Massachusetts General Laws, provide that no action required or permitted to be taken at any annual or special meeting of the stockholders of the Company may be taken without a meeting, unless the unanimous consent of stockholders entitled to vote thereon is obtained. The affirmative vote of the holders of at least 80% of the combined voting power of then outstanding voting stock of the Company will be required to alter, amend or repeal the foregoing provisions that might diminish the likelihood that a potential acquiror would make an offer for the Common Stock, impede a transaction favorable to the interest of the stockholders or increase the difficulty of removing Board of Directors or management. See "Risk Factors -- Anti-Takeover Provisions; Possible Issuance of Preferred Stock." 42 44 Chapters 110D and 110F of Massachusetts General Laws. The Company is subject to the provisions of Chapter 110F of the Massachusetts General Laws, an anti-takeover law. In general, this statute prohibits a publicly held Massachusetts corporation with sufficient ties to Massachusetts from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person becomes an interested stockholder, unless either (i) the interested stockholder obtains the approval of the board of directors prior to becoming an interested stockholder, (ii) the interested stockholder acquires 90% of the outstanding voting stock of the corporation (excluding shares held by certain affiliates of the corporation) at the time he becomes an interested stockholder or (iii) the business combination is approved by both the board of directors and two-thirds of the outstanding voting stock of the corporation (excluding shares held by the interested stockholder). An "interested stockholder" is a person who, together with affiliates and associates, owns (or at any time within the prior three years did own) 5% or more of the corporation's voting stock. A "business combination" includes mergers, stock and asset sales and other transactions resulting in a financial benefit to the stockholder. The Company may at any time amend its Articles of Organization or By-laws to elect not to be governed by Chapter 110F, by vote of the holders of a majority of its voting stock, but such an amendment would not be effective for twelve months and would not apply to a business combination with any person who became an interested stockholder prior to the date of the amendment. The Company is also subject to the provisions of Chapter 110D of the Massachusetts General Laws, entitled "Regulation of Control Share Acquisitions." This statute provides, in general, that any stockholder who acquires 20% or more of the outstanding voting stock of a corporation subject to this statute may not vote that stock unless the stockholders of the corporation so authorize. In addition, Chapter 110D permits a corporation to provide in its articles of organization or by-laws that the corporation may redeem (for fair value) all the shares thereafter acquired in a control share acquisition if voting rights for those shares were not authorized by the stockholders or if no control share acquisition statement was delivered. The By-laws include a provision which permits the Company to effect such redemptions. See "Risk Factors." Directors Liability. The Articles of Organization provide that no director shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for (i) any breach of the director's duty of loyalty to the Company or its stockholders, (ii) acts or omissions which have been adjudicated not to have been in good faith or to have involved intentional misconduct, (iii) pursuant to Chapter 156B, Section 61 or Section 62 of the Massachusetts General Law or (iv) any transaction from which such director derives improper personal benefit. The effect of this provision is to eliminate the rights of the Company and its stockholders (through stockholders' derivative suits on behalf of the Company) to recover monetary damages against a director for breach of the fiduciary duty of care as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (iv) above. The limitations summarized above, however, do not affect the ability of the Company or its stockholders to seek non-monetary based remedies, such as an injunction or rescission, against a director for breach of his fiduciary duty nor would such limitations limit liability under the federal securities laws. The Articles of Organization provide that the Company shall, to the full extent permitted by the Massachusetts General Laws as currently in effect, indemnify and advance expenses to each of its currently acting and former directors, officers, employees and agents arising in connection with their acting in such capacities. LISTING Application has been made for quotation of the Common Stock on the Nasdaq National Market under the symbol VCTK. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar of the Common Stock is Boston EquiServe. 43 45 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, the Company will have 7,028,885 shares of Common Stock outstanding (assuming no exercise of outstanding options). Of these shares, the 2,500,000 shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), except that any shares purchased by "affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144") under the Securities Act ("Affiliates"), may generally only be sold in compliance with the limitations of Rule 144 described below. The remaining shares of Common Stock outstanding upon completion of this offering will be "restricted securities" as that term is defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 promulgated under the Securities Act, which are summarized below. Sales of the Restricted Shares in the public market, or the availability of such shares for sale, could adversely affect the market price of the Common Stock. The officers, directors and certain other holders of Common Stock have entered into contractual "lock-up" agreements providing that they will not offer, sell, contract to sell or grant any option to purchase or otherwise dispose of the shares of Common Stock of the Company or any securities exercisable for or convertible into the Company's Common Stock owned by them for a period of 180 days after the effective date of this offering without the prior written consent of Oppenheimer & Co., Inc. As a result of these contractual restrictions, notwithstanding possible earlier eligibility for sale under the provisions of Rules 144 and 701, shares subject to lock-up agreements will generally not be saleable until such agreements expire. Beginning 180 days after the date of this Prospectus, approximately 4,528,885 shares will be available for immediate sale in the public market, subject in some cases to the volume and other restrictions of Rule 144 or Rule 701 under the Securities Act. SALES OF RESTRICTED SHARES In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of this offering, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least two years (including the holding period of any prior owner except an affiliate) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of (i) one percent of the number of shares of Common Stock then outstanding (which will equal approximately 70,289 shares immediately after this offering) or (ii) the average weekly trading volume of the Common Stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who is not deemed to have been an affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least three years (including the holding period of any prior owner except an affiliate), is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Approximately 6,262 shares of Common Stock (not subject to lock-up agreements) will be eligible for sale in the public market immediately upon the effective date of this offering in reliance of Rule 144(k). OPTIONS As of December 31, 1996, options to purchase a total of 759,775 shares of Common Stock were outstanding, of which options to purchase 459,631 shares of Common Stock were then exercisable. Of the total shares issuable pursuant to such options, 431,998 are subject to lock-up agreements. An additional 563,929 shares of Common Stock are available for future grants under the Company's stock option and employee stock purchase plans. See "Management--Stock Option Plans." In general, under Rule 701 as currently in effect, beginning 90 days after the effective date of this offering, certain shares issued upon exercise of options granted by the Company prior to the date of this Prospectus will also be available for sale in the public market. Any employee, officer or director of or consultant to the Company who purchased his or her shares pursuant to a written compensatory plan or 44 46 contract may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell such shares in reliance on Rule 144 without having to comply with the public information, volume limitation or notice provisions of Rule 144. In both cases, a holder of Rule 701 shares is required to wait until 90 days after the date of this Prospectus before selling such shares. The Company intends to file one or more registration statements on Form S-8 under the Securities Act to register all shares of Common Stock subject to outstanding stock options and Common Stock issuable pursuant to the Company's stock and employee stock purchase plans that do not qualify for an exemption under Rule 701 from the registration requirements of the Securities Act. The Company expects to file these registration statements as soon as practicable after the date of this Prospectus, and such registration statements are expected to become effective upon filing. Shares covered by these registration statements will thereupon be eligible for sale in the public markets, subject to the lock-up agreements, to the extent applicable. LOCK-UP AGREEMENTS The Company, certain holders and all executive officers and directors of the Company, who in the aggregate hold 4,468,571 shares of Common Stock and options to purchase 431,998 shares of Common Stock have agreed, pursuant to the lock-up agreements, not to directly or indirectly, without the prior written consent of Oppenheimer & Co., Inc., offer, sell, offer to sell, contract to sell, or otherwise dispose of any shares of Common Stock beneficially owned by them for a period of 180 days after the date of this Prospectus. REGISTRATION RIGHTS The holders of an aggregate of 4,193,741 shares of Common Stock will be entitled to certain rights with respect to the registration of such shares under the Securities Act. Under the terms of certain registration rights agreements, if the Company proposes to register any of its securities under the Securities Act, either for its own account or for the account of other securityholders exercising registration rights, such holders are entitled to notice of such registration and are entitled to include such shares of Common Stock in the registration. The rights are subject to certain conditions and limitations, among them the right of the underwriters of an offering subject to the registration to limit the number of shares included in such registration. Holders of Common Stock benefiting from these rights may also require the Company to file a registration statement under the Securities Act at its expense with respect to their shares of Common Stock, and the Company is required to use its best efforts to effect such registration, subject to certain conditions and limitations. Furthermore, such holders may require the Company to file additional registration statements on Form S-3 subject to certain conditions and limitations. In connection with this offering, the rights of such holders to have shares of Common Stock registered under the Securities Act as part of this offering were duly waived pursuant to the terms of the agreements providing for such registration rights. No predictions can be made as to the effect, if any, that future sales of shares, or the availability of shares for future sale, will have on the prevailing market price for the Common Stock. Sales of substantial amounts of Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices for the Common Stock and could impair the Company's future ability to obtain capital through an offering of equity securities. 44 47 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement (the "Underwriting Agreement") among the Company, the Selling Stockholders and Oppenheimer & Co., Inc. and First Albany Corporation, as representatives (the "Representatives") of the Underwriters of this offering, the Company and the Selling Stockholders have agreed to sell to the Underwriters, and the Underwriters have severally agreed to purchase from the Company and the Selling Stockholders, the number of shares of Common Stock set forth opposite their names below:
NAME NUMBER OF SHARES ------------------------------------------------------------------ ---------------- Oppenheimer & Co., Inc............................................ First Albany Corporation.......................................... --------- Total........................................................ 2,500,000 =========
The Underwriters propose to offer the shares of Common Stock directly to the public initially at the public offering price set forth on the cover page of this Prospectus and at such price less a concession of not in excess of $ per share to certain securities dealers of which a concession not in excess of $ per share may be reallowed to certain other securities dealers. After the shares are released for sale to the public, the public offering price, allowances, concessions and other selling terms may be changed by the Representatives of the Underwriters. The Underwriting Agreement provides that the obligations of the Underwriters to purchase Common Stock are subject to certain conditions, including that if any shares of Common Stock are purchased by the Underwriters pursuant to the Underwriting Agreement, all such shares must be so purchased. The Selling Stockholders have granted an option to the Underwriters, exercisable within 30 days after the date of this Prospectus, to purchase from the Selling Stockholders up to an aggregate of 375,000 additional shares to cover over-allotments, if any, at the initial public offering price less the underwriting discount set forth on the cover page of this Prospectus. If the Underwriters exercise their over-allotment option to purchase any of the additional 375,000 shares of Common Stock, each of the Underwriters has severally agreed, subject to certain conditions, to purchase approximately the same percentage as the number of shares to be purchased by each of them bears to the 2,500,000 shares of Common Stock offered hereby. The Selling Stockholders will be obligated, pursuant to the over-allotment option, to sell Common Stock to the Underwriters to the extent such over-allotment option is exercised. Except for certain shares being sold by the Selling Stockholders in connection with this offering, the Company's officers, directors and certain stockholders (including all of the Selling Stockholders) have agreed not to offer, sell, contract to sell, pledge or grant any option to purchase or otherwise dispose of any shares of Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock or any rights to acquire Common Stock of the Company, for a period of 180 days after the date of this Prospectus without the prior written consent of Oppenheimer & Co., Inc. Subject to certain limited exceptions, the Company has also agreed not to offer, sell, contract to sell or otherwise dispose of any shares of Common 45 48 Stock, or any securities convertible into or exercisable or exchangeable for Common Stock or any rights to acquire Common Stock (other than shares issuable upon exercise of outstanding options), for a period of 180 days after the date of this Prospectus, without the prior written consent of Oppenheimer & Co., Inc. The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to certain payments the Underwriters may be required to make in respect thereof. The Representatives do not intend to confirm sales of the shares of Common Stock to any account over which they exercise discretionary authority. Prior to this offering, there has been no public market for the Common Stock. There can be no assurance that an active trading market will develop for the Common Stock or as to the price at which the Common Stock may trade in the public market from time to time subsequent to the offering made hereby. The initial price to the public for the Common Stock offered hereby will be determined by negotiation among the Company and the Representatives. Among the factors to be considered in determining the initial price to the public are (i) the history of and the prospects for the industry in which the Company competes, (ii) the ability of the Company's management, (iii) the past and present operations of the Company, (iv) the historical results of operations of the Company, (v) the prospects for future earnings and business potential of the Company, (vi) the general condition of the securities markets at the time of this offering, (vii) the recent market prices of securities of generally comparable companies, (viii) the market capitalizations and stages of development of other companies which the Company and the Representatives believe to be comparable to the Company, and (ix) other factors deemed to be relevant. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts. Anthony J. Medaglia, Jr., a Stockholder of Hutchins, Wheeler & Dittmar and the Clerk of the Company, holds options to purchase 6,666 shares of Common Stock, none of which is currently exercisable. Certain legal matters relating to the offering will be passed upon for the Underwriters by Hale and Dorr LLP, Boston, Massachusetts. EXPERTS The balance sheets as of December 31, 1995 and 1996 and the statements of operations, stockholders' deficit and cash flows for each of the three years in the period ended December 31, 1996 included in this Prospectus have been included herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information with respect to the Company and the Common Stock offered hereby, reference is hereby made to such Registration Statement, exhibits and schedules filed as part of the Registration Statement. Statements contained in this Prospectus as to the contents of any contract or any other document referred to are not necessarily complete and, in each instance, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement or such other document. Each such statement is qualified in all respects by such reference to such exhibit. Upon completion of the offering, the Company will be subject to the informational and reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance 47 49 therewith, will be required to file reports, proxy and information statements, and other information with the Commission. Such reports, proxy statements and other information, as well as the Registration Statement of which this Prospectus is a part and the exhibits and schedules thereto, can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following regional offices: 7 World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Electronic reports, proxy and information statements, and other information filed through the Commission's Electronic Data Gathering, Analysis and Retrieval system, are publicly available through the Commission's Web site (http://www.sec.gov). 47 50 VOICETEK CORPORATION INDEX TO FINANCIAL STATEMENTS
PAGE ----- Report of Independent Accountants..................................................... F-2 Balance Sheets as of December 31, 1995 and 1996....................................... F-3 Statements of Operations for the years ended December 31, 1994, 1995 and 1996......... F-4 Statements of Stockholders' Deficit for the years ended December 31, 1994, 1995 and 1996................................................................................ F-5 Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996......... F-6 Notes to Financial Statements......................................................... F-7
F-1 51 This is the form of the report that we expect to issue upon the effectiveness of the reverse stock split discussed in Note 11 of Notes to Financial Statements. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Voicetek Corporation: We have audited the accompanying balance sheets of Voicetek Corporation as of December 31, 1995 and 1996, and the related statements of operations, stockholders' deficit, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Voicetek Corporation as of December 31, 1995 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Boston, Massachusetts February 3, 1997, except as to the information presented in Note 11, for which the date is February 12, 1997 F-2 52 VOICETEK CORPORATION BALANCE SHEETS
PRO FORMA DECEMBER 31, DECEMBER ------------------- 31, 1995 1996 1996 -------- -------- ----------- (UNAUDITED) (IN THOUSANDS) (NOTE 2) ASSETS Current assets: Cash and cash equivalents.............................. $ 162 $ -- $ -- Accounts receivable, less allowances of $45 in 1995 and $70 in 1996.............................................. 3,518 7,460 7,460 Unbilled accounts receivable........................... 508 440 440 Inventories............................................ 874 1,188 1,188 Other current assets................................... 164 388 388 Deferred taxes......................................... 1,200 2,728 2,728 -------- -------- -------- Total current assets.............................. 6,426 12,204 12,204 Property and equipment, net................................. 845 1,900 1,900 Deferred taxes.............................................. -- 1,886 1,886 Intangible asset............................................ -- 25 25 -------- -------- -------- Total assets...................................... $ 7,271 $ 16,015 $ 16,015 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Short-term debt........................................ $ 925 $ 2,841 $ 2,841 Notes payable -- related party......................... 104 -- -- Accounts payable....................................... 1,046 1,705 1,705 Accrued expenses....................................... 828 2,300 2,300 Deferred revenue....................................... 420 762 762 -------- -------- -------- Total current liabilities......................... 3,323 7,608 7,608 Long-term debt.............................................. -- 236 236 Redeemable convertible preferred stock, at liquidation preference................................................ 10,201 11,297 -- Commitments and contingencies (Note 8) Common stock, $.01 par value; 20,000,000 shares authorized, 380,698, 450,916 and 5,027,760 shares issued and outstanding at December 31, 1995 and 1996 and on a pro forma basis, respectively.............................................. 4 5 50 Additional paid-in capital.................................. 8,024 7,087 18,339 Accumulated deficit......................................... (14,281) (10,218) (10,218) -------- -------- -------- Total liabilities and stockholders' equity (deficit)....................................... $ 7,271 $ 16,015 $ 16,015 ======== ======== ========
The accompanying notes are an integral part of the financial statements. F-3 53 VOICETEK CORPORATION STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues: Systems.................................................. $ 7,746 $11,477 $16,239 Services................................................. 2,310 4,244 5,862 ------- ------- ------- Total revenues...................................... 10,056 15,721 22,101 Cost of revenues: Systems.................................................. 2,393 3,704 5,183 Services................................................. 1,276 2,234 3,161 ------- ------- ------- Total cost of revenues.............................. 3,669 5,938 8,344 ------- ------- ------- Gross profit.................................................. 6,387 9,783 13,757 Operating expenses: Research and development................................. 2,340 3,361 5,771 Sales and marketing...................................... 2,163 3,806 5,435 General and administrative............................... 998 1,315 1,629 ------- ------- ------- Total operating expenses............................ 5,501 8,482 12,835 ------- ------- ------- Income from operations........................................ 886 1,301 922 Interest expense.............................................. (18) (83) (229) Interest income............................................... 9 13 11 ------- ------- ------- Income before provision for (benefit from) income taxes....... 877 1,231 704 Provision for (benefit from) income taxes..................... 23 (1,161) (3,359) ------- ------- ------- Net income.................................................... 854 2,392 4,063 Accretion of redeemable convertible preferred stock to redemption value............................................ 410 996 1,096 ------- ------- ------- Net income available to common stockholders................... $ 444 $ 1,396 $ 2,967 ======= ======= ======= Net income per share -- historical basis (Note 2) Pro forma net income per share................................ $ 0.72 ======= Pro forma weighted average shares outstanding................. 5,680 =======
The accompanying notes are an integral part of the financial statements. F-4 54 VOICETEK CORPORATION STATEMENTS OF STOCKHOLDERS' DEFICIT
COMMON STOCK ADDITIONAL TOTAL ---------------- PAID-IN ACCUMULATED STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT DEFICIT ------ ------- ---------- ----------- ------------- (IN THOUSANDS) Balance at December 31, 1993................. 143 $ 1 $9,415 $ (17,527) $(8,111) Stock options exercised...................... 54 1 3 4 Accretion of redeemable convertible preferred stock to redemption value.................. (410) (410) Net income................................... 854 854 --- --- ------ -------- ------- Balance at December 31, 1994................. 197 2 9,008 (16,673) (7,663) Stock options exercised...................... 184 2 12 14 Accretion of redeemable convertible preferred stock to redemption value.................. (996) (996) Net income................................... 2,392 2,392 --- --- ------ -------- ------- Balance at December 31, 1995................. 381 4 8,024 (14,281) (6,253) Stock options exercised...................... 50 1 5 6 Conversion of stockholder note payable....... 20 154 154 Accretion of redeemable convertible preferred stock to redemption value.................. (1,096) (1,096) Net income................................... 4,063 4,063 --- --- ------ -------- ------- Balance at December 31, 1996................. 451 $ 5 $7,087 $ (10,218) $(3,126) === === ====== ======== =======
The accompanying notes are an integral part of the financial statements. F-5 55 VOICETEK CORPORATION STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------ 1994 1995 1996 ------ ------- ------- (IN THOUSANDS) Cash flows from operating activities: Net income................................................ $ 854 $ 2,392 $ 4,063 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization of property and equipment.......................................... 295 386 716 Amortization of capitalized software development costs.............................................. 50 -- -- Accrued interest converted into common stock......... -- -- 19 Deferred taxes....................................... -- (1,200) (3,414) Changes in operating assets and liabilities: Accounts receivable............................. (716) (1,580) (3,942) Inventories..................................... (94) (602) (314) Unbilled accounts receivable.................... -- (508) 68 Other current assets............................ (29) (93) (224) Accounts payable................................ (14) 409 659 Accrued expenses................................ 155 41 1,503 Deferred revenue................................ 382 (83) 342 ------ ------- ------- Net cash provided by (used for) operating activities............................... 883 (838) (524) ------ ------- ------- Cash flows from investing activities: Additions to property and equipment....................... (289) (712) (1,771) Acquisition of intangible asset........................... -- -- (25) ------ ------- ------- Net cash used in investing activities...... (289) (712) (1,796) ------ ------- ------- Cash flows from financing activities: Proceeds from short-term debt............................. -- 925 1,916 Proceeds from long-term debt.............................. -- -- 236 Proceeds from issuance of convertible equity instrument... 75 -- -- Proceeds from exercise of stock options................... 4 14 6 ------ ------- ------- Net cash provided by financing activities............................... 79 939 2,158 ------ ------- ------- Net change in cash and cash equivalents........................ 673 (611) (162) Cash and cash equivalents, beginning of year................... 100 773 162 ------ ------- ------- Cash and cash equivalents, end of year......................... $ 773 $ 162 -- ====== ======= ======= Supplemental disclosure of cash flow information: Interest paid............................................. $ 8 $ 64 $ 217 Taxes paid................................................ -- $ 89 $ 50 Supplemental disclosure of noncash financing transactions: Equipment acquired under capital leases................... $ 16 $ 163 -- Conversion of related party note payable to common stock................................................... -- -- $ 154
The accompanying notes are an integral part of the financial statements. F-6 56 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND OPERATIONS: Voicetek Corporation (a Massachusetts corporation) (the "Company") was incorporated in 1981 and operates in one business segment. The Company develops, markets and supports interactive communications systems. The Company's principal market and its operations are located in the United States. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: RISKS AND UNCERTAINTIES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of trade receivables. Concentrations of credit risk with respect to trade receivables include receivables from significant customers. The Company's customers are concentrated in one industry segment, the telecommunications industry, and, historically, a significant portion of the Company's revenues have been to a limited number of customers within this industry. The Company does not require collateral or other security to support customer receivables. The Company maintains reserves for credit losses and such losses have been within management's expectations. The Company's allowances amounted to $25,000, $45,000 and $70,000 at December 31, 1994, 1995 and 1996, respectively. The provision charged to the Statement of Operations was $34,000, $41,000 and $39,000 in 1994, 1995 and 1996, respectively, and write-offs against the allowances were $34,000, $21,000 and $14,000 in 1994, 1995 and 1996, respectively. CASH AND CASH EQUIVALENTS The Company's policy is to include amounts as cash and cash equivalents that are short-term, highly liquid investments purchased with a maturity at issuance of three months or less. INVENTORIES Inventories, consisting primarily of purchased components, include materials, labor and overhead, are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed using the straight-line method based on the following estimated useful lives: Equipment...................... 3 years Furniture and fixtures......... 3 years Leasehold improvements......... The shorter of the lease term or the life of the asset
Expenditures for major improvements which substantially increase the useful lives of assets are capitalized. Repair and maintenance costs are expensed as incurred. When assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in results of operations. RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Based on the Company's product development process, technological feasibility is established upon completion of a working model. Software development costs incurred subsequent to the F-7 57 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) establishment of technological feasibility and for significant product enhancements are capitalized until the product is available for general release to customers, and amortized to cost of revenues. Amortization of capitalized software costs is recognized on the greater of the straight-line basis over the estimated economic lives of the related products, or the ratio of current gross revenues to total current and expected future gross revenues of the related products. The Company did not capitalize any software development costs during 1994, 1995 and 1996 because the amounts eligible for capitalization were immaterial. REVENUE RECOGNITION The Company recognizes product and license revenues upon execution of a contract and shipment to customers provided that no significant vendor obligations remain outstanding and collection of the resulting receivable is deemed probable by management. If insignificant vendor obligations remain after shipment of the product, the Company accrues for the estimated costs of such obligations. Additionally, the Company accrues for warranty costs upon shipment. Revenue from post-customer support (maintenance) contracts is recognized ratably over the life of the contract, generally one year. Revenue from training and consulting is recognized as the services are provided. For certain contracts eligible under AICPA Statement of Position No. 81-1, revenue is recognized using the percentage-of-completion accounting method based upon an efforts-expended method. In all cases, changes to total estimated costs and anticipated losses, if any, are recognized in the period in which determined. The percentage-of-completion method requires estimates of costs to complete which may differ from actual costs. UNBILLED ACCOUNTS RECEIVABLE Unbilled accounts receivable represents revenue recognized for contracts accounted for under the percentage-of-completion method which had not been billed at the balance sheet date. All amounts are expected to be collected within one year. There are no amounts included in accounts receivable or unbilled accounts receivable which represent retainages. INCOME TAXES The Company provides for income taxes using the liability method whereby recognition of deferred tax liabilities and assets is based on expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company provides for a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. UNAUDITED PRO FORMA BALANCE SHEET All outstanding shares of Preferred Stock shall automatically convert to shares of common stock upon the closing of an underwritten public offering of common stock on a "firm commitment" basis pursuant to a registration statement on Form S-1 filed under the Securities Act of 1933, as amended, provided that specified minimum per share and gross proceeds are received by the Company. The unaudited pro forma balance sheet as of December 31, 1996 has been prepared assuming the conversion of all the outstanding shares of Preferred Stock into 4,576,844 shares of common stock. COMPUTATION OF INCOME PER SHARE Net income per share is computed based upon the weighted average number of common shares and common equivalent shares outstanding. Common equivalent shares are included in per share calculations where the effect of their inclusion would be dilutive. The preferred stock outstanding is not considered a common stock equivalent based on its effective yield when issued. In accordance with the Securities and F-8 58 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Exchange Commission Staff Accounting Bulletin No. 83, all common and common equivalent shares (including stock options) issued during the twelve-month period prior to the initial filing date in February 1997 of the Registration Statement relating to the Company's initial public offering have been included in the calculation as if they were outstanding for all periods presented, using the treasury stock method at the midpoint of the range of the assumed initial public offering price. Net income per share on a pro forma basis is computed in the same manner as net income per share on a historical basis except that, in the pro forma calculation all outstanding shares of preferred stock are included in the computation as if they had been converted into an equivalent number of shares of common stock. Net income per share on a historical basis is as follows:
YEARS ENDED DECEMBER 31, ------------------------------------ 1994 1995 1996 ------ ------ ------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net income per share....................... $ 1.26 $ 1.27 $ 2.69 ====== ====== ====== Weighted average shares outstanding........ 351 1,096 1,103 ====== ====== ======
Fully diluted net income per share was $0.16, $0.40 and $0.71 in 1994, 1995 and 1996, respectively. Supplemental earnings per share reflecting the elimination of the debt to be paid off with proceeds received from the proposed initial public offering is $2.29 for the year ended December 31, 1996. 3. PROPERTY AND EQUIPMENT: Property and equipment consists of the following:
YEARS ENDED DECEMBER 31, --------------------- 1995 1996 ------ ------ (IN THOUSANDS) Equipment............................................... $3,054 $4,511 Furniture and fixtures.................................. 320 422 Leasehold improvements.................................. 46 258 ------- ------- 3,420 5,191 Less accumulated depreciation and amortization.......... 2,575 3,291 ------- ------- $ 845 $1,900 ======= =======
Equipment under capital leases consists of the following:
YEARS ENDED DECEMBER 31, --------------------- 1995 1996 ------ ------ (IN THOUSANDS) Equipment............................................... $ 211 $ 211 Less accumulated amortization........................... 97 184 ----- ----- $ 114 $ 27 ===== =====
F-9 59 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. INVENTORIES: Inventories consists of the following:
DECEMBER 31, ----------------- 1995 1996 ------ ------ (IN THOUSANDS) Inventories: Raw materials (purchased components)................... $599 $ 885 Work in process........................................ 131 67 Finished goods......................................... 144 236 ---- ------ Total inventories................................. $874 $1,188 ==== ======
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT: During 1996, the Company's Board of Directors voted to increase the number of authorized shares of Common Stock to 30,000,000 shares, and to create a class of 1,000,000 shares of "blank check" preferred stock which may be issued in one or more series with such rights, terms and privileges as the Board of Directors of the Company shall deem necessary or desirable. These actions are subject to stockholder approval and have not been reflected in these financial statements. 1994 RECAPITALIZATION In 1994, the preferred stockholders' ownership in the Company was reallocated among the preferred stockholders pursuant to a recapitalization. The Company raised $2,458,000 during 1992 and 1993 principally from certain existing preferred stockholders. The accretion related to this financing, calculated using the effective yield, amounted to approximately $1,252,000. This accretion was charged to additional paid in capital and reduced net income available to common stockholders principally in 1993. The ownership of common stockholders was not affected by the recapitalization. REDEEMABLE CONVERTIBLE PREFERRED STOCK The outstanding preferred stock of the Company consists of Redeemable Convertible Preferred Stock (issued and outstanding: 5,455,713 shares of Senior Preferred ("Senior") and 679,803 shares of Junior Preferred Series 1 ("Junior Series 1") and 729,758 shares of Junior Preferred Series 2 ("Junior Series 2"), respectively) (together the "Preferred Stock"). The carrying amounts of the Preferred Stock were the same as the respective redemption amounts, and were as follows:
DECEMBER 31, ------------------------------- 1994 1995 1996 ------- ------- ------- (IN THOUSANDS) Senior Preferred.............................. $5,885 $ 6,525 $ 7,228 Junior Series 1............................... 2,128 2,358 2,611 Junior Series 2............................... 1,192 1,318 1,458 ------- ------- ------- Total............................... $9,205 $10,201 $11,297 ======= ======= =======
Voting The Preferred Stock has the same voting rights as common stock on an as-converted basis. F-10 60 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Dividends The holders of Preferred Stock have the right to receive out of funds legally available cumulative dividends, when and if declared by the Board of Directors. The dividends for the Junior Series 1, Junior Series 2 and Senior shares shall be at the annual rate of $0.25, $0.13 and $0.10 per share, respectively. Holders of Senior, Junior Series 1 and Junior Series 2 Preferred Stock shall also be entitled to an annual 10% interest on unpaid dividends, as defined. Liquidation Upon any liquidation, dissolution or winding up of the Company the holders of Preferred Stock are entitled to receive the liquidation preference (as defined) plus any declared and unpaid dividends before any distribution may be made to common stockholders. Conversion Each share of Senior, Junior Series 1 and Junior Series 2 Preferred Stock is convertible, on a two-for-three basis, into shares of common stock at the option of the holders. The conversion rate is adjustable for certain dilutive events. All outstanding shares of Preferred Stock shall automatically convert to shares of common stock upon the closing of an underwritten public offering of common stock on a "firm commitment" basis pursuant to a registration statement on Form S-1 filed under the Securities Act of 1933, as amended, provided that specified minimum per share and gross proceeds are received by the Company. Redemption The Preferred Stock is redeemable at the option of the holder at any time on or after September 30, 1997 for Senior, Junior Series 1 and Junior Series 2 shares at redemption prices per share of $1.005785, $2.501729 and $1.329820, respectively, plus all accrued but unpaid dividends at per share amounts of $0.10, $0.25 and $0.13 for Senior, Junior Series 1 and Junior Series 2, respectively, on a per annum basis plus 10% interest. (See also Note 11 for a subsequent event). STOCK OPTION PLANS 1992 Equity Incentive Plan In 1992, the Company amended its previous qualified stock option plan and established the 1992 Equity Incentive Plan (the "1992 Plan"). Options granted under the 1992 Plan vest over a period of four years. The options expire ten years from the date of grant. The Company applies APB Opinion No. 25 and related Interpretations on accounting for its plans, under which no compensation cost has been recognized for stock option awards. Had compensation cost for the option grants been determined consistent with Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"), the Company's pro forma net income for 1995 and 1996 would have been approximately $2,359,000 and $3,893,000, respectively. In calculating these pro forma disclosures, the fair value of each option grant in 1995 and 1996 has been estimated on the date of grant using the minimum value method with the following assumptions: risk-free interest rate of 6.75% in 1995 and 1996, and expected lives of ten years. F-11 61 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Information related to stock option transactions under the 1992 plan is as follows:
WEIGHTED AVERAGE SHARES EXERCISE PRICE -------- ---------------- Balance at December 31, 1993....................... 801,409 $.075 Granted....................................... 105,993 .127 Canceled...................................... (58,703) .075 Exercised..................................... (53,791) .075 --------- Balance at December 31, 1994....................... 794,908 .082 Granted....................................... 113,036 2.288 Canceled...................................... (10,146) .075 Exercised..................................... (183,724) .127 --------- Balance at December 31, 1995....................... 714,074 .432 Granted....................................... 117,161 6.489 Canceled...................................... (60,380) .111 Exercised..................................... (49,746) 2.957 --------- Balance at December 31, 1996....................... 721,109 $1.227 =========
Information related to options outstanding and exercisable, including options granted under the 1996 Option Plan, at December 31, 1996 is as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ------------------------------- WEIGHTED AVERAGE -------------------------------- RANGE OF NUMBER REMAINING NUMBER WEIGHTED AVERAGE EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE - ---------------- ----------- ---------------- ----------- ---------------- $.075 468,792 6.5 years 402,823 $ .075 .075-.150 71,546 8 years 33,000 .141 .375-4.50 85,627 9 years 23,808 2.509 5.25-7.50 133,810 10 years -- 6.564 ----------- ----------- 759,775 459,631 =========== ==========
The effects of applying SFAS 123 in this pro forma disclosure are not likely to be indicative of the pro forma future effect on net income because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. The exercise price for each stock option grant was determined by the Board of Directors of the Company to be equal to the fair value of the common stock on the date of grant. In reaching this determination at the time of each such grant, the Board considered a broad range of factors, including the illiquid nature of an investment in the Company's common stock, the Company's historical financial performance, the preferences (including liquidation) of the Company's outstanding Preferred Stock and the Company's future prospects. At December 31, 1996, there were 459,631 options exercisable under the plan. In January 1997, options to purchase 58,873 shares of Common Stock were granted with exercise prices of $9.00 per share. 1996 Stock Option Plan The Company's 1996 Stock Option Plan (the "1996 Option Plan") was adopted by the Board of Directors of the Company in August 1996. The 1996 Option Plan provides for the grant of stock options to key employees (including officers who may be members of the Company's Board of Directors), directors who are not employees and consultants to Company. Under the 1996 Option Plan, the Company could grant options intended to qualify as incentive stock options within the meaning of Section 422A of the Code, and options not F-12 62 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) intended to qualify as incentive stock options. A total of 333,333 shares of Common Stock were originally authorized for issuance under the 1996 Option Plan. Effective January 1, 1997 and each January 1 thereafter through January 1, 2006, the number of shares of Common Stock authorized for issuance under the 1996 Option Plan shall be increased cumulatively such that the number of shares of Common Stock subject to the 1996 Option Plan shall equal 15% of the total number of fully diluted shares of Common Stock (excluding shares of Common Stock issuable upon the exercise of options to purchase Common Stock granted under the Company's 1996 Director Option Plan, as defined below) as of the close of business on December 31 of the preceding year. As of December 31, 1996, no options were outstanding under the 1996 Option Plan. 1996 Director Option Plan The Company's 1996 Stock Option Plan for Non-Employee Directors and Clerk (the "1996 Director Option Plan") was adopted by the Board of Directors of the Company in August 1996. The 1996 Director Option Plan provides for the grant of stock options to the Clerk and directors who are not employees of the Company. Under the 1996 Director Option Plan, the Company could grant options not intended to qualify as incentive stock options within the meaning of Section 422A of the Code. A total of 60,000 shares of Common Stock were originally authorized for issuance under the 1996 Director Option Plan. During 1996, options to purchase 38,666 shares of Common Stock, at an exercise price of $7.50 per share, were granted. As of December 31, 1996, these options remain outstanding under the 1996 Option Plan, none of which were exercisable. No options have been exercised to date and options outstanding expire at various dates through August 2006. RESERVED SHARES The Company has reserved 5,733,851 shares of common stock for issuance upon the conversion of the Preferred Stock and for issuance upon the exercise of stock options under the Company's stock option plans. 6. INCOME TAXES: The provision for (benefit from) income taxes consists of the following:
YEARS ENDED DECEMBER 31, ----------------------------- 1994 1995 1996 ----- ------- ------- (IN THOUSANDS) Current: Federal...................................... $ 18 $ 20 $ 22 State........................................ 5 19 33 --- ------- ------- 23 39 55 --- ------- ------- Deferred: Federal...................................... -- (905) (2,825) State........................................ -- (295) (589) --- ------- ------- -- (1,200) (3,414) --- ------- ------- Total provision for (benefit from) income taxes... $ 23 $(1,161) $(3,359) === ======= =======
The following is a reconciliation between the U.S. federal statutory tax rate and the effective tax rate: F-13 63 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 ------- ------- ------- U.S. federal statutory tax rate................. 34.0% 34.0% 34.0% State income taxes, net of federal benefit...... 0.5 1.0 5.5 Nondeductible expenses.......................... 0.9 1.3 3.8 Alternative minimum tax......................... 2.1 -- -- Decrease in valuation allowance................. -- (97.4) (520.4) Net operating losses and carryforward credits... (34.9) (31.0) -- ----- ----- ----- Effective tax rate.............................. 2.6% (92.1)% (477.1)% ===== ===== =====
The following represents the significant components of the Company's net deferred tax assets:
DECEMBER 31, ------------------- 1995 1996 ------- ------- (IN THOUSANDS) Deferred tax assets: Federal net operating losses................. $ 3,725 $ 3,303 Tax credit carryforwards..................... 511 334 Depreciation and amortization................ 51 46 State tax credits and NOL, net of federal benefit.................................... 933 473 Other temporary differences.................. 258 458 Valuation allowance for deferred tax assets..................................... (4,278) -- ------ ------ Net tax asset..................................... $ 1,200 $ 4,614 ====== ======
The Company eliminated its remaining valuation allowance of $3,773,000 in the fourth quarter of 1996. Net operating losses expired in 1996 resulting in the reduction of deferred tax assets of $505,000. Management has evaluated the positive and negative evidence impacting the realizability of the Company's deferred tax assets and concluded based upon the weight of available evidence that it is more likely than not that it will generate taxable income prior to the expiration of its federal and state net operating losses and tax credit carryforwards. Accordingly, there is no valuation allowance against deferred tax assets at December 31, 1996. Management re-evaluates the positive and negative evidence on a quarterly basis, and accordingly, the deferred tax asset could be reduced in future periods. The Company reduced its valuation allowance by $1,228,000 in 1995 based upon Management's estimate of the amount of deferred tax assets that were more likely than not to be realized. As of December 31, 1996, the Company had approximately $9,700,000 of net operating loss carryforwards for federal income tax purposes which expire in the years 2004 through 2009. The Company had approximately $4,100,000 of state net operating losses which expire in the years 1997 through 2009. The Company has research and development credits for federal and state income tax purposes of approximately $560,000 and $450,000, respectively, which begin to expire in 1999. The federal and state net operating losses and credits are subject to certain limitations under IRC Section 382 which may affect the Company's ability to utilize them prior to expiration. 7. DEBT: In September 1996, the Company amended its revolving credit agreement with a bank to increase its revolving line of credit to $5,000,000 at the prime rate plus 0.75% (9.00% at December 31, 1996), expiring on September 1, 1997. The outstanding balance at December 31, 1996 under the line of credit was $2,700,000. The line of credit is collateralized by certain receivables of the Company. The Company also entered into a term loan agreement with the bank. Borrowings under the term loan are payable over three years. The interest rate on borrowings under the term loan bear interest at the prime rate plus 1% (9.25% at December 31, 1996). F-14 64 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The outstanding balance under the term loan was approximately $377,000 at December 31, 1996. The term loan is collateralized by certain equipment of the Company. The Company is subject to certain financial covenants under the agreements including specified debt to worth ratios and maintaining a certain capital base and profitability, as defined. In November 1988, the Company borrowed $250,000 from a stockholder and issued a note, payable in 48 monthly installments with an interest rate of 10% per annum. In April 1992, the original terms of the agreement were amended, and the payment of interest and principal by the Company, in agreement with the stockholder, was deferred until a future date. The principal balance of $104,176 and related accrued interest was converted into 20,488 shares of common stock in December 1996. At December 31, 1996, the Company had an immaterial cash overdraft balance. 8. COMMITMENTS AND CONTINGENCIES: LEASE COMMITMENTS The Company occupies manufacturing and office space under an operating lease which expires in October 1999. The Company must pay insurance, maintenance, utilities and a percentage of real estate taxes on the lease. The Company also leases certain equipment under noncancelable capital leases that mature at various dates. The future minimum payments under the capital leases are immaterial. Approximate future, minimum, noncancelable, annual payments under the operating leases are as follows:
YEARS ENDING DECEMBER 31, (IN THOUSANDS) ----------------------------------------------------------------- 1997........................................................... $ 323 1998........................................................... 329 1999........................................................... 346 2000........................................................... 409 2001........................................................... 425 ------ $1,832 ======
Rent expense under operating leases was approximately $109,000, $191,000 and $233,000 in 1994, 1995 and 1996, respectively. 9. EMPLOYEE PLAN: As amended on January 1, 1988, the Company approved the establishment of the Voicetek Corporation 401(k) Plan (the "Plan"). Employees are eligible to participate in the Plan by meeting certain requirements, including length of service and minimum age. The Company can elect to make discretionary matching contributions. The annual contributions may not exceed the maximum allowed under the applicable provisions of the Internal Revenue Code. The Company has provided for contributions of approximately $28,000, $48,000 and $58,000 in 1994, 1995 and 1996, respectively. F-15 65 VOICETEK CORPORATION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 10. SIGNIFICANT CUSTOMERS AND EXPORT SALES: The following represents significant customer revenue:
YEARS ENDED DECEMBER 31, ----------------------------------- 1994 1995 1996 ------- ------- ------- Customer A.................................... 45% 25% 24% Customer B.................................... 11 23 12 Customer C.................................... -- -- 12
Export sales were approximately $719,000, $1,604,000 and $2,352,000 in 1994, 1995 and 1996, respectively. 11. SUBSEQUENT EVENTS: On February 12, 1997, the Board of Directors approved a two-for-three stock split of the Company's common stock. All share and per share amounts have been restated in these financial statements to reflect this reverse stock split. In February 1997, certain holders of Preferred Stock contractually agreed to extend the redemption date on the Redeemable Convertible Preferred Stock to July 31, 1998. F-16 66 [ARTWORK DEPICTING PHOTOGRAPH OF COMPUTER SCREEN WHILE RUNNING GENERATIONS APPLICATION DEVELOPER SOFTWARE] 67 - ------------------------------------------------------------ - ------------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................................... 3 Risk Factors.......................................... 5 Use of Proceeds....................................... 11 Dividend Policy....................................... 11 Capitalization........................................ 12 Dilution.............................................. 13 Selected Financial Data............................... 14 Management's Discussion and Analysis of Financial Condition and Results of Operations................. 15 Business.............................................. 21 Management............................................ 32 Certain Transactions.................................. 38 Principal and Selling Stockholders.................... 39 Description of Capital Stock.......................... 41 Shares Eligible for Future Sale....................... 43 Underwriting.......................................... 45 Legal Matters......................................... 46 Experts............................................... 46 Additional Information................................ 46 Index to Financial Statements......................... F-1
------------------------ UNTIL , 1997 (25 DAYS FROM THE DATE OF THE PROSPECTUS), ALL DEALERS EFFECTING TRANSAC- TIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OF SUBSCRIPTIONS. - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ - ------------------------------------------------------------ 2,500,000 SHARES LOGO COMMON STOCK ------------------------ PROSPECTUS ------------------------ OPPENHEIMER & CO., INC. FIRST ALBANY CORPORATION , 1997 - ------------------------------------------------------------ - ------------------------------------------------------------ 68 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses (other than underwriting discounts and commissions) payable in connection with the sale of the Common Stock offered hereby (including the Common Stock which may be issued pursuant to an over-allotment option) are as follows:
AMOUNTS ---------- SEC Registration fee................................................... 10,455 NASD filing fee........................................................ 3,950 Nasdaq National Market fee............................................. 30,070 Printing Expenses...................................................... 150,000 Legal fees and expenses................................................ 250,000 Accounting Fees and expenses........................................... 250,000 Blue sky fees and expenses (including legal fees and expenses)......... 10,000 Transfer agent and registrar fees and expenses......................... 10,000 Miscellaneous.......................................................... 35,525 ---------- Total............................................................. $ 750,000* ==========
The Company will bear all expenses shown above. - --------------- * All amounts are estimated, except SEC Registration, NASD and Nasdaq National Market Fees. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 67 of Chapter 156B of the Massachusetts Business Corporation Law, which is applicable to the Company, provides as follows: Indemnification of directors, officers, employees and other agents of a corporation, and persons who serve at its request as directors, officers, employees or other agents of another organization, or who serve at its request in any capacity with respect to any employee benefit plan, may be provided by it to whatever extent shall be specified in or authorized by (i) the articles of organization or (ii) a by-law adopted by the stockholders or (iii) a vote adopted by the holders of a majority of the shares of stock entitled to vote on the election of directors. Except as the articles of organization or by-laws otherwise require, indemnification of any persons referred to in the preceding sentence who are not directors of the corporation may be provided by it to the extent authorized by the directors. Such indemnification may include payment by the corporation of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding, upon receipt of an undertaking by the person indemnified to repay such payment if he shall be adjudicated to be not entitled to indemnification under this section which undertaking may be accepted without reference to the financial ability of such person to make repayment. Any such indemnification may be provided although the person to be indemnified is no longer an officer, director, employee or agent of the corporation or of such other organization or no longer serves with respect to any such employee benefit plan. No indemnification shall be provided for any person with respect to any matter as to which he shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his action was in the best interest of the corporation or to the extent that such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. The absence of any express provision for indemnification shall not limit any right of indemnification existing independently of this section. A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or other agent of another organization or with respect to any employee benefit plan, against any liability incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability. II-1 69 In addition, pursuant to its Articles of Organization and By-laws, the Company shall indemnify its directors and officers against expenses (including judgments or amounts paid in settlement) incurred in any action, civil or criminal, to which any such person is a party by reason of any alleged act or failure to act in his capacity as such, except as to a matter as to which such director or officer shall have been finally adjudged not to have acted in good faith in the reasonable belief that his action was in the best interest of the corporation. The Underwriting Agreement provides that the Underwriters are obligated, under certain circumstances, to indemnify directors, officers and controlling persons of the Company against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Act"). Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1 hereto. The Company maintains directors and officers liability insurance for the benefit of its directors and certain of its officers and has entered into indemnification agreements with its directors and certain of its officers. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES During the past three years, Voicetek has issued the following securities, none of which have been registered under the Securities Act of 1933, as amended (the "Act"): (a) Since January 1, 1994, the Company has granted options to purchase an aggregate of 374,856 shares of Common Stock, 144,999 of which have been granted to executive officers and directors of the Company. (b) Since January 1, 1994, the Company has issued 287,261 shares of Common Stock upon the exercise of options at an average exercise price of $0.08, of which 287,261 shares were issued to executive officers and directors of the Corporation. (c) In December 1996, the company issued 20,248 shares of Common Stock to a current stockholder upon the conversion of outstanding principal balance (and accrued interest) on a promissory note. (d) In connection with the Company's Credit Facility, on September 30, 1996, the Company issued a promissory note in the original principal amount of $1.0 million to Fleet Bank of Massachusetts, N.A. (e) In December 1994, the Company issued 6,286 shares of Senior Preferred Stock. ITEM 16. EXHIBITS
A. EXHIBITS: 1.1 Form of Underwriting Agreement 3.1 Restated Articles of Organization 3.2 Amended and Restated By-laws 4.1 Specimen certificate representing the Common Stock* 5.1 Opinion of Hutchins, Wheeler & Dittmar, a Professional Corporation* 10.1 OEM Agreement between Northern Telecom, Inc. and Voicetek dated June 16, 1995** 10.2 Amendment No. 1 to OEM Agreement dated December 3, 1996** 10.3 Volume Purchase Agreement between Dialogic Corporation and Voicetek dated as of September 20, 1995** 10.4 Distributor Agreement between Rockwell International, SSD and Voicetek as of September 26, 1996** 10.5 Lease dated as of May 25, 1993 by and between Teachers Realty Corporation and Voicetek 10.6 First Amendment to Lease dated August 8, 1994 10.7 Second Amendment to Lease dated March 25, 1996 10.8 Third Amendment to Lease dated November 8, 1996 10.9 Letter Agreement dated September 21, 1994 between Fleet Bank of Massachusetts, N.A. and Voicetek 10.10 Third Loan Modification Agreement dated September 26, 1996 between Voicetek and Fleet National Bank 10.11 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Sheldon Dinkes 10.12 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Roger Tuttle
II-2 70
A. EXHIBITS: 10.13 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Paul Gagne 10.14 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Scott Ganson 10.15 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Daniel Poranski 10.16 Voicetek Corporation 1992 Equity Incentive Plan 10.17 Voicetek Corporation 1996 Stock Option Plan 10.18 Voicetek Corporation 1996 Stock Option Plan for Non-Employee Directors and Clerk 10.19 Voicetek Corporation 1997 Employee Stock Purchase Plan 10.20 Registration and First Refusal Rights Agreement dated as of December 22, 1992 by and among Voicetek and the holders of the Company's Preferred Stock 11.1 Statement re: Computation of Per Share Earnings 23.1 Consent of Coopers & Lybrand, L.L.P. 23.2 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit 5.1 above) 27.1 Financial Data Schedule
- --------------- * to be filed by amendment. ** Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Commission. B. FINANCIAL STATEMENT SCHEDULES. All schedules have been omitted because the information is not applicable or because the information required is included in the Financial Statements or the notes thereto. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement 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. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of his 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; and (2) For the purpose of determining any liability under the Securities Act, 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. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to provisions described in Item 14 above, 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. II-3 71 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Chelmsford, Massachusetts, on February 14, 1997. VOICETEK CORPORATION By: /s/ SHELDON L. DINKES ------------------------------------ SHELDON L. DINKES PRESIDENT AND CHIEF EXECUTIVE OFFICER We, the undersigned officers and directors of Voicetek Corporation, hereby severally constitute and appoint Sheldon L. Dinkes and John A. Blaeser, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us and in our names in the capacities indicated below, the Registration Statement on Form S-1 filed herewith and any and all pre-effective and post-effective amendments to said Registration Statement, and, in connection with any registration of additional securities pursuant to Rule 462(b) under the Securities Act of 1933, to sign any abbreviated registration statement and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, in each case, with the Securities and Exchange Commission, and generally to do all such things in our names and on our behalf in our capacities with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE(S) DATE - ---------------------------------------- --------------------------------- ------------------ /s/ SHELDON L. DINKES President, Chief Executive February 14, 1997 - ---------------------------------------- Officer and Director SHELDON L. DINKES /s/ ROGER N. TUTTLE, JR. Vice President and Treasurer February 14, 1997 - ---------------------------------------- (principal accounting officer) ROGER N. TUTTLE JR. /s/ CHRISTOPHER W. LYNCH Director February 14, 1997 - ---------------------------------------- CHRISTOPHER W. LYNCH /s/ SHERMAN M. WOLF Director February 14, 1997 - ---------------------------------------- SHERMAN M. WOLF /s/ ALAN VOULGARIS Director February 14, 1997 - ---------------------------------------- ALAN VOULGARIS /s/ JOHN A. BLAESER Director February 14, 1997 - ---------------------------------------- JOHN A. BLAESER
II-4 72 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------ ---------------------------------------------------------------------- ------------ 1.1 Form of Underwriting Agreement........................................ 3.1 Restated Articles of Organization..................................... 3.2 Amended and Restated By-laws.......................................... 4.1 Specimen certificate representing the Common Stock*................... 5.1 Opinion of Hutchins, Wheeler & Dittmar, a Professional Corporation*... 10.1 OEM Agreement between Northern Telecom, Inc. and Voicetek dated June 16, 1995**.......................................................... 10.2 Amendment No. 1 to OEM Agreement dated December 3, 1996**............. 10.3 Volume Purchase Agreement between Dialogic Corporation and Voicetek dated as of September 20, 1995**.................................... 10.4 Distributor Agreement between Rockwell International, SSD and Voicetek as of September 26, 1996**.......................................... 10.5 Lease dated as of May 25, 1993 by and between Teachers Realty Corporation and Voicetek............................................ 10.6 First Amendment to Lease dated August 8, 1994......................... 10.7 Second Amendment to Lease dated March 25, 1996........................ 10.8 Third Amendment to Lease dated November 8, 1996....................... 10.9 Letter Agreement dated September 21, 1994 between Fleet Bank of Massachusetts, N.A. and Voicetek.................................... 10.10 Third Loan Modification Agreement dated September 26, 1996............ 10.11 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Sheldon Dinkes......................................... 10.12 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Roger Tuttle........................................... 10.13 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Paul Gagne............................................. 10.14 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Scott Ganson........................................... 10.15 Executive Employment Agreement dated as of January 13, 1997 between Voicetek and Daniel Poranski........................................ 10.16 Voicetek Corporation 1992 Equity Incentive Plan....................... 10.17 Voicetek Corporation 1996 Stock Option Plan........................... 10.18 Voicetek Corporation 1996 Stock Option Plan for Non-Employee Directors and Clerk........................................................... 10.19 Voicetek Corporation 1997 Employee Stock Purchase Plan................ 10.20 Registration and First Refusal Rights Agreement dated as of December 22, 1992 by and among Voicetek and the holders of the Company's Preferred Stock..................................................... 11.1 Statement re: Computation of Per Share Earnings....................... 23.1 Consent of Coopers & Lybrand, L.L.P................................... 23.2 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit 5.1 above)..................................... 27.1 Financial Data Schedule...............................................
- --------------- * to be filed by amendment. ** Confidential Treatment Requested. EX-1.1 2 UNDERWRITERS AGREEMENT 1 EXHIBIT 1.1 [Form of Underwriting Agreement - To be negotiated] 2,500,000 Shares VOICETEK CORPORATION Common Stock UNDERWRITING AGREEMENT ---------------------- March __, 1997 Oppenheimer & Co., Inc. First Albany Corporation c/o Oppenheimer & Co., Inc. Oppenheimer Tower World Financial Center New York, New York 10281 On behalf of the Several Underwriters named on Schedule I attached hereto. Ladies and Gentlemen: Voicetek Corporation, a Massachusetts corporation (the "Company"), and the selling stockholders named on Schedule II attached to this Agreement (the "Selling Stockholders") propose to sell to you and the other underwriters named on Schedule I to this Agreement (the "Underwriters"), for whom you are acting as Representatives, an aggregate of 2,500,000 shares (the "Firm Shares") of the Company's Common Stock, $.01 par value (the "Common Stock"). Of the 2,500,000 Firm Shares, 2,000,000 are to be issued and sold by the Company and 500,000 are to be sold by the Selling Stockholders. In addition, the Selling Stockholders propose to grant to the Underwriters an option to purchase up to an additional 375,000 shares (the "Option Shares") of Common Stock from them for the purpose of covering over-allotments in connection with the sale of the Firm Shares. The Firm Shares and the Option Shares are together called the "Shares." 1. SALE AND PURCHASE OF THE SHARES. On the basis of the representations, warranties and agreements contained in, and subject to the terms and conditions of, this Agreement: (a) The Company and the Selling Stockholders agree, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase, at $_____ per share (the "Initial Price"), the number of Firm Shares (adjusted by the Representatives to eliminate fractions) which bears the same proportion of the total number of Firm Shares to be sold by the Company or the Selling Stockholders, as the case may be, as the number of Firm Shares set forth opposite the name of such Underwriter on Schedule I attached to this Agreement bears to the total number of Firm Shares to be sold by the Company and the Selling Stockholders. (b) The Selling Stockholders, severally and not jointly, grant to the Underwriters an option to purchase, severally and not jointly, all or any part of the 2 Option Shares at the Initial Price. The number of Option Shares to be purchased by each Underwriter shall be the same percentage (adjusted by the Representatives to eliminate fractions) of the total number of Option Shares to be purchased by the Underwriters as such Underwriter is purchasing of the Firm Shares. Such option may be exercised only to cover over- allotments in the sales of the Firm Shares by the Underwriters and may be exercised in whole or in part at any time on or before 12:00 noon, New York City time, on the business day before the Firm Shares Closing Date (as defined below), and only once thereafter within 30 days after the date of this Agreement, in each case upon written or facsimile notice, or verbal or telephonic notice confirmed by written or facsimile notice, by the Representatives to the Company no later than 12:00 noon, New York City time, on the business day before the Firm Shares Closing Date or at least two business days before the Option Shares Closing Date (as defined below), as the case may be, setting forth the number of Option Shares to be purchased and the time and date (if other than the Firm Shares Closing Date) of such purchase. 2. DELIVERY AND PAYMENT. Delivery of the certificates for the Firm Shares shall be made by the Company and the Custodian (as hereinafter defined) on behalf of the Selling Stockholders to the Representatives for the respective accounts of the Underwriters, and payment of the purchase price by certified or official bank check or checks payable in New York Clearing House (next day) funds to the Company and the Custodian, respectively, shall take place at the offices of Oppenheimer & Co., Inc., at Oppenheimer Tower, World Financial Center, New York, New York 10281, at 10:00 a.m., New York City time, on the third business day following the date of this Agreement; provided, however, that if the Shares sold hereunder are priced and this Agreement is entered into after 4:30 p.m., New York City time, on any business day, payment and delivery in respect of the Firm Shares shall take place on the fourth business day following the date of this Agreement; in either case, unless another time and date, not later than 10 business days after the date of this Agreement, shall be agreed upon by the Company, the Selling Stockholders and the Representatives (such time and date of delivery and payment are called the "Firm Shares Closing Date"). In the event the option with respect to the Option Shares is exercised, delivery of the certificates for the Option Shares shall be made by the Custodian to the Representatives for the respective accounts of the Underwriters, and payment of the purchase price by certified or official bank check or checks payable in New York Clearing House (next day) funds to the Selling Shareholders shall take place at the offices of Oppenheimer & Co., Inc. specified above at the time and on the date (which may be the same date as, but in no event shall be earlier than, the Firm Shares Closing Date) specified in the notice referred to in Section 1(b) (such time and date of delivery and payment are called the "Option Shares Closing Date"). The Firm Shares Closing Date and the Option Shares Closing Date are called, individually, a "Closing Date" and, together, the "Closing Dates." Certificates evidencing the Shares shall be registered in such names and shall be in such denominations as the Representatives shall request at least two full business days before the Firm Shares Closing Date or, in the case of Option Shares, on the day of notice of exercise of the option as described in Section 1(b) and shall be made available to the Representatives for checking and packaging, at such place as is designated by the Representatives, on the full business day before the Firm Shares Closing Date (or the Option Shares Closing Date in the case of the Option Shares). -2- 3 3. REGISTRATION STATEMENT AND PROSPECTUS; PUBLIC OFFERING. The Company has prepared in conformity with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the published rules and regulations thereunder (the "Rules") adopted by the Securities and Exchange Commission (the "Commission") a registration statement on Form S-1 (No. 333-____), including a preliminary prospectus relating to the Shares, and has filed with the Commission the Registration Statement (as hereinafter defined) and such amendments thereof as may have been required to the date of this Agreement. Copies of such Registration Statement (including all amendments thereof) and of the related preliminary prospectus have heretofore been delivered by the Company to you. The term "preliminary prospectus" means any preliminary prospectus (as described in Rule 430 of the Rules) included at any time as a part of the Registration Statement. The Registration Statement as amended at the time and on the date it becomes effective (the "Effective Date"), including all exhibits and information, if any, deemed to be part of the Registration Statement pursuant to Rule 424(b) and Rule 430A of the Rules, is called the "Registration Statement." The term "Prospectus" means the prospectus in the form first used to confirm sales of the Shares (whether such prospectus was included in the Registration Statement at the time of effectiveness or was subsequently filed with the Commission pursuant to Rule 424(b) of the Rules). The Company and the Selling Stockholders understand that the Underwriters propose to make a public offering of the Shares, as set forth in and pursuant to the Prospectus, as soon after the Effective Date and the date of this Agreement as the Representatives deem advisable. The Company and the Selling Stockholders hereby confirm that the Underwriters and dealers have been authorized to distribute or cause to be distributed each preliminary prospectus and are authorized to distribute the Prospectus (as from time to time amended or supplemented if the Company furnishes amendments or supplements thereto to the Underwriters). 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING STOCKHOLDERS. The Company and the Selling Stockholders hereby, jointly and severally, represent and warrant to each Underwriter as follows: (a) On the Effective Date the Registration Statement complied, and on the date of the Prospectus, on the date any post-effective amendment to the Registration Statement shall become effective, on the date any supplement or amendment to the Prospectus is filed with the Commission and on each Closing Date, the Registration Statement and the Prospectus (and any amendment thereof or supplement thereto) will comply, in all material respects, with the applicable provisions of the Securities Act and the Rules and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder; the Registration Statement did not, as of the Effective Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the other dates referred to above neither the Registration Statement nor the Prospectus, nor any amendment thereof or supplement thereto, will contain any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. When any related preliminary prospectus was first filed with the Commission (whether filed as part of the Registration Statement or any amendment thereto or pursuant to Rule 424(a) of the Rules) and when any amendment thereof or supplement thereto was first filed with the Commission, such preliminary prospectus as amended or supplemented complied in all material respects with the applicable provisions of the Securities Act and the Rules and did not contain any untrue statement of a material fact or -3- 4 omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. Notwithstanding the foregoing, the Company and the Selling Stockholders make no representation or warranty as to the last paragraph on the cover page of the Prospectus, the paragraph with respect to stabilization on the inside front cover page of the Prospectus and the statements contained under the caption "Underwriting" in the Prospectus. The Company and the Selling Stockholders acknowledge that the statements referred to in the previous sentence constitute the only information furnished in writing by the Representatives on behalf of the Underwriters specifically for inclusion in the Registration Statement, any preliminary prospectus or the Prospectus. (b) All contracts and other documents required to be filed as exhibits to the Registration Statement have been filed with the Commission as exhibits to the Registration Statement. (c) The financial statements of the Company (including all notes and schedules thereto) included in the Registration Statement and Prospectus present fairly the financial position, results of operations and cash flows and the stockholders' equity and the other information purported to be shown therein of the Company at the respective dates and for the respective periods to which they apply; and such financial statements have been prepared in conformity with generally accepted accounting principles, consistently applied throughout the periods involved, and all adjustments necessary for a fair presentation of the results for such periods have been made. (d) Coopers & Lybrand LLP, whose reports filed with the Commission as a part of the Registration Statement, are and, during the periods covered by their reports, were independent public accountants as required by the Securities Act and the Rules. (e) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the Commonwealth of Massachusetts. The Company has no subsidiaries and does not control, directly or indirectly, any corporation, partnership, joint venture, association or business. The Company is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its assets or properties (owned, leased or licensed) or the nature of its business makes such qualification necessary except for such jurisdictions where the failure to so qualify would not have a material adverse effect on the assets or properties, business, results of operations or financial condition of the Company. Except as disclosed in the Registration Statement and the Prospectus, the Company does not own, lease or license any asset or property or conduct any business outside the United States of America. The Company has all requisite corporate power and authority, and all necessary authorizations, approvals, consents, orders, licenses, certificates and permits of and from all governmental or regulatory bodies or any other person or entity, to own, lease and license its assets and properties and conduct its businesses as now being conducted and as described in the Registration Statement and the Prospectus except for such authorizations, approvals, consents, orders, material licenses, certificates and permits the failure to so obtain would not have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company; no such authorization, approval, consent, order, license, certificate or permit contains a materially burdensome restriction other than as disclosed in the Registration Statement and the Prospectus; and the Company has all such corporate power and -4- 5 authority, and such authorizations, approvals, consents, orders, licenses, certificates and permits to enter into, deliver and perform this Agreement and to issue and sell the Shares (except as may be required under state and foreign Blue Sky laws). (f) The Company owns or possesses adequate and enforceable rights to use all patents, patent applications, trademarks, trademark applications, trade names, service marks, copyrights, copyright applications, licenses, know-how and other similar rights and proprietary knowledge (collectively, "Intangibles") described in the Registration Statement as owned or licensed by the Company. To the Company's knowledge, there are no other Intangibles necessary for the conduct of its business as described in the Registration Statement and the Prospectus. The Company has not received any notice of, and to its best knowledge is not aware of, any infringement of or conflict with asserted rights of others with respect to any Intangibles owned or licensed by the Company which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (g) The Company has good title to each of the items of personal property which are reflected in the financial statements referred to in Section 4(c) or are referred to in the Registration Statement and the Prospectus as being owned by it and valid and enforceable leasehold interests in each of the items of real and personal property which are referred to in the Registration Statement and the Prospectus as being leased by it, in each case free and clear of all liens, encumbrances, claims, security interests and defects, other than those described in the Registration Statement and the Prospectus and those which do not and will not have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (h) There is no litigation or governmental or other proceeding or investigation before any court or before or by any public body or board pending or, to the Company's best knowledge, threatened against, or involving the assets, properties or business of, the Company which, if determined adversely to the Company, would materially adversely affect the value or the operation of any such assets or properties or the business, results of operations, prospects or condition (financial or otherwise) of the Company. (i) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as described therein, (i) there has not been any material adverse change in the assets or properties, business, results of operations, prospects or condition (financial or otherwise), of the Company, whether or not arising from transactions in the ordinary course of business; (ii) the Company has not sustained any material loss or interference with its assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree; and (iii) and since the date of the latest balance sheet included in the Registration Statement and the Prospectus, except as reflected in the Registration Statement or the Prospectus, the Company has not (a) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money, except such liabilities or obligations incurred in the ordinary course of business, -5- 6 (b) entered into any transaction not in the ordinary course of business or (c) declared or paid any dividend or made any distribution on any shares of its stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its stock. (j) There is no document or contract of a character required to be described in the Registration Statement or Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed as required. Each agreement listed in the Exhibits to the Registration Statement is in full force and effect and is valid and enforceable by and against the Company in accordance with its terms, assuming the due authorization, execution and delivery thereof by each of the other parties thereto. Neither the Company, nor, to the best of the Company's knowledge, any other party is in default in the observance or performance of any term or obligation to be performed by it under any such agreement, and no event has occurred which with notice or lapse of time or both would constitute such a default, in any such case which default or event would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. No default exists, and no event has occurred which with notice or lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition, by the Company of any other agreement or instrument to which the Company is a party or by which it or its properties or business may be bound or affected which default or event would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (k) The Company is not in violation of any term or provision of its Articles of Organization, as amended, or By-Laws, as amended, or of any franchise, license, permit, judgment, decree, order, statute, rule or regulation, where the consequences of such violation would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (l) Neither the execution, delivery and performance of this Agreement by the Company nor the consummation of any of the transactions contemplated hereby (including, without limitation, the issuance and sale by the Company of the Shares and the sale by the Selling Stockholders of the Shares to be sold by them) will give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach of any term or provision of, or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or require any consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to the terms of, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company is a party or by which it or any of its properties or businesses is bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company or violate any provision of the Articles of Organization, as amended, or By-Laws, as amended, of the Company, except for such consents or waivers which have already been obtained and are in full force and effect. (m) The Company has an authorized and outstanding capital stock as set forth under the captions "Capitalization" and "Description of Capital Stock" in the Prospectus. All of the outstanding shares of Common Stock [and Series A -6- 7 Preferred Stock, par value $.01 per share,] have been duly and validly issued and are fully paid and nonassessable and none of them was issued in violation of any preemptive or other similar right. The Shares to be issued and sold by the Company, when issued and sold by the Company pursuant to this Agreement, and the Shares to be sold by the Selling Stockholders, when sold by the Selling Stockholders pursuant to this Agreement, will be duly and validly issued, fully paid and nonassessable and none of them will be issued in violation of any preemptive or other similar right. Except as disclosed in the Registration Statement and the Prospectus, there is no outstanding option, warrant or other right calling for the issuance of, and there is no commitment, plan or arrangement to issue, any share of stock of the Company or any security convertible into, or exercisable or exchangeable for, such stock. The Common Stock and the Shares conform in all material respects to all statements in relation thereto contained in the Registration Statement and the Prospectus. (n) No holder of any security of the Company has the right to have any security owned by such holder included in the Registration Statement or to demand registration of any security owned by such holder during the period ending 180 days after the date of this Agreement, other than rights which have been waived. Each stockholder, director and executive officer of the Company has delivered to the Representatives his enforceable written agreement that he will not, for a period of 180 days after the date of this Agreement, offer for sale, sell, distribute, grant any option for the sale of, or otherwise dispose of, directly or indirectly, or exercise any registration rights with respect to, any shares of Common Stock (or any securities convertible into, exercisable for, or exchangeable for any shares of Common Stock) owned by him, without the prior written consent of Oppenheimer & Co., Inc., on behalf of the Underwriters. (o) Each stockholder listed on Schedule III hereto, director and executive officer of the Company has delivered to the Representatives his or her enforceable written agreement that, except, in the case of the Selling Stockholders, for the sale of the Shares to be sold by the Selling Stockholders pursuant to the Registration Statement, he, she or it will not, for a period of 180 days after the date of this Agreement, sell (including "short sales"), loan, pledge, assign, transfer, encumber, distribute, grant or other transfer or dispose of, directly or indirectly (collectively, "Transfer"), or offer, contract or otherwise agree to Transfer, any Common Stock or any other securities convertible into or exchangeable for Common Stock or any other equity securities of the Company owned by him, her or it, without the prior written consent of the Representatives, except for (i) sales to the several Underwriters pursuant to this Agreement or (ii) pursuant to will or the laws of intestate succession, provided the transferee thereof agrees in writing to be bound by such restrictions. (p) All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Shares. This Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles and (ii) to the extent that rights to indemnity or contribution under this Agreement may be limited by Federal and state securities laws or the public policy underlying such laws. -7- 8 (q) The Company is not involved in any labor dispute nor, to the knowledge of the Company, is any such dispute threatened, which dispute would have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (r) No transaction has occurred between or among the Company and any of its officers, directors or stockholders, as the case may be, or any affiliate or affiliates of any such officer, director or stockholder, that is required to be described in and is not described in the Registration Statement and the Prospectus. (s) The Company has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of any of the Shares. (t) The Company has filed all Federal, state, local and foreign tax returns which are required to be filed by it through the date hereof, or has received extensions thereof, and has paid all taxes shown on such returns and all assessments received by it to the extent that the same are material and have become due. (u) The Shares have been duly authorized for quotation on the National Association of Securities Dealers Automated Quotation ("NASDAQ") National Market System. (v) The Company has complied with all of the requirements and filed the required forms as specified in Florida Statutes Section 517.075. 5. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each of the Selling Stockholders, severally and not jointly, represents and warrants to each Underwriter that: (a) Such Selling Stockholder is, and on the Firm Shares Closing Date will be, the sole lawful owner of the Shares to be sold by it hereunder, and has, and on such date will have, good and marketable title to the Shares to be sold by such Selling Stockholder hereunder, free and clear of any lien, charge, claim, encumbrance, security interest, stockholders' agreement, voting trust, restriction on transfer or other defect in title. (b) Such Selling Stockholder has, and on the Firm Shares Closing Date will have, full legal right, power and authority, and every approval, authorization or other consent, required to sell, assign, transfer and deliver such Shares in the manner provided in this Agreement; delivery of certificates for the Shares to be sold by such Selling Stockholder pursuant hereto will, upon payment therefor, pass good and marketable title thereto to each Underwriter, free and clear of any lien, charge, claim, encumbrance, security interest, stockholders' agreement, voting trust, restriction on transfer or other defect in title; and there are no outstanding options, warrants, rights or other agreements or arrangements requiring such Selling Stockholder at an time to transfer any Shares which may be sold to the Underwriters pursuant to this Agreement. -8- 9 (c) Such Selling Stockholder has duly executed and delivered a power of attorney (the "Power of Attorney"), in the form heretofore delivered to the Representatives, appointing __________________ and __________________, as such Selling Stockholder's attorneys-in-fact (the "Attorneys-in-Fact"), each of them, together or individually with full power and authority to execute, deliver and perform this Agreement on behalf of such Selling Stockholder. (d) Such Selling Stockholder has duly executed and delivered a custody agreement (the "Custody Agreement"), in the form heretofore delivered to the Representatives pursuant to which certificates in negotiable form for the Shares to be sold by such Selling Stockholder under this Agreement were deposited with ___________________, as a custodian (the "Custodian"). The Custody Agreement and the Custodian's authority thereunder and the appointment of the Attorneys-in-Fact are irrevocable and the obligations of such Selling Stockholder hereunder and under the Custody Agreement are not subject to termination by such Selling Stockholder, except as provided in this Agreement, the Power of Attorney or the Custody Agreement, or by operation of law, whether by the death or incapacity of any trustee or executor or the termination of any trust or estate (if such Selling Stockholder is a trust or estate), the dissolution or liquidation of any corporation or partnership (if such Selling Stockholder is a corporation or a partnership), or the occurrence of any other event. If any event referred to in the preceding sentence should occur before the deliver of the Shares hereunder, the certificates for the Shares to be sold by such Selling Stockholder in accordance with the terms and conditions of this Agreement and the Custody Agreement, and action taken by the Custodian pursuant to the Custody Agreement shall be as valid as if such event had not occurred, whether or not the Custodian or the Attorneys-in-Fact, or any one of them, shall have received notice of such event. (e) The execution, delivery and performance of this Agreement, the Power of Attorney and the Custody Agreement and the consummation of the transactions to be performed by such Selling Stockholder contemplated hereby and thereby, including the delivery and sale of the Shares to be delivered and sold by such Selling Stockholder hereunder and thereunder, will not conflict with or result in a breach or violation of, or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, any agreement, indenture or other instrument to which such Selling Stockholder is a party or by which it is bound, or to which any of its assets or properties are subject or affected, nor will the performance by such Selling Stockholder of its obligations hereunder or thereunder violate any statute, rule, regulation or order or decree of any court or any governmental or regulatory agency, authority or body having jurisdiction over such Selling Stockholder or any of its assets or properties or result in the creation or imposition of any lien, charge, claim, security interest, encumbrance or restriction whatsoever upon such Shares. (f) Except for permits and similar authorizations required under the Securities Act, the securities or Blue Sky laws of certain jurisdictions, and such permits and authorizations which have been obtained, no consent, approval, authorization, license, permit or certificate or order of any court, governmental or regulatory agency, authority or body or financial institution is required in connection with the consummation of the transactions to be performed by such Selling Stockholder contemplated by this Agreement, including the delivery and sale of the Shares to be sold by such Selling Stockholder. -9- 10 (g) Each of this Agreement, the Power of Attorney and the Custody Agreement has been duly and validly authorized, executed and delivered by such Selling Stockholder and constitutes a legal, valid and binding obligation of such Selling Stockholder, enforceable against such Selling Stockholder in accordance with its terms, except (i) as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles and (ii) to the extent that rights to indemnity or contribution under this Agreement may be limited by Federal and state securities laws or the public policy underlying such laws. (h) All information furnished to the Company by such Selling Stockholder or on such Selling Stockholder's behalf for use in connection with the preparation of the Registration Statement and Prospectus (including, without limiting the generality of the foregoing, all representations and warranties of such Selling Stockholder in such Selling Stockholder's Power of Attorney and the information relating to such Selling Stockholder which is set forth in the Registration Statement under the caption "Principal and Selling Stockholders') is true and correct and does not omit any material fact necessary to make such information not misleading. (i) The sale by such Selling Stockholder of Shares pursuant hereto is not prompted by any adverse information concerning the Company. (j) Such Selling Stockholder has not since the filing of the Registration Statement (i) sold, bid for, purchased, attempted to induce any person to purchase, or paid anyone any compensation for soliciting purchases of, the Common Shares or (ii) paid or agreed to pay to any person any compensation for soliciting another to purchase any securities of the Company, except for the sale of the Shares by the Selling Stockholders under this Agreement. (k) Such Selling Stockholder has not taken and will not take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Shares to facilitate the sale or resale of the Shares. 6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the Underwriters under this Agreement are several and not joint. The respective obligations of the Underwriters to purchase the Shares are subject to each of the following terms and conditions: (a) The Prospectus shall have been timely filed with the Commission in accordance with Section 7(A)(a) of this Agreement. (b) No order preventing or suspending the use of any preliminary prospectus or the Prospectus shall have been or shall be in effect and no order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for such purpose shall be pending before or threatened by the Commission, and any requests for additional information on the part of the Commission (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the satisfaction of the Representatives. -10- 11 (c) The representations and warranties of the Company and the Selling Stockholders contained in this Agreement and in the certificates delivered pursuant to Section 6(d) and 6(e), respectively, shall be true and correct when made and on and as of each Closing Date as if made on such date and the Company and the Selling Stockholders shall have performed all covenants and agreements and satisfied all the conditions contained in this Agreement required to be performed or satisfied by it at or before such Closing Date. (d) The Representatives shall have received on each Closing Date a certificate, addressed to the Representatives and dated such Closing Date, of the chief executive or chief operating officer and the chief financial officer or chief accounting officer of the Company to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus and this Agreement and that the representations and warranties of the Company in this Agreement are true and correct on and as of such Closing Date with the same effect as if made on such Closing Date and the Company has performed all covenants and agreements and satisfied all conditions contained in this Agreement required to be performed or satisfied by it at or prior to such Closing Date. (e) The Representatives shall have received on the Firm Shares Closing Date a certificate, addressed to the Representatives and dated such Closing Date, of each Selling Stockholder, to the effect that such Selling Stockholder has carefully examined the Registration Statement, the Prospectus and this Agreement and that the representations and warranties of such Selling Stockholder in this Agreement are true and correct on and as of such Closing Date with the same effect as if made on such Closing Date and such Selling Stockholder has performed all covenants and agreements and satisfied all conditions contained in this Agreement required to be performed or satisfied by such Selling Stockholder at or prior to such Closing Date. (f) The Representatives shall have received on the Effective Date, at the time this Agreement is executed and on each Closing Date a signed letter from Coopers & Lybrand LLP addressed to the Representatives and dated, respectively, the Effective Date, the date of this Agreement and each such Closing Date, in form and substance reasonably satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Securities Act and the Rules, that the response to Item 10 of the Registration Statement is correct insofar as it relates to them and stating in effect that: (i) In their opinion the audited financial statements and financial statement schedules included in the Registration Statement and the prospectus and reported on by them comply as to form in all material respects with the applicable accounting requirements of the Securities Act and Rules; (ii) on the basis of a reading of the amounts included in the Registration Statement and the Prospectus under the headings "Summary Financial Information" and "Selected Financial Data," carrying out certain procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter, a reading of the minutes of the meetings of the stockholders and directors of the Company, and inquiries of certain officials of the Company who have -11- 12 responsibility for financial and accounting matters of the Company as to transactions and events subsequent to the date of the latest audited financial statements, except as disclosed in the Registration Statement and the Prospectus, nothing came to their attention which caused them to believe that: (A) the amounts in "Summary Financial Information," and "Selected Financial Data" included in the Registration Statement and the Prospectus do not agree with the corresponding amounts in the audited [and unaudited financial statements] from which such amounts were derived; or [(B) with respect to the Company, there were, at a specified date not more than five business days prior to the date of the letter, any increases in the current liabilities and long-term liabilities of the Company or any decreases in net income or in working capital or the stockholders' equity in the Company, as compared with the amounts shown on the Company's audited balance sheet for the year ended December 31, 1995 included in the Registration Statement;] (iii) they have performed certain other procedures as a result of which they determined that certain information of an accounting, financial or statistical information derived from the general accounting records of the Company) set forth in the Registration Statement and the Prospectus and reasonably specified by the Representatives agrees with the accounting records of the Company. References to the Registration Statement and the Prospectus in this paragraph (f) are to such documents as amended and supplemented at the date of the letter. (g) The Representatives shall have received on each Closing Date: (i) an opinion from Hutchins, Wheeler & Dittmar, counsel for the Company, addressed to the Representatives, dated each Closing Date, stating in effect that: (A) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the Commonwealth of Massachusetts. To the best of such counsel's knowledge, the Company has no subsidiary and does not control, directly or indirectly, any corporation, partnership, joint venture, association or other business organization. The Company is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its assets or properties (owned, leased or licensed) or the nature of its businesses makes such qualification necessary, except for such jurisdictions where the failure to so qualify would not have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (B) The Company has all requisite corporate power and authority to own, lease and license its assets and properties and conduct its business as now being conducted and as described in the -12- 13 Registration Statement and the Prospectus; and the Company has all requisite corporate power and authority and all necessary authorizations, approvals, consents, orders, licenses, certificates and permits to enter into, deliver and perform this Agreement and to issue and sell the Shares other than those required under state and foreign Blue Sky laws. (C) The Company has authorized and issued capital stock as set forth in the Registration Statement and the Prospectus; the certificates evidencing the Shares are in due and proper legal form and have been duly authorized for issuance by the Company; all of the outstanding shares of Common Stock of the Company have been duly and validly authorized and have been duly and validly issued and are fully paid and nonassessable and none of them was issued in violation of any preemptive or other similar right. The Shares when issued and sold pursuant to this Agreement will be duly and validly issued, outstanding, fully paid and nonassessable and none of them will have been issued in violation of any preemptive or other similar right. To the best of such counsel's knowledge, except as disclosed in the Registration Statement and the Prospectus, there is no outstanding option, warrant or other right calling for the issuance of, and no commitment, plan or arrangement to issue, any share of stock of the Company or any security convertible into, exercisable for, or exchangeable for stock of the Company. The Common Stock and the Shares conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus. (D) The agreement of the Company's stockholders set forth on Schedule III to this Agreement and directors and officers stating that (except in the case of the Selling Stockholders, for the sale of the Shares to be sold by the Selling Stockholders pursuant to the Registration Statement) for a period of 180 days from the date of this Agreement they will not, without the Representatives' prior written consent, directly or indirectly Transfer, or offer, contract or otherwise agree to Transfer, any Common Stock or any other securities convertible into or exchangeable for Common Stock or any other equity securities owned by them, except for (i) sales to the several Underwriters pursuant to this Agreement or (ii) pursuant to will or the laws of intestate succession, provided the transferee thereof agrees in writing to be bound by such restrictions, has been duly and validly executed and delivered by such persons and constitutes the legal, valid and binding obligation of each such person enforceable against each such person in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. (E) All necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Shares. This Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the -13- 14 Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles and (ii) to the extent that rights to indemnity or contribution under this Agreement may be limited by Federal or state securities laws or the public policy underlying such laws. (F) Neither the execution, delivery and performance of this Agreement by the Company nor the consummation of any of the transactions contemplated hereby (including, without limitation, the issuance and sale by the Company of the Shares to be issued and sold by the Company) will give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach of any term or provision of, or constitute a default (or any event which with notice or lapse of time, or both, would constitute a default) under, or require consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, note or other agreement or instrument of which such counsel is aware and to which the Company is a party or by which it or any of its properties or businesses is bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation of which such counsel is aware or violate any provision of the Articles of Organization, as amended, or By-Laws, as amended, of the Company. (G) To the best of such counsel's knowledge, no default exists, and no event has occurred which with notice or lapse of time, or both, would constitute a default, in the due performance and observance of any term, covenant or condition by the Company of any indenture, mortgage, deed of trust, note or any other agreement or instrument to which the Company is a party or by which it or any of its assets or properties or businesses may be bound or affected, where the consequences of such default would have a material adverse effect on the assets or properties, businesses, results of operations, prospects or condition (financial or otherwise) of the Company. (H) To the best of such counsel's knowledge, the Company is not in violation of any term or provision of its Articles of Organization, as amended, or By-Laws, as amended, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation, where the consequences of such violation would have a material adverse effect on the assets or properties, businesses, results of operations, prospects or condition (financial or otherwise) of the Company. (I) No consent, approval, authorization or order of any court or governmental agency or body is required for the performance of this Agreement by the Company or the consummation of the transactions contemplated hereby, except such -14- 15 as have been obtained under the Securities Act and such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the several Underwriters. (J) To the best of such counsel's knowledge, there is no litigation or governmental or other proceeding or investigation, before any court or before or by any public body or board pending or threatened against, or involving the assets, properties or businesses of, the Company which would have a material adverse effect upon the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company. (K) The statements in the Prospectus under the captions "Description of Capital Stock," "Principal and Selling Stockholders," "Certain Transactions," "Shares Eligible for Future Sale" [and "________________________"] insofar as such statements constitute a summary of documents referred to therein or matters of law, are fair summaries in all material respects and accurately present the information called for with respect to such documents and matters. All contracts and other documents required to be filed as exhibits to, or described in, the Registration Statement have been so filed with the Commission or are fairly described in the Registration Statement, as the case may be. (L) The Registration Statement, all preliminary prospectuses and the Prospectus and each amendment or supplement thereto (except for the financial statements and schedules and other financial and statistical data included therein, as to which such counsel need not express an opinion) comply as to form in all material respects with the requirements of the Securities Act and the Rules. (M) The Registration Statement has become effective under the Securities Act, and no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are threatened, pending or contemplated. To the extent deemed advisable by such counsel, they may rely as to matters of fact on certificates of responsible officers of the Company and public officials and on the opinions of other counsel satisfactory to the Representatives as to matters which are governed by laws other than the laws of the State of New York, the Commonwealth of Massachusetts and the Federal laws of the United States; provided that such counsel shall state that in their opinion the Underwriters and they are justified in relying on such other opinions. Copies of such certificates and other opinions shall be furnished to the Representatives and counsel for the Underwriters. In addition, such counsel shall state that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the Representatives and representatives of the independent certified public accountants of the Company, at which conferences the contents of the Registration Statement and the Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, -15- 16 completeness or fairness of the statements contained in the Registration Statement and the Prospectus (except as specified in the foregoing opinion), on the basis of the foregoing, no facts have come to the attention of such counsel which lead such counsel to believe that the Registration Statement at the time it became effective (except with respect to the financial statements and notes and schedules thereto and other financial data, as to which such counsel need express no belief) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus as amended or supplemented (except with respect to the financial statements and notes and schedules thereto and other financial data, as to which such counsel need make no statement) on the date thereof contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (i) an opinion from ____________________, counsel for the Selling Stockholders, addressed to the Representatives, dated the Firm Shares Closing Date, stating in effect that: (A) Assuming that the Underwriters acquire their respective interests in the Shares to be sold by the Selling Stockholders in good faith and without notice of any adverse claims (within the meaning of Section 8-302 of the Uniform Commercial Code), upon delivery to the Underwriters of such Shares registered in their names, the Underwriters will acquire good and marketable title to such Shares free and clear of all liens, charges, claims, security interests, encumbrances, pledges, stockholders' agreements, voting trusts and any other restrictions whatsoever. (B) The execution, delivery and performance of this Agreement, the Power of Attorney and the Custody Agreement and the consummation of the transactions to be performed by each such Selling Stockholder contemplated hereby and thereby (including, without limitation, the delivery and sale of the Shares to be delivered and sold by such Selling Stockholder hereunder and thereunder), will not give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach or violation of any term or provision of, or constitute a default (or any event which with notice or lapse of time, or both would constitute a default) under, or require consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of such Selling Stockholder pursuant to the terms of any indenture, mortgage, deed of trust, note or other agreement or instrument to which such Selling Stockholder is a party or bound or by which it or any of such Selling Stockholder's assets, properties or businesses are subject or affected, or any franchise, license, consent, certificate, permit, judgment, decree, order, notice, plan, code, statute, rule or regulation of which such counsel is aware or result in the creation of imposition of any lien, charge, claim, encumbrance, security interest or restriction whatsoever upon the Shares to be sold by such Selling Stockholder. (C) No consent, approval, authorization, license, certificate, permit or order of any court, governmental or regulatory agency, authority or body or financial institution is required in connection -16- 17 with the performance of this Agreement by each Selling Stockholder or the consummation of the transactions contemplated hereby, by the Power of Attorney or by the Custody Agreement, including the delivery and sale of the Shares to be delivered and sold by such Selling Stockholder, except such as have been obtained under the Securities Act and such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the several Underwriters. (D) Each of this Agreement, the Power of Attorney and the Custody Agreement has been duly and validly authorized, executed and delivered by each Selling Stockholder and constitutes a legal, valid, and binding obligation of such Selling Stockholder, enforceable against such Selling Stockholder in accordance with its terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) to the extent that rights to indemnity or contribution under this Agreement may be limited by Federal and state securities laws or the public policy underlying such laws. To the extent deemed advisable by such counsel, they may rely as to matters of fact on certificates of the Selling Stockholders and on the opinions of other counsel satisfactory to the Representatives as to matters which are governed by laws other than the laws of the State of New York, the Commonwealth of Massachusetts and the Federal laws of the United States; provided that such counsel shall state that in their opinion the Underwriters and they are justified in relying on such other opinions. Copies of such certificates and other opinions shall be furnished to the Representatives and counsel for the Underwriters. (h) All proceedings taken in connection with the sale of the Firm Shares and the Option Shares as herein contemplated shall be reasonably satisfactory in form and substance to the Representatives and their counsel and the Underwriters shall have received from Hale and Dorr LLP a favorable opinion, addressed to the Representatives and dated such Closing Date, with respect to the Shares, the Registration Statement and the Prospectus, and such other related matters, as the Representatives may reasonably request, and the Company shall have furnished to Hale and Dorr LLP such documents as they may reasonably request for the purpose of enabling them to pass upon such matters. (i) The Representatives shall have received on each Closing Date a certificate, addressed to the Representatives, and dated such Closing Date, of an executive officer of the Company to the effect that the signer of such certificate has reviewed and understands the provisions of Section 517.075 of the Florida Statutes, and represents that the Company has complied, and at all times will comply, with all provisions of Section 517.075 and further, that as of such Closing Date, neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba. (j) The Representatives shall have received from each of the stockholders listed on schedule III hereto and each director and executive officer of the Company the enforceable written agreements described in Section 4(o). -17- 18 7. Covenants of the Company. ------------------------ (A) The Company covenants and agrees as follows: (a) The Company shall prepare the Prospectus in a form approved by the Representatives and file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act, and shall promptly advise the Representatives (i) when any amendment to the Registration Statement shall have become effective, (ii) of any request by the Commission for any amendment of the Registration Statement or the Prospectus or for any additional information, (iii) of the prevention or suspension of the use of any preliminary prospectus or the Prospectus or of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company shall not file any amendment of the Registration Statement or supplement to the Prospectus unless the Company has furnished the Representatives a copy for its review prior to filing and shall not file any such proposed amendment or supplement to which the Representatives reasonably object. The Company shall use its best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Shares is required to be delivered under the Securities Act and the Rules, any event occurs as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend or supplement the Prospectus to comply with the Securities Act or the Rules, the Company promptly shall prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 7(A), an amendment or supplement which shall correct such statement or omission or an amendment which shall effect such compliance. (c) The Company shall make generally available to its security holders and to the Representatives as soon as practicable, but not later than 45 days after the end of the 12-month period beginning at the end of the fiscal quarter of the Company during which the Effective Date occurs (or 90 days if such 12-month period coincides with the Company's fiscal year), an earning statement (which need not be audited) of the Company, covering such 12-month period, which shall satisfy the provisions of Section 11(a) of the Securities Act or Rule 158 of the Rules. (d) The Company shall furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement (including all exhibits thereto and amendments thereof), and to each other Underwriter a copy of the Registration Statement (without including all exhibits thereto and all amendments thereof), and, so long as delivery of a prospectus by an underwriter or dealer may be required by the Securities Act or the Rules, as -18- 19 many copies of any preliminary prospectus and the Prospectus and any amendments thereof and supplements thereto as the Representatives may reasonably request. (e) The Company shall cooperate with the Representatives and their counsel in endeavoring to qualify the Shares for offer and sale under the laws of such jurisdictions as the Representatives may designate and shall maintain such qualifications in effect so long as required for the distribution of the Shares; provided, however, that the Company shall not be required in connection therewith, as a condition thereof, to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation as doing business in any jurisdiction. (f) For a period of five years after the date of this Agreement, the Company shall supply to the Representatives and to each other Underwriter who may so request in writing, copies of such financial statements and other periodic and special reports as the Company may from time to time distribute generally to the holders of any class of its capital stock and to furnish to the Representatives a copy of each annual or other report it shall be required to file with the Commission (including the Report on Form SR required by Rule 463 of the Rules). (g) Without the prior written consent of the Representatives, for a period of 180 days after the date of this Agreement, the Company shall not issue, sell or register with the Commission (other than on Form S-8 or on any successor form), or otherwise dispose of, directly or indirectly, any equity securities of the Company (or any securities convertible into or exercisable or exchangeable for equity securities of the Company), except for the issuance of the Shares pursuant to the Registration Statement, and the issuance of shares pursuant to the Company's existing stock option plan or bonus plan. In the event that during this period, (i) any shares are issued pursuant to the Company's existing stock option plan or bonus plan or (ii) any registration is effected on Form S-8 or on any successor form, the Company shall obtain the written agreement of such grantee or purchaser or holder of such registered securities that, for a period of 180 days after the date of this Agreement, such person will not, without the prior written consent of the Representatives, offer for sale, sell, distribute, grant any option for the sale of, or otherwise dispose of, directly or indirectly, or exercise any registration rights with respect to, any shares of Common Stock (or any securities convertible into, exercisable for, or exchangeable for any shares of Common Stock) owned by such person. (h) The Company shall cause each director and executive officer of the Company and each stockholder set forth on Schedule III to this Agreement to deliver to the Representatives his or her enforceable written agreement that, except, in the case of a Selling Stockholder, for the sale of the Shares to be sold by such Selling Stockholder pursuant to the Registration Statement, he or she will not, without the prior written consent of Oppenheimer & Co., Inc., directly or indirectly, Transfer, or offer, contract or otherwise agree to Transfer, any Common Stock or any other securities convertible into or exchangeable for Common Stock or any other equity securities of the Company until 180 days after the date of this Agreement, except for (i) sales to the several Underwriters pursuant to this Agreement or (ii) pursuant to will or the laws of intestate succession, provided the transferee thereof agrees in writing to be bound by such restrictions. -19- 20 (i) On or before completion of this offering, the Company shall make all filings required under applicable securities laws and by the NASDAQ National Market System (including any required registration under the Exchange Act). (B) The Company agrees to pay, or reimburse if reasonably paid by the Representatives, whether or not the transactions contemplated hereby are consummated or this Agreement is terminated, all costs and expenses incident to the public offering of the Shares and the performance of the obligations of the Company and of the Selling Stockholders under this Agreement including those relating to: (i) the preparation, printing, filing and distribution of the Registration Statement including all exhibits thereto, each preliminary prospectus, the Prospectus, all amendments and supplements to the Registration Statement and the Prospectus, and the printing, filing and distribution of this Agreement; (ii) the preparation and delivery of certificates for the Shares to the Underwriters; (iii) the registration or qualification of the Shares for offer and sale under the securities or Blue Sky laws of the various jurisdictions referred to in Section 7(A)(e), including the reasonable fees and disbursements of counsel for the Underwriters in connection with such registration and qualification and the preparation, distribution and shipment of preliminary and supplementary Blue Sky memoranda; (iv) the furnishing (including costs of shipping and mailing) to the Representatives and to the Underwriters of copies of each preliminary prospectus, the Prospectus and all amendments or supplements to the Prospectus, and of the several documents required by this Section to be so furnished, as may be reasonably requested for use in connection with the offering and sale of the Shares by the Underwriters or by dealers to whom Shares may be sold; (v) the filing fees of the National Association of Securities Dealers, Inc. in connection with its review of the terms of the public offering; (vi) the furnishing (including costs of shipping and mailing) to the Representatives and to the Underwriters of copies of all reports and information required by Section 7(A)(f); (vii) inclusion of the Shares for quotation on the NASDAQ National Market System; and (viii) all transfer taxes, if any, with respect to the sale and delivery of the Shares by the Company and the Selling Stockholders to the Underwriters. Subject to the provisions of Section 10, the Underwriters agree to pay, whether or not the transactions contemplated hereby are consummated or this Agreement is terminated, all costs and expenses incident to the performance of the obligations of the Underwriters under this Agreement not payable by the Company pursuant to the preceding sentence, including, without limitation, the fees and disbursements of counsel for the Underwriters. 8. Indemnification. --------------- (a) The Company and each Selling Stockholder agree, jointly and severally, to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all losses, claims, damages and liabilities, joint or several (including any reasonable investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other Federal or state law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment thereof or supplement thereto, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that such indemnity shall not inure to the benefit of any Underwriter (or -20- 21 any person controlling such Underwriter) on account of any losses, claims, damages or liabilities arising from the sale of the Shares to any person by such Underwriter if such untrue statement or omission or alleged untrue statement or omission was made in such preliminary prospectus, the Registration Statement or the Prospectus, or such amendment or supplement, in reliance upon and in conformity with information furnished in writing to the Company by the Representatives on behalf of any Underwriter specifically for use therein. Notwithstanding the foregoing, the liability of each Selling Stockholder pursuant to the provisions of this Section 8(a) shall be limited to an amount equal to the aggregate net proceeds received by such Selling Stockholder from the sale of the Shares sold by such Selling Stockholder hereunder. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the Selling Stockholders, each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each director of the Company, and each officer of the Company who signs the Registration Statement, to the same extent as the foregoing indemnity from the Company or such Selling Stockholder to each Underwriter, but only insofar as such losses, claims, damages or liabilities arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which was made in any preliminary prospectus, the Registration Statement or the Prospectus, or any amendment thereof or supplement thereto, contained in the last paragraph of the cover page of the Prospectus, in the paragraph relating to stabilization on the inside front cover page of the Prospectus and the first four paragraphs under the caption "Underwriting" in the Prospectus; provided, however, that the obligation of each Underwriter to indemnify the Company or any Selling Stockholder (including any controlling person, director or officer thereof) shall be limited to the net proceeds received by the Company or the Selling Stockholder, as the case may be, from such Underwriter. (c) Any party that proposes to assert the right to be indemnified under this Section will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section, notify each such indemnifying party of the commencement of such action, suit or proceeding, enclosing a copy of all papers served. No indemnification provided for in Section 8(a) or 8(b) shall be available to any party who shall fail to give notice as provided in this Section 8(c) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice but the omission so to notify such indemnifying party of any such action, suit or proceeding shall not relieve it from any liability that it may have to any indemnified party for contribution or otherwise than under this Section. In case any such action, suit or proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and the approval by the indemnified party of such counsel, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses, except as provided below and except for the reasonable costs of investigation -21- 22 subsequently incurred by such indemnified party in connection with the defense thereof. The indemnified party shall have the right to employ its counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of counsel by such indemnified party has been authorized in writing by the indemnifying parties, (ii) the indemnified party shall have reasonably concluded that there may be a conflict of interest between the indemnifying parties and the indemnified party in the conduct of the defense of such action (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying parties shall not have employed counsel to assume the defense of such action within a reasonable time after notice of the commencement thereof, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying parties. An indemnifying party shall not be liable for any settlement of any action, suit, proceeding or claim effected without its written consent. 9. CONTRIBUTION. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Section 8(a) or 8(b) for any reason is unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b), then each indemnifying party shall contribute to the aggregate losses, claims, damages and liabilities (including any investigation, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted) to which the indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders on the one hand and the Underwriters on the other from the offering of the Shares or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in Section 8 hereof, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Selling Stockholders on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, the Selling Stockholders and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the offering (net of underwriting discounts but before deducting expenses) received by the Company or the Selling Stockholders, as set forth in the table on the cover page of the Prospectus, bear to (y) the underwriting discounts received by the Underwriters, as set forth in the table on the cover page of the Prospectus. The relative fault of the Company, the Selling Stockholders or the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact related to information supplied by the Company, the Selling Stockholders or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 9, (i) in no case shall any Underwriter (except as may be provided in the Agreement Among Underwriters) be liable or responsible for any amount in excess of the underwriting discount applicable to the Shares purchased by such Underwriter hereunder, (ii) the Company shall be liable and responsible for any amount in excess of such underwriting discount and (iii) in no case shall any Selling Stockholder be liable and responsible for any amount in excess of the aggregate net proceeds of the sale of Shares received by such -22- 23 Selling Stockholder hereunder; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Underwriter, and each person, if any, who controls the Company within the meaning of the Section 15 of the Securities Act or Section 20(a) of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i), (ii) and (iii) in the immediately preceding sentence of this Section 9. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section, notify such party or parties from whom contribution may be sought, but the omission so to notify such party or parties from whom contribution may be sought shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise than under this Section. No party shall be liable for contribution, with respect to any action, suit, proceeding or claim settled without its written consent. The Underwriter's obligations to contribute pursuant to this Section 9 are several in proportion to their respective underwriting commitments and not joint. 10. TERMINATION. This Agreement may be terminated with respect to the Shares to be purchased on a Closing Date by the Representatives by notifying the Company or the Selling Stockholders at any time (a) in the absolute discretion of the Representatives at or before any Closing Date: (i) if on or prior to such date, any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Representatives will in the future materially disrupt, the securities markets; (ii) if there has occurred any new outbreak or material escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in the judgment of the Representatives, inadvisable to proceed with the offering; (iii) if there shall be such a material adverse change in general financial, political or economic conditions or the effect of international conditions on the financial markets in the United States is such as to make it, in the judgment of the Representatives, inadvisable or impracticable to market the Shares; (iv) if trading in the Shares has been suspended by the Commission or trading generally on the New York Stock Exchange, Inc., on the American Stock Exchange, Inc. or on the NASDAQ National Market System has been suspended or limited, or minimum or maximum ranges for prices for securities shall have been fixed, or maximum ranges for prices for securities have been required, by said exchanges or by order of the Commission, the National Association of Securities Dealers, Inc., or any other governmental or regulatory authority; or (v) if a banking moratorium has been declared by any state or Federal authority, or (b) at or before any Closing Date, that any of the conditions specified in Section 5 shall not have been fulfilled when and as required by this Agreement. If this Agreement is terminated pursuant to any of its provisions, neither the Company nor any of the Selling Stockholders shall be under any liability to any Underwriter (except as set forth in Section 7(B) and Sections 8 and 9), and no Underwriter shall be under any liability to the Company, except that (y) if this Agreement is terminated by the Representatives or the Underwriters because of any -23- 24 failure, refusal or inability on the part of the Company or the Selling Stockholders to comply with the terms or to fulfill any of the conditions of this Agreement, the Company will reimburse the Underwriters for all out-of-pocket expenses (including the reasonable fees and disbursements of their counsel) incurred by them in connection with the proposed purchase and sale of the Shares or in contemplation of performing their obligations hereunder and (z) no Underwriter who shall have failed or refused to purchase the Shares agreed to be purchased by it under this Agreement, without some reason sufficient hereunder to justify cancellation or termination of its obligations under this Agreement, shall be relieved of liability to the Company, the Selling Stockholders or to the other Underwriters for damages occasioned by its failure or refusal. 11. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters shall fail (other than for a reason sufficient to justify the cancellation or termination of this Agreement under Section 10) to purchase on any Closing Date the Shares agreed to be purchased on such Closing Date by such Underwriter or Underwriters, the Representatives may find one or more substitute underwriters to purchase such Shares or make such other arrangements as the Representatives may deem advisable or one or more of the remaining Underwriters may agree to purchase such Shares in such proportions as may be approved by the Representatives, in each case upon the terms set forth in this Agreement. If no such arrangements have been made by the close of business on the business day following such Closing Date, (a) if the number of Shares to be purchased by the defaulting Underwriters on such Closing Date shall not exceed 10% of the Shares that all the Underwriters are obligated to purchase on such Closing Date, then each of the nondefaulting Underwriters shall be obligated to purchase such Shares on the terms herein set forth in proportion to their respective obligations hereunder; provided, that in no event shall the maximum number of Shares that any Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant to this Section 11 by more than one-ninth of such number of Shares without the written consent of such Underwriter, or (b) if the number of Shares to be purchased by the defaulting Underwriters on such Closing Date shall exceed 10% of the Shares that all the Underwriters are obligated to purchase on such Closing Date, then the Company shall be entitled to an additional business day within which it may, but is not obligated to, find one or more substitute underwriters reasonably satisfactory to the Representatives to purchase such Shares upon the terms set forth in this Agreement. In any such case, either the Representatives or the Company shall have the right to postpone the applicable Closing Date for a period of not more than five business days in order that necessary changes and arrangements (including any necessary amendments or supplements to the Registration Statement or Prospectus) may be effected by the Representatives and the Company. If the number of Shares to be purchased on such Closing Date by such defaulting Underwriter or Underwriters shall exceed 10% of the Shares that all the Underwriters are obligated to purchase on such Closing Date, and none of the nondefaulting Underwriters or the Company shall make arrangements pursuant to this Section within the period stated for the purchase of the Shares that the defaulting Underwriters agreed to purchase, this Agreement shall terminate with respect to the Shares to be purchased on such Closing Date without liability on the part of any nondefaulting Underwriter to the Company or the Selling Stockholders and without liability on the part of the Company or the Selling Stockholders, except in both cases as -24- 25 provided in Sections 7(B), 8, 9 and 10. The provisions of this Section shall not in any way affect the liability of any defaulting Underwriter to the Company, the Selling Stockholders or to the nondefaulting Underwriters arising out of such default. A substitute underwriter hereunder shall become an Underwriter for all purposes of this Agreement. 12. MISCELLANEOUS. The respective agreements, representations, warranties, indemnities and other statements of the Company or its directors or officers, of the Selling Stockholders and the Underwriters set forth in or made pursuant to this Agreement shall remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or the Selling Stockholders or any of the officers, directors or controlling persons referred to in Sections 8 and 9 hereof, and shall survive delivery of and payment for the Shares. The provisions of Sections 7(B), 8, 9 and 10 shall survive the termination or cancellation of this Agreement. This Agreement has been and is made for the benefit of the Underwriters, the Company and the Selling Stockholders and their respective successors and assigns, and, to the extent expressed herein, for the benefit of persons controlling any of the Underwriters, or the Company, and directors and officers of the Company, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include any purchaser of Shares from any Underwriter merely because of such purchase. All notices and communications hereunder shall be in writing and mailed or delivered or by telephone or telegraph if subsequently confirmed in writing, (a) if to the Representatives, c/o Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281 Attention: Stanley B. Stern; (b) if to the Company, to its agent for service as such agent's address appears on the cover page of the Registration Statement; and (c) if to a Selling Stockholder, to the Attorneys-in-Fact, c/o ______________. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws. -25- 26 This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Please confirm that the foregoing correctly sets forth the agreement among us. Very truly yours, VOICETEK CORPORATION By: -------------------------- Name: Sheldon L. Dinkes Title: Chief Executive Officer Confirmed: OPPENHEIMER & CO., INC. FIRST ALBANY CORPORATION Acting severally on behalf of themselves and as Representatives of the several Underwriters named in Schedule I annexed hereto OPPENHEIMER & CO., INC. By: --------------------------------------- Name: Stanley B. Stern Title: Managing Director FIRST ALBANY CORPORATION By: --------------------------------------- Name: Kenneth Mabbs Title: Director - Corporate Finance -26- 27 SCHEDULE I NUMBER OF FIRM SHARES TO NAME BE PURCHASED ---- ------------------------ Oppenheimer & Co., Inc. First Albany Corporation Total ----- -27- 28 SCHEDULE II SELLING STOCKHOLDERS NUMBER OF FIRM SHARES TO SELLING STOCKHOLDER BE SOLD ------------------- ------------------------ Total ----- -28- 29 SCHEDULE III STOCKHOLDERS EXECUTING CERTAIN AGREEMENTS PURSUANT TO SECTION 7(A)(h) -29- EX-3.1 3 RESTATED ARTICLE OF ORGANIZATION 1 EXHIBIT 3.1 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN Secretary of the Commonwealth FEDERAL IDENTIFICATION ONE ASHBURTON PLACE, BOSTON, MASS: 02108 NO. 04-2675674 ---------- RESTATED ARTICLES OF ORGANIZATION GENERAL LAWS, CHAPTER 156B, SECTION 74 This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the restated articles of organization. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts. ---------- We, Sheldon L. Dinkes , President and Anthony J. Medaglia, Jr. , Clerk of Voicetek Corporation - -------------------------------------------------------------------------------- (Name of Corporation) located at 19 Alpha Road, Chemlsford, MA 01824 --------------------------------------------------------------------- do hereby certify that the following restatement of the articles of organization of the corporation was duly adopted at a meeting held on __________, 199__, by vote of Common - --------- shares of ---------------- out of ------------ shares outstanding (Class of Stock) Preferred - --------- shares of ---------------- out of ------------ shares outstanding, and (Class of Stock) - --------- shares of ---------------- out of ------------ shares outstanding. (Class of Stock) being at least two-thirds of each class of stock outstanding and entitled to vote and of each class or series of stock adversely affected thereby: 1. THE NAME BY WHICH THE CORPORATION SHALL BE KNOWN IS: Voicetek Corporation 2. THE PURPOSES FOR WHICH THE CORPORATION IS FORMED ARE AS FOLLOWS: See continuation sheets attached. 2 3. THE TOTAL NUMBER OF SHARES AND THE PAR VALUE, IF ANY, OF EACH CLASS OF STOCK WHICH THE CORPORATION IS AUTHORIZED TO ISSUE IS AS FOLLOWS: WITHOUT PAR VALUE WITH PAR VALUE ----------------- -------------- CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE - -------------- ---------------- ---------------- --------- PREFERRED None 1,000,000 $ .01 COMMON 30,000,000 $.01 *4. IF MORE THAN ONE CLASS IS AUTHORIZED, A DESCRIPTION OF EACH OF THE DIFFERENT CLASSES OF STOCK WITH, IF ANY, THE PREFERENCES, VOTING POWERS, QUALIFICATIONS, SPECIAL OR RELATIVE RIGHTS OR PRIVILEGES AS TO EACH CLASS THEREOF AND ANY SERIES NOW ESTABLISHED: See continuation sheet attached. *5. THE RESTRICTIONS, IF ANY, IMPOSED BY THE ARTICLES OF ORGANIZATION UPON THE TRANSFER OF SHARES OF STOCK OF ANY CLASS ARE AS FOLLOWS: None. *6. OTHER LAWFUL PROVISIONS, IF ANY, FOR THE CONDUCT AND REGULATION OF THE BUSINESS AND AFFAIRS OF THE CORPORATION, FOR ITS VOLUNTARY DISSOLUTION, OR FOR DEFINING, OR REGULATING THE POWERS OF THE CORPORATION, OR OF ITS DIRECTORS OR STOCKHOLDERS, OR OF ANY CLASS OF STOCKHOLDERS: See continuation sheets attached. * IF THERE ARE NO SUCH PROVISIONS, STATE "NONE". 3 Articles of Organization of VOICETEK CORPORATION Continuation Sheet ------------------ Article 2 continued: The purposes of the Corporation shall be: To engage in the business of developing, marketing and supplying interactive communication systems; to make and enter into all kinds of contracts, agreements and obligations by or with any persons, firms, associations and corporations in furtherance of such activities, and, generally, to perform any and all acts connected therewith, or incidental thereto, and all acts proper or necessary for the purposes of this business. To carry on any business or other activity which may lawfully be carried on by a corporation organized under Chapter 156B of the Massachusetts General Laws (the "Business Corporation Law"), whether or not related to those referred to in the foregoing paragraph, whether or not related or similar to the activities described in the preceding paragraph. To carry on any business, operation or activity through a wholly owned or partly owned subsidiary. To carry on any business, operation or activity referred to in the foregoing paragraphs to the same extent as might an individual, whether as principal, agent, contractor or otherwise, and either alone or as a partner, trustee, participant, member or stockholder of or in any form of partnership, joint venture, corporation, association, trust, limited liability company or other form of entity or with any individual, and, without limiting the generality of the foregoing, to be a limited and/or general partner of any partnership organized to carry on any business or activity of the type described herein. To have as additional purposes all powers granted and conferred by the laws of The Commonwealth of Massachusetts upon business corporations organized under the Business Corporation Law. In these provisions, the enumeration of specific purposes or powers shall not be construed to limit other statements of purposes or powers which this Corporation may otherwise have under applicable law, all of the same being separate and cumulative, and all of the same may be carried on, promoted and pursued, transacted or exercised in any place in the world whatsoever. 4 Continuation Sheet ------------------ DESCRIPTION OF CAPITAL STOCK ---------------------------- Article 4. ---------- A. AUTHORIZED SHARES. The aggregate number of shares which this Corporation shall have authority to issue is: 40,000,000 shares of common stock having no par value per share (the "Common Stock") and 1,000,000 shares of preferred stock having a par value of $.01 per share (the "Series Preferred Stock"). B. SERIES PREFERRED STOCK. Shares of Series Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors, each of said series to be distinctly designated. All shares of any one series of the Series Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers, if any, and the designations, preferences and relative, participating, optional or other special rights or privileges of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph D hereof, there is hereby expressly vested in the Board of Directors of the Corporation the authority to issue one or more series of the Series Preferred Stock and to fix in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors of the Corporation the Voting powers, if any, and the designations, preferences and relative, participating, optional or other special rights or privileges, and the qualifications, limitations or restrictions of such series, including, but without limiting the generality of the foregoing, the following: (1) The distinctive designation of, and the number of shares of, the Series Preferred Stock which shall constitute such series. The designation of a series of preferred stock need not include the words "preferred" or "preference" and may be designated "special" or other distinctive term. Unless otherwise provided in the resolution issuing such series, the number of shares of any series of the Series Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the Board of Directors in the manner prescribed by law; (2) The rate and times at which, and the terms and conditions upon which, dividends, if any, on the Series Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other classes of stock and whether such dividends shall be cumulative or non-cumulative and, if cumulative, the date from which such dividends shall be cumulative; (3) Whether the series shall be convertible into, or exchangeable for, at the option of the holders of the Series Preferred Stock of such series or the Corporation or upon the happening of a specified event, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation, and the 5 terms and conditions of such conversion or exchange, including provisions for the adjustment of any such conversion rate in such events as the Board of Directors shall determine; (4) Whether or not the Series Preferred Stock of such series shall be subject to redemption at the option of the Corporation or the holders of such series or upon the happening of a specified event, and the redemption price or prices and the time or times at which, and the terms and conditions upon which, the Series Preferred Stock of such series may be redeemed; (5) The rights, if any, of the holders of the Series Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation; (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Series Preferred Stock of such series; and (7) Subject to subparagraph 5 of Paragraph D hereof, whether such series of the Series Preferred Stock shall have full, limited or no voting powers including, without limiting the generality of the foregoing, whether such series shall have the right, voting as a series by itself or together with other series of the Series Preferred Stock or all series of the Series Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of the Series Preferred Stock or under such other circumstances and on such conditions as the Board of Directors may determine. C. Common Stock. ------------ (1) After the Corporation has complied with the requirements, if any, fixed in accordance with the provisions of Paragraph B hereof with respect to (a) dividends on series of the Series Preferred Stock (in accordance with the relative preferences among such series), and (b) the setting aside of sums as sinking funds or redemption or purchase accounts for series of the Series Preferred Stock (in accordance with the relative preferences among such series), and subject further to any other conditions which may be fixed in accordance with the provisions of Paragraph B hereof, then, and not otherwise, the holders of Common Stock shall be entitled to receive such dividends (either in cash, stock or otherwise) as may be declared from time to time by the Board of Directors out of assets of the Corporation legally available therefor and the holders of the Series Preferred Stock shall not be entitled to participate in any such dividends. (2) After distribution in full of the preferential amount, if any, to be distributed to the holders of series of the Series Preferred Stock (in accordance with the relative preferences among such series) in the event of voluntary or involuntary liquidation, - 3 - 6 distribution, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to shareholders, ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law, each holder of Common Stock shall have one vote in respect of each share of Common Stock held by him on all matters voted upon by the shareholders. D. Other Provisions. ---------------- (1) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations (including such holders or others) and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (2) The relative powers, preferences and rights of each series of the Series Preferred Stock in relation to the powers, preferences and rights of each other series of the Series Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in Paragraph B hereof. The consent, by class or series vote or otherwise, of the holders of such of the series of the Series Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of the Series Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of the Series Preferred Stock adopted pursuant to Paragraph B hereof, the conditions, if any, under which the consent of the holders of a majority (or such greater proportion as shall be fixed therein) of the outstanding shares of such series shall be require for the issuance of any or all other series of the Series Preferred Stock. - 4 - 7 (3) Subject to the provisions of subparagraph 2 of this Paragraph D, shares of any series of the series Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (4) Shares of authorized Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (5) The number of authorized shares of Common Stock and of the Series Preferred Stock, without a class or series vote, may be increased or decreased from time to time (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. (6) Notwithstanding any other provisions of these Articles of Organization or the by-laws of the Corporation or the fact that a lesser percentage may be specified by law, these Articles of Organization or the by-laws of the Corporation, the affirmative vote of the holders of at least eighty (80%) percent of the combined voting power of the outstanding stock of the Corporation entitled to vote generally in the election of Directors ("Voting Stock"), voting together as a single class, shall be required to amend, alter, adopt any provision inconsistent with or to repeal this provision. - 5 - 8 ARTICLE 6. Other lawful provisions for the conduct and regulation of the business and affairs of the Corporation, for its voluntary dissolution or for limiting, defining or regulating the powers of the Corporation, or of its Directors or stockholders, or of any class of stockholders: No Director or officer shall be disqualified by his office from dealing or contracting as vendor, purchaser or otherwise, whether in his individual capacity or through any other corporation, trust, association or firm in which he is interested as stockholder, director, trustee, partner or otherwise, with the Corporation or any corporation, trust, association or firm in which the Corporation shall be a stockholder or otherwise interested or which shall hold stock or be otherwise interested in the Corporation, nor shall any such dealing or contract be avoided, nor shall any Director or officer so dealing or contracting be liable to account for any profit or benefit realized through any such dealing or contract to the Corporation or to any stockholder or creditor thereof solely because of the fiduciary relationship established by reason of his holding such Directorship or office. Any such interest of a Director shall not disqualify him from being counted in determining the existence of a quorum at any meeting nor shall any such interest disqualify him from voting or consenting as a Director or having his vote or consent counted in connection with any such dealing or contract. No stockholder shall be disqualified from dealing or contracting as vendor, purchaser or otherwise, either in his individual capacity or through any other corporation, trust, association or firm in which he is interested as a stockholder, Director, trustee, partner or otherwise, with the Corporation or any corporation, trust, association or firm in which the Corporation shall be a stockholder or otherwise interested or which shall hold stock or be otherwise interested in the Corporation, nor shall any such dealing or contract be avoided, nor shall any stockholder so dealing or contracting be liable to account for any profit or benefit realized through any such contract or dealing to the Corporation or to any stockholder or creditor thereof by reason of such stockholder holding stock in the Corporation to any amount, nor shall any fiduciary relationship be deemed to be established by such stock holdings. Meetings of the stockholders of the Corporation may be held at any place within the United States. Special meetings of stockholders of the Corporation may be called only by the Board of Directors, the Chairman of the Board of Directors or the President. No action required or permitted to be taken at any annual or special meetings of the stockholders of the Corporation may be taken without a meeting, unless the unanimous consent of stockholders entitled to vote thereon is obtained. The Corporation may be a partner in any business enterprise it would have power to conduct by itself. The Directors may make, amend or repeal the by-laws in whole or in part, except with respect to any provision thereof which by law, these Amended and Restated Articles of Organization or the by-laws requires action by the stockholders. - 6 - 9 No Director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director notwithstanding any statutory provision or other law imposing such liability, except for liability of a Director (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section sixty-one or sixty-two of Chapter 156B of the Massachusetts General Laws, or (iv) for any transaction from which the Director derived an improper personal benefit. Classified Board of Directors (1) The Directors of the Corporation shall be divided into three classes: Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the whole number of the Board of Directors. If the number of Directors is not evenly divisible by three, the Board of Directors shall determine the number of Directors to be elected initially into each class. The election of directors at a Special Meeting of stockholders held on March , 1997 will determine the directors and their respective classes. Thereafter, Class I Directors will hold office for a term to expire at the first annual meeting of stockholders thereafter. Thereafter, Class II Directors will hold office for a term to expire at the second annual meeting of stockholders thereafter. Thereafter, Class III Directors will hold office for a term to expire at the third annual meeting of stockholders thereafter. After the March 10, 1997 Special Meeting of Stockholders, the Directors elected to succeed those whose terms expire shall be identified as being of the same class as the Directors they succeed and shall be elected to hold office for a term to expire at the third annual meeting of the stockholders after their election, and until their respective successors are duly elected and qualified. If the number of Directors changes, any increase or decrease in Directors shall be apportioned among the classes so as to maintain all classes as equal in number as possible, and any additional Director elected to any class shall hold office for a term which shall coincide with the terms of the other Directors in such class and until his successor is duly elected and qualified. (2) Notwithstanding any other provisions of these Articles of Organization or the by-laws of the Corporation or the fact that a lesser percentage may be specified by law, these Articles of Organization or the by-laws of the Corporation, the affirmative vote of the holders of at least eighty (80%) percent of the combined voting power of the outstanding Voting Stock, voting together as a single class, shall be required to amend, alter, adopt any provision inconsistent with or to repeal this provision. Vote Required for Certain Business Combinations (A) In addition to any affirmative vote required by law or these Articles of Organization, and except as otherwise expressly provided in Paragraph (B) of this Provision: 1. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) an Interested Stockholder (as hereinafter defined) or (b) any other Corporation - 7 - 10 (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as such term is hereinafter defined) of an Interested Stockholder; or 2. any sale, lease, exchange, mortgage, pledge, grant of a security interest, transfer or other disposition (in one transaction or a series of transactions) to or with (a) an Interested Stockholder or (b) or any other person (whether or not itself an Interested Stockholder) which is, or after such sale, lease, exchange, mortgage, pledge, grant of security interest, transfer or other disposition would be, an Affiliate of an Interested Stockholder, directly or indirectly, of substantially all of the assets of the Corporation (including, without limitation, any voting securities of a Subsidiary) or any Subsidiary; or 3. the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary, or both, to (a) an Interested Stockholder or (b) any other person (whether or not itself an Interested Stockholder) which is, or after such issuance or transfer would be, an Affiliate of an Interested Stockholder in exchange for cash, securities or other property (or a combination thereof); or 4. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of an Interested Stockholder; or 5. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary directly or indirectly beneficially owned by (a) an Interested Stockholder or (b) any other person (whether or not itself an Interested Stockholder) which is, or after such reclassification, recapitalization, merger or consolidation or other transaction would be, an Affiliate of an Interested Stockholder shall not be consummated unless such consummation shall have been approved by the affirmative vote of the holders of at least eighty (80%) percent of the combined voting power of the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law, in these Articles of Organization or in any agreement with any national securities exchange or otherwise. (B) The provisions of Paragraph (A) of this Provision shall not be applicable to any particular Business Combination (as hereinafter defined) and such Business Combination shall require only such affirmative votes required by law if the Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined) or all of the following conditions shall have been met: - 8 - 11 1. The transaction constituting the Business Combination shall provide for a consideration to be received by all holders of Common Stock in exchange for all their shares of Common Stock, and the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following: (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by an Interested Stockholder (i) within the two-year period immediately prior to the Announcement Date (as hereinafter defined), (ii) within the two-year period immediately prior to the Determination Date (as hereinafter defined) or (iii) in the transaction in which it became an Interested Stockholder, whichever is highest; or (b) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher; 2. If the transaction constituting the Business Combination shall provide for a consideration to be received by holders of any class or series of outstanding Voting Stock other than Common Stock, the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of such class or series of Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this subparagraph 2 shall be required to be met with respect to every class or series of outstanding Voting Stock, whether or not an Interested Stockholder has previously acquired any shares of a particular class of Voting Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers, fees) paid in order to acquire any shares of-such class or series of Voting Stock beneficially owned by an Interested Stockholder (i) within the two-year period immediately prior to the Announcement Date, (ii) within the two-year period immediately prior to the Determination Date, or (ii) in the transaction in which it became an Interested Stockholder, whichever is highest; or (b) the Fair Market Value per share of such class or series of Voting Stock on the Announcement Date or the Determination Date, whichever is higher; or (c) (if applicable) the highest preferential amount per share to which the holders of shares of such class or series of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; 3. The consideration to be received by holders of a particular class or series of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as was previously paid in order to acquire shares of such class or series of Voting Stock which are beneficially - 9 - 12 owned by an Interested Stockholder and, if an Interested Stockholder beneficially owns shares of any class or series of Voting Stock which were acquired with varying forms of consideration, the form of consideration for such class or series of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class or series of Voting Stock beneficially owned by it. The price determination in accordance with subparagraphs 1 and 2 of this Paragraph (B) shall be subject to appropriate adjustment in the event of any recapitalization, stock dividend, stock split, combination of shares or similar event; 4. After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor the full amount of any dividends (whether or not cumulative) payable on any outstanding preferred stock; (b) there shall have been (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock) other than as approved by a majority of the Continuing Directors and (ii) an increase in such annual rate of dividends as necessary to prevent any such reduction in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; (c) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock at a price lower than that paid in the transaction in which it became an Interested Stockholder. 5. After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise; and 6. A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such act, rules or regulations) shall be mailed to the stockholders of the Corporation, no later than the earlier of (a) thirty (30) days prior to any vote on the proposed Business Combination or (b) if no vote on such Business Combination is required, sixty (60) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). Such proxy statement shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing and, if - 10 - 13 deemed advisable by a majority of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination, from the point of view of the holder of Voting Stock other than an Interested Stockholder (such investment banking firm to be selected by a majority of the Continuing Directors, to be furnished with all information it reasonably requests and to be paid a reasonable fee for its services upon receipt by the Corporation of such opinion). (C) For the purposes of this Provision: 1. "Business Combination" shall mean any transaction which is referred to in any one or more of subparagraphs 1 through 5 of Paragraph (A) of this Provision. 2. "Voting Stock" shall mean stock of all classes and series of the Corporation entitled to vote generally in the election of Directors. 3. "Person" shall mean any individual, firm, trust, partnership, association, Corporation or other entity. 4. "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary or any person who was a stockholder of the Corporation on October 10, 1996) who or which: (a) is the beneficial owner, directly or indirectly, of more than ten (10%) percent of the combined voting power of the then outstanding Voting Stock; or (b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of more than ten (10%) percent of the combined voting power of the then outstanding Voting Stock; or (c) is an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, unless such assignment or succession shall have occurred pursuant to a Public Transaction (as hereinafter defined) or any series of transactions involving a Public Transaction. For the purposes of determining whether a person is an Interested Stockholder, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph 6 below but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or option, or otherwise. 5. "Public Transaction" shall mean any (a) purchase of shares offered pursuant to an effective registration statement under the Securities Act of 1933 or (b) open-market purchase of - 11 - 14 shares on a national securities exchange if, in either such case, the price and other terms of sale are not negotiated by the purchaser and the seller of the beneficial interest in the shares. 6. A person shall be a "beneficial owner" of any Voting Stock: (a) which such person or any of its Affiliates beneficially owns, directly or indirectly; or (b) which such person or any of its Affiliates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise or (ii) the right to vote or to direct the voting thereof pursuant to any agreement, arrangement or understanding; or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. 7. "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on June 27, 1989. 8. "Subsidiary" shall mean any Corporation of which a majority of any class of equity security (as defined in Rule 12b-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on May 13, 1991) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in subparagraph 4, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. 9. "Continuing Director" shall mean any member of the Board of Directors of the Corporation who is unaffiliated with, and not a nominee of, an Interested Stockholder and was a member of the Board prior to the time that such Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director who is unaffiliated with, and not a nominee of, an Interested Stockholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board. 10. "Announcement Date" shall mean the date of the first public announcement of the proposed Business Combination. 11. "Determination Date" shall mean the date on which an Interested Stockholder became an Interested Stockholder. - 12 - 15 12. "Fair Market Value" shall mean: (a) in the case of stock, the highest closing sale price during the thirty period immediately preceding the date in question of a share of such stock on the National Market System of the National Association of Securities Dealers Automated Quotation System or any system then in use on any national securities exchange or automated quotation system, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Continuing Directors in good faith. (D) A majority of the Continuing Directors shall have the power and duty to determine for the purposes of this Provision, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Provision, including, without limitation, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate of another, (4) whether the requirements of Paragraph (B) of this Provision have been met and (5) such other matters with respect to which a determination is required under this Provision. The good faith determination of a majority of the Continuing Directors on such matters shall be conclusive and binding for all purposes of this Provision. (E) Nothing contained in this Provision shall be construed to relieve an Interested Stockholder of any fiduciary obligation imposed by law. (F) Notwithstanding any other provisions of these Articles of Organization or the By-laws of the Corporation or the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least eighty (80%) percent of the combined voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, alter, adopt any provision inconsistent with or repeal this Provision. Redemption of Shares In accordance with Section 6 of Chapter 110D of the General Laws of the Commonwealth of Massachusetts, the Corporation by action of its Board of Directors is authorized, at the option of the Corporation by such Board action but without requiring agreement of the person who has made a control share acquisition (as defined in said Chapter 110D), to redeem all but not less than all shares acquired in such a control share acquisition in accordance with and subject to the limitations contained in said Chapter 110D including Section 6 thereof. *We further certify that the foregoing restated articles of organization effect no amendments to the articles of organization of the corporation as heretofore amended, except amendments to the following articles 2,3,4,6. - ------- (*If there are no such amendments, state "None".) - 13 - 16 Briefly describe amendments in space below: Article 2. Article 2 has been amended to include additional purposes of ---------- the Corporation. Article 3. Article 3 has been amended to add a new class of preferred ---------- stock. Article 4. Article 4 has been added to set forth the preferences, ---------- voting powers, qualifications and special or relative rights of each class and series of authorized stock. Article 6. Article 6 has been amended(i) to allow for otherwise lawful ---------- transactions between the Corporation and officers, directors and/or stockholders; (ii) to create a staggered Board of Directors and (iii) to address business combinations between the Corporation and interested stockholders. IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this __ day of February in the year 1997. Sheldon L. Dinkes President -------------------------------------------------------- Anthony J. Medaglia Clerk -------------------------------------------------------- -14- 17 THE COMMONWEALTH OF MASSACHUSETTS RESTATED ARTICLES OF ORGANIZATION (General Laws, Chapter 156B, Section 74) I hereby approve the within restated articles of organization and, the filing fee in the amount of _____ having been paid, said articles are deemed to have been filed with me this ____ day of February, 1997. _____________________________ William Francis Galvin Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT TO: Joseph Listengart, Esq. HUTCHINS, WHEELER & DITTMAR A Professional Corporation 101 Federal Street Boston, MA 02110 Telephone: (617) 951-6600 -15- EX-3.2 4 AMENDED AND RESTATED BY LAWS 1 EXHIBIT 3.2 BY-LAWS of VOICETEK CORPORATION (A Massachusetts corporation) 2 BY-LAWS of VOICETEK CORPORATION TABLE OF CONTENTS
Page ---- ARTICLE 1 Articles of Organization.....................................................1 ARTICLE 2 Fiscal Year..................................................................1 ARTICLE 3 Meetings of Stockholders.....................................................1 Section 3.1 Annual Meeting...............................................................1 Section 3.2 Special Meetings.............................................................3 Section 3.3 Place of Meetings............................................................3 Section 3.4 Notice of Meetings...........................................................4 Section 3.5 Quorum.......................................................................4 Section 3.6 Action without Meeting.......................................................5 Section 3.7 Proxies and Voting...........................................................6 ARTICLE 4 Directors....................................................................6 Section 4.1 Enumeration, Election and Term of Office.............................................................6 Section 4.2 Powers.......................................................................8 Section 4.3 Meetings of Directors........................................................9 Section 4.4 Quorum of Directors..........................................................9 Section 4.5 Consent in Lieu of Meeting and Participation in Meetings by Communications Equipment..................................10 Section 4.6 Committees..................................................................10 ARTICLE 5 Officers....................................................................11 Section 5.1 Enumeration, Election and Term of Office............................................................11 Section 5.2 President and Chairman of the Board.........................................12 Section 5.3 Treasurer and Assistant Treasurer...........................................12 Section 5.4 Clerk and Assistant Clerk...................................................13 Section 5.5 Secretary of the Board and Assistant Secretary............................. 13 Section 5.6 Temporary Clerk and Temporary Secretary.....................................14 Section 5.7 Other Powers and Duties.....................................................14
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ARTICLE 6 Resignations, Removals and Vacancies........................................14 Section 6.1 Resignations................................................................14 Section 6.2 Removals....................................................................14 Section 6.3 Vacancies...................................................................15 ARTICLE 7 Indemnification of Directors and Others.....................................16 Section 7.1 Definitions.................................................................16 Section 7.2 Right to Indemnification....................................................17 Section 7.3 Indemnification Not Available...............................................17 Section 7.4 Compromise or Settlement....................................................17 Section 7.5 Advances....................................................................18 Section 7.6 Not Exclusive...............................................................18 Section 7.7 Insurance...................................................................18 ARTICLE 8 Stock.......................................................................18 Section 8.1 Stock Authorized............................................................18 Section 8.2 Issue of Authorized Unissued Capital Stock..................................19 Section 8.3 Certificates of Stock.......................................................19 Section 8.4 Replacement Certificate.....................................................20 Section 8.5 Transfers...................................................................20 Section 8.6 Record Date.................................................................21 ARTICLE 9 Miscellaneous Provisions....................................................22 Section 9.1 Execution of Papers.........................................................22 Section 9.2 Voting of Securities........................................................22 Section 9.3 Corporate Seal..............................................................22 Section 9.4 Corporate Records...........................................................22 ARTICLE 10 Amendments..................................................................23
- ii - 4 BY-LAWS of VOICETEK CORPORATION ARTICLE 1 Articles of Organization The name and purposes of the Corporation shall be as set forth in the Articles of Organization. These By-Laws, the powers of the Corporation and its Directors and stockholders, and all matters concerning the conduct and regulation of the business of the Corporation, shall be subject to such provisions in regard thereto, if any, as are set forth in the Articles of Organization. All references in these By-Laws to the Articles of Organization shall be construed to mean the Articles of Organization of the Corporation as from time to time amended or restated. ARTICLE 2 Fiscal Year Except as from time to time otherwise determined by the Directors, the fiscal year of the Corporation shall be the twelve months ending on December 31. ARTICLE 3 Meetings of Stockholders Section 3.1 Annual Meeting The annual meeting of the stockholders shall be held at 10:00 o'clock A.M. on the 2nd Tuesday of April in each year. Purposes for which an annual meeting is to be held, additional to those prescribed by law and by these By-Laws, may be specified by the President or by the Directors. 5 If such annual meeting has not been held on the day herein provided therefor, a special meeting of the stockholders in lieu of the annual meeting may be held, and any business transacted or elections held at such special meeting shall have the same effect as if transacted or held at the annual meeting, and in such case all references in these By-Laws, except in this Section 3.1, to the annual meeting of the stockholders shall be deemed to refer to such special meeting. Any such special meeting shall be called, and the purposes thereof shall be specified in the call, as provided in Section 3.2 of this Article 3. To be properly brought before the meeting, business must be of a nature that is appropriate for consideration at an annual meeting and must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before the annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Clerk of the Corporation. To be timely, each such notice must be given either by personal delivery or by United States mail, postage prepaid, to the Clerk of the Corporation not later than (1) with respect to a matter to be brought before an annual meeting of stockholders or special meeting in lieu of an annual meeting, sixty (60) days prior to the date set forth in the By-Laws for the annual meeting and (2) with respect to a matter to be brought before a special meeting of the stockholders not in lieu of an annual meeting, the close of business on the tenth (10th) day following the date on which notice of such meeting is first given to stockholders. The notice shall set forth (i) information concerning the stockholder, including his or her name and address; (ii) a representation that the stockholder is - 2 - 6 entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to present the matter specified in the notice, and (iii) such other information as would be required to be included in a proxy statement soliciting proxies for the presentation of such matter to the meeting. Notwithstanding anything in these By-Laws to the contrary, no business shall be transacted at the annual meeting except in accordance with the procedures set forth in this Section; provided, however, that nothing in this Section shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with these By-Laws. Section 3.2 Special Meetings A special meeting of the stockholders may be called at any time by the President, or by a majority of the Directors acting by vote or by written instrument or instruments signed by them. A special meeting of the stockholders shall be called by the Clerk, or in the case of the death, absence, incapacity or refusal of the Clerk, by any other officer, upon written application of one or more stockholders who hold at least thirty (30) percent in interest of the capital stock entitled to vote thereat. Such call shall state the time, place and purposes of the meeting. In the event that none of the officers is able or willing to call a special meeting, the supreme judicial or superior court, upon application of one or more stockholders who hold at least thirty (30) percent in interest of the capital stock entitled to vote thereat, shall have jurisdiction in equity to authorize one or more of such stockholders to call a meeting by giving notice as is required by law. Section 3.3 Place of Meetings All meetings of the stockholders shall be held at the principal office of the Corporation in Massachusetts, unless a different place within Massachusetts or, if permitted by the Articles of - 3 - 7 Organization, elsewhere within the United States is designated by the President, or by a majority of the Directors acting by vote or by written instrument or instruments signed by them. Any adjourned session of any meeting of the stockholders shall be held at such place within Massachusetts or, if permitted by the Articles of Organization, elsewhere within the United States as is designated in the vote of adjournment. Section 3.4 Notice of Meetings A written notice of the place, date and hour of all meetings of stockholders stating the purposes of the meeting shall be given at least seven (7) days before the meeting to each stockholder entitled to vote thereat, by leaving such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the Corporation. Such notice shall be given by the Clerk, or in the case of the death, absence, incapacity or refusal of the Clerk, by any other officer or by a person designated either by the Clerk, by the person or persons calling the meeting, by any stockholder or group of stockholders applying for such meeting pursuant to Section 3.2 of Article 3 of these By-Laws or by the Board of Directors. Whenever notice of a meeting is required to be given a stockholder under any provision of law, of the Articles of Organization, or of these By-Laws, a written waiver thereof, executed before or after the meeting by such stockholder or his attorney thereunto authorized, and filed with the records of the meeting, shall be deemed equivalent to such notice. Section 3.5 Quorum At any meeting of the stockholders, a quorum for the election of any Director or for the consideration of any question shall consist of a majority in interest of all stock issued, outstanding - 4 - 8 and entitled to vote at such election or upon such question, respectively, except that if two or more classes of stock are entitled to vote as separate classes for the election of any Director or upon any question, then in the case of each such class a quorum for the election of any Director or for the consideration of such question shall consist of a majority in interest of all stock of that class issued, outstanding and entitled to vote thereon. Stock owned by the Corporation, if any, shall be disregarded in determining any quorum. Whether or not a quorum is present, any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, and the meeting may be held as adjourned without further notice. When a quorum for an election is present at any meeting, a plurality of the votes properly cast for any office shall elect such office. When a quorum for the consideration of a question is present at any meeting, a majority of the votes properly cast upon the question shall decide the question; except that if two or more classes of stock are entitled to vote as separate classes upon such question, then in the case of each such class a majority of the votes of such class properly cast upon the question shall decide the vote of that class upon the question; and except in any case where a larger vote is required by law or by the Articles of Organization. Section 3.6 Action without Meeting Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of the meetings of stockholders. Such consents shall be treated for all purposes as a vote at a meeting. - 5 - 9 Section 3.7 Proxies and Voting Except as may otherwise be provided in the Articles of Organization, stockholders entitled to vote shall have one vote for each share of stock entitled to vote owned by them. Stockholders entitled to vote may vote in person or by proxy. No proxy dated more than six (6) months before the meeting named therein shall be valid and no proxy shall be valid after the final adjournment of such meeting; provided, however, that a proxy coupled with an interest sufficient in law to support an irrevocable power, including, without limitation, an interest in the shares or in the Corporation generally, may be irrevocable if it so provides, need not specify the meeting to which it relates, and shall be valid and enforceable until the interest terminates, or for such shorter period as may be specified in the proxy. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to the exercise of the proxy the Corporation receives specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. Proxies shall be filed with the Clerk, or person performing the duties of clerk, at the meeting, or any adjournment thereof, before being voted. The Corporation shall not, directly or indirectly, vote upon any share of its own stock. ARTICLE 4 Directors Section 4.1 Enumeration, Election and Term of Office The business and affairs of this corporation shall be managed under the direction of a Board of Directors consisting of not fewer than three (3) nor more than fifteen (15) Directors, the - 6 - 10 exact number to be determined from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors, such Board of Directors to be divided into such classes and elected by such stockholders as have the right to vote thereon, for such terms as are provided in the Articles of Organization. Each Director shall hold office until his successor shall have been elected and qualified, subject to Article 6 of these By-Laws. Whenever used in these By-Laws, the phrase "entire Board of Directors" shall mean that number of Directors fixed by the most recent resolution adopted pursuant to the preceding sentence prior to the date as of which a determination of the number of Directors then constituting the entire Board of Directors shall be relevant for any purpose under these By-Laws. Subject to the foregoing limitations and the requirements of the Articles of Organization, the Board of Directors may be enlarged by the stockholders at any meeting or by the affirmative vote of a majority of the entire Board of Directors then in office. Nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote generally in the election of Directors. However, any stockholder entitled to vote generally in the election of Directors may nominate one or more persons for election as Directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Clerk of the Corporation not later than (1) with respect to an election to be held at an annual meeting of stockholders or special meeting in lieu of an annual meeting, sixty (60) days prior to the date for the annual meeting set forth in the By-Laws and (2) with respect to an election to be held at a special meeting of stockholders not in lieu of an annual meeting, the close of business on the tenth (10th) day - 7 - 11 following the date on which notice of such meeting is first given to stockholders. Each such notice to the Clerk shall set forth (i) the name and address of the stockholder and each of his or her nominees; (ii) a representation that the stockholder is entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each such nominee; (iv) such other information as would be required to be included in a proxy statement soliciting proxies or the election of the nominees of such stockholder; and (v) the consent of each nominee to serve as a Director of the Corporation if so elected. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a Director of the Corporation. The presiding officer of the meeting may, if the facts warrant, determine that a nomination was not made in accordance with the foregoing procedure, and if such officer should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. No Director need be a stockholder. Any election of Directors by the stockholders shall be by ballot if so requested by any stockholder entitled to vote thereon. Section 4.2 Powers The business of the Corporation shall be managed by the Board of Directors, which shall exercise all the powers of the Corporation except as otherwise required by law, by the Articles of Organization or by these By-Laws. In the event of one or more vacancies in the Board of Directors, the remaining Directors, if at least two (2) Directors still remain in office, may exercise the powers of the full Board until such vacancy or vacancies are filled. - 8 - 12 Section 4.3 Meetings of Directors Regular meetings of the Directors may be held without notice at such places and at such times as may be fixed from time to time by the Directors. A regular meeting of the Directors may be held without notice immediately following an annual meeting of stockholders or any special meeting held in lieu thereof. Special meetings of Directors may be called by the Chairman of the Board, the President, the Treasurer or any two (2) or more Directors, or if there shall be less than three (3) Directors, by any one (1) Director, and shall be held at such time and place as specified in the call. Reasonable notice of each special meeting of the Directors shall be given to each Director. Such notice may be given by the Secretary or Assistant Secretary of the Board, the Clerk or any Assistant Clerk or by the officer or one of the Directors calling the meeting. Notice to a Director shall in any case be sufficient if sent by telegram or telecopier at least forty-eight (48) hours or by mail at least ninety-six (96) hours before the meeting addressed to the Director at his or her usual or last known business or residence address, or if given to him or her at least forty-eight (48) hours before the meeting in person or by telephone or by handing him or her a written notice. Notice of a meeting need not be given to any Director if a written waiver of notice, executed by him or her before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him or her. A notice or waiver of notice need not specify the purposes of the meeting. Section 4.4 Quorum of Directors At any meeting of the Directors, a quorum for any election or for the consideration of any question shall consist of a majority of the Directors then in office. Whether or not a quorum is - 9 - 13 present any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, the votes of a majority of the Directors present shall be requisite and sufficient for election to any office and shall decide any question brought before such meeting, except in any case where a larger vote is required by law, by the Articles of Organization or by these By-Laws. Section 4.5 Consent in Lieu of Meeting and Participation in Meetings by Communications Equipment Any action required or permitted to be taken at any meeting of the Directors may be taken without a meeting if all the Directors consent to the action in writing and the written consents are filed with the records of the meetings of the Directors. Such consents shall be treated for all purposes as a vote of the Directors at a meeting. Members of the Board of Directors or any Committee designated thereby may participate in a meeting of such Board or Committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. Section 4.6 Committees By vote of a majority of the Directors then in office, the Directors may elect from their own number an Executive Committee or other Committees and may by like vote delegate to any such Committee some or all of their powers except those which by law may not be delegated. - 10 - 14 ARTICLE 5 Officers Section 5.1 Enumeration, Election and Term of Office The officers of the Corporation shall include a President, a Treasurer and a Clerk, who shall be chosen by the Directors at their first meeting following an annual meeting of the stockholders. Each of the officers shall hold office until the next annual election to the office which he or she holds and until his or her successor is chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. The Directors may choose one of their number to be Chairman of the Board and determine his or her powers, duties and term of office. The Directors may at any time appoint such other officers, including one or more Vice Presidents, Assistant Treasurers, Assistant Clerks, a Secretary of the Board and an Assistant Secretary of the Board as they deem wise, and may determine their respective powers, duties and terms of office. The Corporation may also designate individuals as divisional, group, or segment vice presidents or vice presidents of a particular function, which individual shall carry such title on a non-executive basis and not as an executive officer of the Corporation. Said non-executive vice presidents may be designated by the Board of Directors or by the President pursuant to Board resolutions so-authorizing the President to appoint non-executive vice presidents on a particular occasion or from time to time in his or her discretion, said honorary vice presidents to be titled "Vice President (specific area of function)." No officer need be a stockholder or a Director except that the Chairman of the Board shall be a Director. The same person may hold more than one office, except that no person shall be both President and Clerk. - 11 - 15 Section 5.2 President and Chairman of the Board The President shall be the Chief Executive Officer of the Corporation and, subject to the control and direction of the Directors, shall have general supervision and control of the business of the Corporation. The President shall preside at all meetings of the stockholders at which he or she is present, and, if the President is a Director, at all meetings of the Directors, if there shall be no Chairman of the Board or in the absence of the Chairman of the Board. If there shall be a Chairman of the Board, such person shall make his or her counsel available to the other officers of the Corporation, and shall have such other duties and powers as may from time to time be conferred on him or her by the Directors. The Chairman of the Board shall preside at all meetings of the Directors at which he or she is present, and, in the absence of the President, at all meetings of stockholders. Section 5.3 Treasurer and Assistant Treasurer The Treasurer shall have the custody of the funds and valuable books and papers of the Corporation, except such as are directed by these By-Laws to be kept by the Clerk or by the Secretary of the Board. The Treasurer shall perform all other duties usually incident to such office, and shall be at all times subject to the control and direction of the Directors. If required by the Directors, the Treasurer shall give bond in such form and amount and with such sureties as shall be determined by the Directors. If the Treasurer is absent or unavailable, any Assistant Treasurer shall have the duties and powers of Treasurer and shall have such further duties and powers as the Directors shall from time to time determine. - 12 - 16 Section 5.4 Clerk and Assistant Clerk If the Corporation shall not have a resident agent appointed pursuant to law, the Clerk shall be a resident of the Commonwealth of Massachusetts. The Clerk shall record all proceedings of the stockholders in a book to be kept therefor. In case a Secretary of the Board is not elected, the Clerk shall also record all proceedings of the Directors in a book to be kept therefor. If the Corporation shall not have a transfer agent, the Clerk shall also keep or cause to be kept the stock and transfer records of the Corporation, which shall contain the names of all stockholders and the record address and the amount of stock held by each. If the Clerk is absent or unavailable, any Assistant Clerk shall have the duties and powers of the Clerk and shall have such further duties and powers as the Directors shall from time to time determine. Section 5.5 Secretary of the Board and Assistant Secretary If a Secretary of the Board is elected, such person shall record all proceedings of the Directors in a book to be kept therefor. If the Secretary of the Board is absent or unavailable, any Assistant Secretary shall have the duties and powers of the Secretary and shall have such further duties and powers as the Directors shall from time to time determine. If no Secretary or Assistant Secretary has been elected, or if, having been elected, no Secretary or Assistant Secretary is present at a meeting of the Directors, the Clerk or an Assistant Clerk shall record the proceedings of the Directors. - 13 - 17 Section 5.6 Temporary Clerk and Temporary Secretary If no Clerk or Assistant Clerk shall be present at any meeting of the stockholders, or if no Secretary, Assistant Secretary, Clerk or Assistant Clerk shall be present at any meeting of the Directors, the person presiding at the meeting shall designate a Temporary Clerk or Secretary to perform the duties of Clerk or Secretary. Section 5.7 Other Powers and Duties Each officer shall, subject to these By-Laws and to the control and direction of the Directors, have in addition to the duties and powers specifically set forth in these By-Laws, such duties and powers as are customarily incident to such office and such additional duties and powers as the Directors may from time to time determine. ARTICLE 6 Resignations, Removals and Vacancies Section 6.1 Resignations Any Director or officer may resign at any time by delivering his or her resignation in writing to the President or the Clerk or to a meeting of the Directors. Such resignations shall take effect at such time as is specified therein, or if no such time is so specified, then upon delivery thereof to the President or the Clerk or to a meeting of the Directors. Section 6.2 Removals Directors, including Directors elected by the Directors to fill vacancies in the Board, may be removed from office (a) with cause by vote of the holders of a majority of the shares issued and outstanding and entitled to vote generally in the election of Directors; (b) with or without cause by vote of the holders of at least 80% of the votes entitled to be cast by the holders of all shares of the - 14 - 18 Corporation entitled to vote generally in the election of Directors, voting together as a single class; (c) with cause by vote of a.majority of the Directors then in office; or (d) without cause by vote of at least 80% of the Directors then in office (including the Director to be removed in calculating said percentage); provided that the Directors of a class elected by a particular class of stockholders may be removed only by vote of the holders of a majority of the shares of such class. The Directors may terminate or modify the authority of any agent or employee. The Directors may remove any officer from office with or without assignment of cause by vote of a majority of the Directors then in office. If cause is assigned for removal of any Director or officer, such Director or officer may be removed only after reasonable notice and opportunity to be heard before the body proposing to remove him. No Director or officer who resigns or is removed shall have any right to any compensation as such Director or officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise; provided, however, that the foregoing provision shall not prevent such Director or officer from obtaining damages for breach of any contract of employment legally binding upon the Corporation. Section 6.3 Vacancies Any vacancy in the Board of Directors, including a vacancy resulting from an enlargement of the Board, may be filled by the Directors by vote of a majority of the remaining Directors then in office, though less than a quorum, or by the stockholders at a meeting called for the purpose, provided that any vacancy created by the stockholders may be filled by the stockholders at the - 15 - 19 same meeting. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new Directorship was created or the vacancy occurred and until such Directors' successor shall have been elected and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. If the office of any officer becomes vacant, the Directors may choose or appoint a successor by vote of a majority of the Directors present at the meeting at which such choice or appointment is made. Each such successor shall hold office for the unexpired term of the Director's predecessor and until a successor shall be chosen or appointed and qualified, or until he or she sooner dies, resigns, is removed or becomes disqualified. ARTICLE 7 Indemnification of Directors and Others Section 7.1 Definitions For purposes of this Article 7: (a) "Director/officer" means any person who is serving or has served as a Director, officer or employee of the Corporation appointed or elected by the Board of Directors or the stockholders of the Corporation, or any Director, officer or employee of the Corporation who is serving or has served at the request of the Corporation as a Director, officer, trustee, principal, partner, employee or other agent of any other organization. (b) "Proceeding" means any action, suit or proceeding, civil or criminal, brought or threatened in or before any court, tribunal, administrative or legislative body or agency. - 16 - 20 (c) "Expense" means any fine or penalty, and any liability fixed by a judgment, order, decree or award in a Proceeding, any amount reasonably paid in settlement of a Proceeding and any professional fees and other disbursements reasonably incurred in connection with a Proceeding. Section 7.2 Right to Indemnification Except as limited by law or as provided in Sections 7.3 and 7.4 of this Article 7, each Director/officer (and his heirs and personal representatives) shall be indemnified by the Corporation against any Expense incurred by such Director/officer in connection with each Proceeding in which he or she is involved as a result of his or her serving or having served as a Director/officer. Section 7.3 Indemnification not Available No indemnification shall be provided to a Director/officer with respect to a Proceeding as to which it shall have been adjudicated that he or she did not act in good faith in the reasonable belief that his or her action was in the best interests of the Corporation. Section 7.4 Compromise or Settlement In the event that a Proceeding is compromised or settled so as to impose any liability or obligation on a Director/officer or upon the Corporation, no indemnification shall be provided as to said Director/officer with respect to such Proceeding if such Director/officer shall have been adjudicated not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Corporation. - 17 - 21 Section 7.5 Advances The Corporation shall pay sums on account of indemnification in advance of a final disposition of a Proceeding upon receipt of an undertaking by the Director/officer to repay such sums if it is subsequently established that he or she is not entitled to indemnification pursuant to Sections 7.3 and 7.4 hereof, which undertaking may be accepted without reference to the financial ability of such person to make repayment. Section 7.6 Not Exclusive Nothing in this Article 7 shall limit any lawful rights to indemnification existing independently of this Article 7. Section 7.7 Insurance The provisions of this Article 7 shall not limit the power of the Board of Directors to authorize the purchase and maintenance of insurance on behalf of any Director/officer against any Expense, whether or not the Corporation would have the power to indemnify such Director/officer against such Expense under this Article 7. ARTICLE 8 Stock Section 8.1 Stock Authorized The total number of shares and the par value, if any, of each class of stock which the Corporation is authorized to issue, and if more than one class is authorized, the descriptions, preferences, voting powers, qualifications and special and relative rights and privileges as to each class and any series thereof, shall be as stated in the Articles of Organization. - 18 - 22 Section 8.2 Issue of Authorized Unissued Capital Stock Any unissued capital stock from time to time authorized under the Articles of Organization and amendments thereto may be issued by vote of the Directors. No stock shall be issued unless the cash, so far as due, or the property, services or expenses for which it was authorized to be issued, has been actually received or incurred by, or conveyed or rendered to, the Corporation, or is in its possession as surplus. Section 8.3 Certificates of Stock Each stockholder shall be entitled to a certificate in such form as may be prescribed from time to time by the Directors, stating the number and the class and the designation of the series, if any, of the shares held by such stockholder. Such certificates shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer. Such signatures may be facsimiles if the certificate is signed by a transfer agent, or by a registrar, other than a Director, officer or employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer at the time of its issue. Every certificate issued by the Corporation for shares of stock at a time when such shares are subject to any restriction on transfer pursuant to the Articles of Organization, the By-Laws or any agreement to which the Corporation is a party, shall have the restriction noted conspicuously on the certificate and shall also set forth on the face or back of the certificate either the full text of the restriction, or a statement of the existence of such restriction and a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and - 19 - 23 without charge. Every stock certificate issued by the Corporation at a time when it is authorized to issue more than one class or series of stock shall set forth upon the face or back of the certificate either the full text of the preferences, voting powers, qualifications and special and relative rights of the shares of each class and series, if any, authorized to be issued, as set forth in the Articles of Organization, or a statement of the existence of such preferences, powers, qualifications and rights and a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Section 8.4 Replacement Certificate In case of the alleged loss or destruction or the mutilation of a certificate of stock, a new certificate may be issued in place thereof, upon such conditions as the Directors may determine. Section 8.5 Transfers Subject to the restrictions, if any, imposed by the Articles of Organization, the By-Laws or any agreement to which the Corporation is a party, shares of stock shall be transferred on the books of the Corporation only by the surrender to the Corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment of such shares or by a written power of attorney to sell, assign or transfer such shares, properly executed, with necessary transfer stamps affixed, and with such proof that the endorsement, assignment or power of attorney is genuine and effective as the Corporation or its transfer agent may reasonably require. Except as may otherwise be required by law, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on - 20 - 24 the books of the Corporation in accordance with the requirements of these By-Laws. It shall be the duty of each stockholder to notify the Corporation of his or her post office address. Section 8.6 Record Date The Directors may fix in advance a time, which shall be not more than sixty (60) days before the date of any meeting of stockholders or the date for the payment of any dividend or the making of any distribution to stockholders or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such consent or dissent, and in such case only stockholders of record on such date shall have such right, notwithstanding any transfer of stock on the books of the Corporation after the record date; or without fixing such record date the Directors may for any such purposes close the transfer books for all or any part of such period. If no record date is fixed and the transfer books are not closed: (1) The record date for determining stockholders having the right to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given. (2) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors acts with respect thereto. - 21 - 25 ARTICLE 9 Miscellaneous Provisions Section 9.1 Execution of Papers All deeds, leases, transfers, contracts, bonds, notes, releases, checks, drafts and other obligations authorized to be executed on behalf of the Corporation shall be signed by the President or the Treasurer except as the Directors may generally or in particular cases otherwise determine. Section 9.2 Voting of Securities Except as the Directors may generally or in particular cases otherwise determine, the President or the Treasurer may, on behalf of the Corporation (i) waive notice of any meeting of stockholders or shareholders of any other corporation, or of any association, trust or firm, of which any securities are held by this Corporation; (ii) appoint any person or persons to act as proxy or attorney-in-fact for the Corporation, with or without substitution, at any such meeting; and (iii) execute instruments of consent to stockholder or shareholder action taken without a meeting. Section 9.3 Corporate Seal The seal of the Corporation shall be a circular die with the name of the Corporation, the word "Massachusetts" and the year of its incorporation cut or engraved thereon, or shall be in such other form as the Board of Directors or the stockholders may from time to time determine. Section 9.4 Corporate Records The original, or attested copies, of the Articles of Organization, By-Laws, and the records of all meetings of incorporators and stockholders, and the stock and transfer records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts for inspection by the stockholders at the principal office of the - 22 - 26 Corporation or at an office of the Clerk, or if the Corporation shall have a transfer agent or a resident agent, at an office of either of them. Said copies and records need not all be kept in the same office. ARTICLE 10 Amendments These By-Laws may be altered, amended or repealed or new By-Laws enacted by the affirmative vote of a majority of the entire Board of Directors (if notice of the proposed alteration or amendment is contained in the notice of the meeting at which such vote is taken or if all Directors are present) or at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by the affirmative vote of a majority of the shares represented and entitled to vote at such meeting (if notice of the proposed alteration or amendment is contained in the notice of such meeting). - 23 - EX-10.1 5 OEM AGREEMENT 1 EXHIBIT 10.1 OEM AGREEMENT BETWEEN NORTHERN TELECOM INC. AND VOICETEK CORPORATION Page 1 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 2 THIS OEM AGREEMENT is made and entered into by and between Northern Telecom Inc., a Delaware corporation, with offices located at 2305 Mission College Boulevard, Santa Clara, California 95054-1591 (hereinafter "NTI") and Voicetek Corporation, a Massachusetts corporation, having its principal place of business at 19 Alpha Road, Chelmsford, Massachusetts 01824-4175 (hereinafter "VOICETEK"). RECITALS WHEREAS, NTI shall assume the role of an original equipment manufacturer that procures products from VOICETEK for incorporation into a number of Northern Telecom applications; AND WHEREAS, NTI wishes to obtain the nonexclusive rights and VOICETEK agrees to extend nonexclusive rights to NTI to purchase, resell and distribute VOICETEK's standard product(s) and/or services at NTI's option as enumerated in VOICETEK's Price List; AND WHEREAS, NTI wishes to obtain exclusive rights and VOICETEK agrees to extend exclusive rights to NTI to purchase, resell, and distribute VOICETEK's product(s) and/or services which VOICETEK has, or will in the future, as the case may be, modify according to specifications agreed upon by NTI and VOICETEK and for which NTI has paid development fees to VOICETEK under one or more development agreements and/or annexes applicable to development agreements unless otherwise negotiated; AND WHEREAS, NTI wishes to obtain the nonexclusive rights and VOICETEK agrees to extend nonexclusive rights to NTI to purchase hardware not manufactured by VOICETEK (an example of which is Dialogic-manufactured circuit pack assemblies), direct from VOICETEK's external supplier(s) for installation in and use with SELF-HOSTED UNITS only, without such direct purchase and installation by NTI or NTI's qualified technicians of such non-VOICETEK-manufactured hardware voiding and/or negatively affecting any and all warranties granted to NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES for SELF-HOSTED UNITS herein; AND WHEREAS, the procured products have specific utilitarian functions to carry out within the Northern Telecom applications into which they are incorporated; AND WHEREAS, the parties desire to establish a stable and dependable business relationship to ensure the smooth flow of products between the parties and timely resolution of performance-related issues identified in the products supplied by VOICETEK; NOW THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, THE PARTIES HERETO AGREE AS FOLLOWS: ARTICLE I - DEFINITIONS Terms in the Agreement (other than names of parties and Article headings) which are in capital letters shall have the meanings set forth in this Article I for all purposes in connection with the Agreement. 1.1 "AGREEMENT" as used herein shall mean this OEM Agreement, as amended, modified, supplemented or otherwise altered from time to time. 1.2 "ANNUAL SUPPORT SERVICES PERIOD" as used herein shall mean the particular twelve (12) month period for which NTI has paid the requisite annual fee for RESELLER SUPPORT SERVICES. 1.3 "APPLICATION PROCESSOR" or "APPLICATION PROCESSORS" as used herein shall mean the computing platform used specifically to develop and/or execute GENERATIONS-based software in a client-server environment. 1.4 "AUTHORIZED DISTRIBUTOR" or "AUTHORIZED DISTRIBUTORS" as used herein shall mean any company which has signed a Distributorship Agreement (or the equivalent) with NTI, a NORTHERN TELECOM COMPANY or a MANUFACTURING LICENSEE granting such company the right to distribute one or more of the Northern Telecom product lines. Page 4 3 1.5 "AUTHORIZED TERRITORY" as used herein shall mean the countries listed in Schedule A, which is attached hereto and is by this reference made a part of the AGREEMENT. 1.6 "BLANKET ORDER" or "BLANKET ORDERS" as used herein shall mean an ORDER which does not set forth a DELIVERY DATE. 1.7 "CANCELLATION PERIOD" as used herein shall mean the period commencing on VOICETEK's receipt of an ORDER or ORDER RELEASE and ending thirty (30) days immediately prior to the SHIPMENT DATE thereof. 1.8 "CRITICAL PROBLEM" or "CRITICAL PROBLEMS" as used herein shall mean problems characterized by one or more of the following: (i) system is inoperable, or (ii) causes software reloads or initializations, or (iii) substantially impairs a major application feature, or (iv) an error in USER DOCUMENTATION and/or MODIFIED USER DOCUMENTATION which requires an immediate revision and/or an immediate letter to NTI, and/or NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES and/or AUTHORIZED DISTRIBUTORS in order to correct such problem(s). 1.9 "DELIVERY DATE" as used herein shall mean the date when PRODUCTS shall be delivered to the DELIVERY LOCATION. 1.10 "DELIVERY LOCATION" as used herein shall mean the NTI, NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE location where PRODUCTS shall be delivered. 1.11 "EFFECTIVE DATE" as used herein shall mean the date upon which the latter of the parties to execute the AGREEMENT performs that function. 1.12 "GENERAL AVAILABILITY" as used herein shall mean the date when the PRODUCTS, or any of them, have been released for unrestricted commercial sale and are available for sale by AUTHORIZED DISTRIBUTORS in any part of the AUTHORIZED TERRITORY. 1.13 "GENERATIONS" as used herein shall mean the object-oriented applications development and runtime environment developed and owned by VOICETEK. 1.14 "HARDWARE" as used herein shall mean all items that are designated as hardware in a PRICE LIST including, but not limited to, VTK Base Systems, Voice Ports/Network Interfaces, Voice Storage, APPLICATION PROCESSORS, Parts and Spares, Technical Documentation, KEYLOCKS, VOICE RESPONSE UNITS, SELF-HOSTED UNITS and Marketing Materials. 1.15 "HARDWARE PRODUCTS" as used herein shall mean either STANDARD HARDWARE PRODUCTS or MODIFIED HARDWARE PRODUCTS or both, as the context requires. 1.16 "KEYLOCK" or "KEYLOCKS" as used herein shall mean the VOICETEK-supplied hardware and keycode in object form functioning as a software lock and preventing unauthorized use and/or duplication of SOFTWARE PRODUCTS purchased by NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES hereunder. 1.17 "MANUFACTURING LICENSEE" or "MANUFACTURING LICENSEES"as used herein shall mean those third parties properly authorized and empowered by NTI or a NORTHERN TELECOM COMPANY to manufacture and market product lines including, but not limited to, Northern Telecom proprietary hardware systems such as the Meridian 1 PBX, under its or their own corporate name(s), under a private brand, or under a Northern Telecom name and, as a result, require certain rights to SOFTWARE PRODUCTS which are substantially similar in scope to those granted directly to NTI by the AGREEMENT. 1.18 "MARKS" as used herein shall mean the trademarks, trade names and service marks now owned by, licensed to, or hereafter obtained by VOICETEK as may from time to time be added to Schedule C, which is attached hereto and by this reference made a part of the AGREEMENT. Page 5 4 1.19 "MAXIMUM DELIVERY PERIOD" as used herein shall mean thirty (30) days for HARDWARE PRODUCTS and two (2) days or less for SOFTWARE PRODUCTS commencing on the date that VOICETEK receives an ORDER or an ORDER RELEASE therefor. 1.20 "MINOR PROBLEM" or "MINOR PROBLEMS" as used herein shall mean a problem with the SOFTWARE PRODUCTS which causes or may cause degradation of feature operation, or a problem with USER DOCUMENTATION, respectively, both for which an acceptable workaround is available and the problem can persist without customer complaint for a limited time. 1.21 "MODIFIED HARDWARE PRODUCT or "MODIFIED HARDWARE PRODUCTS" as used herein shall mean any and all HARDWARE modified at NTI's direction and expense under one or more Technology Development Agreements and annexes or addenda thereto, and which may or may not be enumerated in Schedules D and/or E which are attached hereto and are by this reference made a part of the AGREEMENT and which are products VOICETEK sells exclusively to NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES. 1.22 "MODIFIED PRODUCT" or "MODIFIED PRODUCTS" as used herein shall mean either MODIFIED HARDWARE PRODUCTS or MODIFIED SOFTWARE PRODUCTS or both, as the context requires. 1.23 "MODIFIED SOFTWARE PRODUCT" or "MODIFIED SOFTWARE PRODUCTS" as used herein shall mean any and all SIGNATURES, USER DOCUMENTATION, and software modified at NTI's direction and expense under one or more Technology Development Agreements and annexes or addenda thereto, and which may or may not be enumerated in Schedules D and/or E and which are products VOICETEK sells exclusively to NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES. 1.24 "MODIFIED USER DOCUMENTATION" as used herein shall mean USER DOCUMENTATION and/or user manuals created by VOICETEK for the PRODUCTS and modified at NTI's direction to reflect, but are not restricted to, such changes as NTI's naming convention, product names, NTI-supplied platforms and removal of options or features not sold by NTI and which may contain all or parts of the USER DOCUMENTATION and/or user manuals. 1.25 "NORTHERN TELECOM COMPANY" or "NORTHERN TELECOM COMPANIES" as used herein shall mean Northern Telecom Limited, the parent company of NTI, and all subsidiaries or affiliates wholly or at least majority owned, directly or indirectly, by Northern Telecom Limited, but not including NTI. 1.26 "OPTION PERIOD" as used herein shall mean the three (3) month period immediately following conclusion of the TERM for which NTI can elect to extend the AGREEMENT on these stated terms while a renewal hereof or a new agreement are being negotiated by the parties. 1.27 "ORDER" or "ORDERS" as used herein shall mean the document issued or output of an electronic "paperless" process initiated by NTI by which PRODUCTS are ordered. 1.28 "ORDER RELEASE" or "ORDER RELEASES" as used herein shall mean the document issued or output of an electronic "paperless" process initiated by NTI pursuant to a BLANKET ORDER by which the DELIVERY DATE for such BLANKET ORDER, or a portion thereof, is established. 1.29 "POINT RELEASE" or "POINT RELEASES" as used herein shall mean revision(s) of any SOFTWARE PRODUCTS included as part of the applicable cost of RESELLER SUPPORT SERVICES and supplied by VOICETEK at no additional charge to NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES, the principle function of which is to provide bug fixes to the SOFTWARE PRODUCTS but which can include minor new functionality, an example of which would be a change from 3.xx to 3.xy. 1.30 "PRICE LIST" as used herein shall mean the Voicetek Corporation Price Book For North America and Asia, and the Voicetek Corporation International Pricebook, respectively, identified and incorporated by reference in Schedule 8, that are in effect at the time NTI or NORTHERN Page 6 5 TELECOM COMPANIES or MANUFACTURING LICENSEES procure(s) STANDARD PRODUCTS from VOICETEK. 1.31 "PRODUCT" or "PRODUCTS" as used herein shall mean either STANDARD PRODUCTS or MODIFIED PRODUCTS or both, as the context requires. 1.32 "RESCHEDULING PERIOD" as used herein shall mean the period commencing on VOICETEK's receipt of an ORDER or ORDER RELEASE and ending thirty (30) days immediately prior to the SHIPMENT DATE thereof. 1.33 "RESELLER SUPPORT SERVICES" as used herein shall mean those support services enumerated in Article XIII and Schedule F, which is attached hereto and is by this reference made a part of the AGREEMENT. 1.34 "RMA" as used herein shall mean Return Material Authorization. 1.35 "SELF-HOSTED UNIT" or "SELF-HOSTED UNITS" as used herein shall mean any SYSTEM configuration comprised of SOFTWARE PRODUCTS executable on a single hardware platform performing the combined functions of APPLICATION PROCESSOR and VOICE RESPONSE UNIT. 1.36 "SERIOUS PROBLEM" or "SERIOUS PROBLEMS" as used herein shall mean a problem that is characterized by a substantial reduction in service and/or missing or incorrect USER DOCUMENTATION and/or MODIFIED USER DOCUMENTATION of major functionality for which there is not an acceptable workaround or interim solution available. 1.37 "SHIPMENT DATE" as used herein shall mean the date when PRODUCTS shall be shipped by VOICETEK to the DELIVERY LOCATION. 1.38 "SIGNATURE" or "SIGNATURES" as used herein shall mean the VOICETEK-supplied code(s) which are branded into the firmware of HARDWARE components not manufactured by VOICETEK (examples of which are Dialogic boards) which enable PRODUCTS (HARDWARE and software combined) to compatibly perform their functions together as a SYSTEM. 1.39 "SOFTWARE PRODUCTS" as used herein shall mean either STANDARD SOFTWARE PRODUCTS or MODIFIED SOFTWARE PRODUCTS or both, as the context requires. 1.40 "SOURCE CODE MATERIALS" as used herein shall mean the first version of the following items and all subsequent POINT RELEASES, UPDATES, VERSION RELEASES and enhancements thereof: (a) one copy of the source code of SOFTWARE PRODUCTS in machine-readable form, and (b) one copy of all development tools, editors and compilers normally supplied by VOICETEK in making use of source code of the SOFTWARE PRODUCTS, and (c) any documentation describing source code of SOFTWARE PRODUCTS normally supplied by VOICETEK in making use of source code of SOFTWARE PRODUCTS. 1.41 "SPECIFICATIONS" as used herein shall mean the most current version of the document or documents published by VOICETEK and applicable to PRODUCTS that define the applicable PRODUCTS including, but not limited to, materials, dimensions, quality performance criteria, Mean Time Between Failures (MTBF), SYSTEM architecture, physical configuration, product capabilities, functionality, functional parameters, performance standards, operating characteristics and compliance with corresponding commercial and regulatory requirements. 1.42 "STANDARD HARDWARE PRODUCT" or "STANDARD HARDWARE PRODUCTS" as used herein shall mean HARDWARE as enumerated in the PRICE LIST and/or Schedule D and/or Schedule E which are the same products VOICETEK sells to its general customer base and which products have not been modified by VOICETEK in any unique and/or specific manner to suit any NTI customer or specific group of NTI customers. Page 7 6 1.43 "STANDARD PRODUCT" or "STANDARD PRODUCTS" as used herein shall mean either STANDARD HARDWARE PRODUCTS or STANDARD SOFTWARE PRODUCTS or both, as the context requires. 1.44 "STANDARD SOFTWARE PRODUCT" or "STANDARD SOFTWARE PRODUCTS" as used herein shall mean software and USER DOCUMENTATION as enumerated in the PRICE LIST and/or Schedule D and/or Schedule E which are the same products VOICETEK sells to its general customer base and which products have not been modified by VOICETEK in any unique and/or specific manner to suit any NTI customer or specific group of NTI customers. 1.45 "SUPPORT ORGANIZATION" as used herein shall mean the identified NTI or NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE whose primary contact persons are authorized to contact VOICETEK for warranty service during the WARRANTY PERIOD or for RESELLER SUPPORT SERVICES thereafter, as the case may be. 1.46 "SYSTEM" or "SYSTEMS" as used herein shall mean any combination of PRODUCTS, USER DOCUMENTATION and/or MODIFIED USER DOCUMENTATION together required to assemble, (load in the case of software), install and operate as fully functional interactive voice response product(s). 1.47 "TERM" as used herein shall mean the three (3) year period from and after the EFFECTIVE DATE. 1.48 "TRAINING MATERIALS" as used herein shall mean available course materials such as instructor's notes, presentation materials, binders, slides, videos and software examples, but not including equipment or HARDWARE. 1.49 "TRAINING PROGRAM" or "TRAINING PROGRAMS" as used herein shall mean the VOICETEK-supplied instruction courses covering the subjects of, but not limited to, Administration, Applications Development and Installation and Maintenance. 1.50 "UPDATE" or "UPDATES" as used herein shall mean a release included as part of the applicable cost of RESELLER SUPPORT SERVICES and supplied by VOICETEK to NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES of SOFTWARE PRODUCTS in which minor new functionality has been added in addition to the normal complement of bug fixes supplied, an example of which would be a change from 3.x to 3.y. 1.51 "USER DOCUMENTATION" as used herein shall mean VOICETEK's user manuals, technical manuals, release notes including advisements for PRODUCTS, installation and operation, promotional materials and other data and documentation describing the use of PRODUCTS normally supplied to customers of VOICETEK. 1.52 "VERSION RELEASE" or "VERSION RELEASES" as used herein shall mean a release of SOFTWARE PRODUCTS that is not included in the scope of RESELLER SUPPORT SERVICES in which major new functionality has been added in addition to any complement of bug fixes supplied, an example of which would be a release from 3.x to 4.x, and for which NTI or NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES would be expected to pay a fee in addition to the requisite annual fee for RESELLER SUPPORT SERVICES. 1.53 "VOICE RESPONSE UNIT" or "VOICE RESPONSE UNITS" as used herein shall mean the computing platform used to execute VRS. 1.54 "VRS" as used herein shall mean the voice response server software, also known as TSP, developed and owned by VOICETEK and executable on VOICE RESPONSE UNITS whether supplied by NTI or VOICETEK. 1.55 "WARRANTY PERIOD" as used herein shall mean fifteen (15) months in the case of SOFTWARE PRODUCTS and twelve (12) months in the case of HARDWARE PRODUCTS beginning on the date of receipt thereof (in the case of SOFTWARE PRODUCTS duplicated by NTI on the date of receipt of gold standard master) by NTI, NORTHERN TELECOM COMPANIES, or MANUFACTURING LICENSEES. Page 8 7 1.56 "WARRANTY REPAIR PERIOD" as used herein shall mean ten (10) calendar days which shall commence on the date that VOICETEK receives HARDWARE PRODUCTS which do not conform to the warranty set forth in Section 11.1 at VOICETEK's repair facility in Chelmsford, Massachusetts, except that in the case of HARDWARE PRODUCTS destined for locations outside of the United States and Canada, the understanding is that the repaired or replaced item will have been shipped but not necessarily received by a NORTHERN TELECOM COMPANY or a MANUFACTURING LICENSEE within the ten (10) day period as stated herein due to potential extended transit time for shipments outside of North America and which actual transit time would be the shortest period of time available from the carrier designated by NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES. ARTICLE II - WARRANTIES OF OWNERSHIP 2.1 VOICETEK warrants that it has developed, it is the owner of, and/or it possesses all necessary rights to market the use of STANDARD SOFTWARE PRODUCTS and owns and/or has the right to use as of the EFFECTIVE DATE certain MARKS and VOICETEK's goodwill of the businesses symbolized thereby. 2.2 VOICETEK warrants and represents that STANDARD SOFTWARE PRODUCTS, or any substantial portions thereof, have not been published or otherwise made available to third parties without appropriate copyright and/or other proprietary notices to preserve VOICETEK's ownership and proprietary or licensed rights therein. 2.3 VOICETEK warrants that it is either the owner, or is otherwise in possession of sufficient licensed rights pertaining to any portion of the proprietary and intellectual property rights owned by third parties, of all proprietary and intellectual property rights in and to all STANDARD HARDWARE PRODUCTS. VOICETEK further warrants that title to all STANDARD HARDWARE PRODUCTS shipped to NTI and/or NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES pursuant to the AGREEMENT shall pass to NTI or a NORTHERN TELECOM COMPANY or a MANUFACTURING LICENSEE, as the case may be, free and clear of any liens, charges, encumbrances, restrictions or rights created in, by or against the STANDARD HARDWARE PRODUCTS or against VOICETEK, except any intellectual property rights of VOICETEK and/or one or more of VOICETEK's licensors in the STANDARD HARDWARE PRODUCTS, if any. Without investigating the nature and scope of any intellectual property rights that may exist in or to the STANDARD HARDWARE PRODUCTS, the parties agree that NTI undertakes no obligation to protect any such intellectual property rights as may be claimed by VOICETEK and/or one or more of VOICETEK's licensors in the STANDARD HARDWARE PRODUCTS in connection with purchase and sale of STANDARD HARDWARE PRODUCTS pursuant to the AGREEMENT. 2.4 VOICETEK warrants that USER DOCUMENTATION or any substantial portions thereof, have not been published or otherwise made available to third parties without appropriate copyright and/or other proprietary notices to preserve VOICETEK's ownership and proprietary or licensed rights therein. 2.5 VOICETEK warrants and represents that no prior license or other agreement is violated by or is inconsistent with the terms and conditions of the AGREEMENT. ARTICLE III - GRANT OF NONEXCLUSIVE RIGHTS 3.1 In accordance with and subject to the terms and conditions of the AGREEMENT, VOICETEK hereby grants to NTI the nonexclusive right: (a) to market and distribute STANDARD HARDWARE PRODUCTS and to market and sublicense STANDARD SOFTWARE PRODUCTS only in object form and/or USER DOCUMENTATION under the MARKS respectively applicable, if any, or, at NTI's option, under NTI's trademarks and/or trade dress, directly or indirectly, as components of a Northern Telecom-manufactured application to AUTHORIZED DISTRIBUTORS and/or Page 9 8 end-user customers in the AUTHORIZED TERRITORY, and to grant these same rights to MANUFACTURING LICENSEES. (b) to use, adapt, merge, copy and incorporate, as necessary, the STANDARD SOFTWARE PRODUCTS, or portions thereof, as a part of a Northern Telecom-manufactured application, and to grant these same rights to MANUFACTURING LICENSEES. The right to reproduce copies of STANDARD SOFTWARE PRODUCTS, or portions thereof, shall include the right to have such reproduction performed by another party on NTI's behalf, provided such party has signed a substantially unmodified version of NTI's Reproduction Services Agreement, a copy of which is attached hereto as Schedule G and is by this reference made a part hereof. (c) to use, modify, translate, reproduce and distribute, either directly, or through AUTHORIZED DISTRIBUTORS to customers in the AUTHORIZED TERRITORY, and to use, translate and reproduce for internal use, copies of the USER DOCUMENTATION delivered to NTI under the AGREEMENT and to grant all of these same rights to MANUFACTURING LICENSEES. The right to reproduce copies of USER DOCUMENTATION shall include the right to have such reproduction performed by another party on NTI's behalf, provided such party has signed a substantially unmodified version of NTI's Reproduction Services Agreement. (d) to manufacture and distribute copies of POINT RELEASES, UPDATES and VERSION RELEASES [for STANDARD SOFTWARE PRODUCTS only] either directly or indirectly, to end-user customers in the AUTHORIZED TERRITORY. (e) to purchase HARDWARE not manufactured by VOICETEK (an example of which is Dialogic-manufactured circuit pack assemblies), direct from VOICETEK's external supplier(s) for installation and use in VOICETEK-supplied components without such direct purchase, sale, distribution and installation by NTI or NTI's qualified technicians of such HARDWARE not manufactured by VOICETEK voiding and/or negatively affecting in any way the warranties granted to NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES elsewhere in the AGREEMENT. (f) to brand SIGNATURES for any HARDWARE purchased under the rights granted to NTI under subsection (e) above at NTI's option and at no additional cost to NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES and to have such branding of SIGNATURES not void and/or negatively affect in any way the warranties granted to NTI elsewhere in the AGREEMENT. ARTICLE IV - GRANT OF EXCLUSIVE RIGHTS 4.1 In accordance with and subject to the terms and conditions of the AGREEMENT, VOICETEK hereby grants to NTI the exclusive right: (a) to market and distribute MODIFIED HARDWARE PRODUCTS and to market and sublicense MODIFIED SOFTWARE PRODUCTS only in object form and/or MODIFIED USER DOCUMENTATION under NTI's trademarks and/or trade dress, directly or indirectly, as components of a Northern Telecom application to AUTHORIZED DISTRIBUTORS and/or end-user customers in the AUTHORIZED TERRITORY, and to grant these same rights to MANUFACTURING LICENSEES. (b) to use, adapt, merge, copy and incorporate, as necessary, the MODIFIED SOFTWARE PRODUCTS, or portions thereof, as a part of a Northern Telecom application, and to grant these same rights to MANUFACTURING LICENSEES. The right to reproduce copies of MODIFIED SOFTWARE PRODUCTS shall include the right to have such reproduction performed by another party on NTI's behalf, provided such party has signed a substantially unmodified version of NTI's Reproduction Services Agreement. (c) to use, modify, translate, reproduce and distribute, either directly, or through AUTHORIZED DISTRIBUTORS to customers in the AUTHORIZED TERRITORY, and to Page 10 9 use, translate and reproduce for internal use, copies of the MODIFIED USER DOCUMENTATION and to grant all of these same rights to MANUFACTURING LICENSEES. The right to reproduce copies of MODIFIED USER DOCUMENTATION shall include the right to have such reproduction performed by another party on NTI's behalf, provided such party has signed a substantially unmodified version of NTI's Reproduction Services Agreement. (d) to manufacture and distribute copies of POINT RELEASES, UPDATES and VERSION RELEASES [for MODIFIED SOFTWARE PRODUCTS only], either directly or indirectly, to end-user customers in the AUTHORIZED TERRITORY. ARTICLE V - DISTRIBUTION AND SUBLICENSING 5.1 Subject to the terms and conditions set forth herein, VOICETEK agrees to sell [or license, in the case of SOFTWARE PRODUCTS] and NTI shall have the right to purchase or otherwise procure, as the case may be, PRODUCTS at the license fees and/or prices set forth in Schedule B, Schedule D or Schedule E, as the case may be, during the TERM. 5.2 Except as may otherwise be required by VOICETEK's agreements with its suppliers of STANDARD PRODUCTS, NTI reserves the right to market and distribute HARDWARE PRODUCTS and to market and sublicense SOFTWARE PRODUCTS in object form under its own trademarks, service marks and/or trade dress associated with the various Northern Telecom applications into which such PRODUCTS are incorporated. NTI and/or NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES may request that a Northern Telecom logo or other form of trade dress be placed on MODIFIED PRODUCTS by NTI or a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE itself or by VOICETEK. Regardless of which party places a Northern Telecom logo or other form of trade dress on MODIFIED PRODUCTS, it is the understanding of the parties that any MODIFIED PRODUCTS provided with a warranty pursuant to the AGREEMENT shall carry the same warranty from VOICETEK whether or not Northern Telecom logos and/or trade dress are applied thereto. 5.3 If NTI or any NORTHERN TELECOM COMPANY, MANUFACTURING LICENSEE OR AUTHORIZED DISTRIBUTOR desires to distribute the PRODUCTS in object form in countries outside of the AUTHORIZED TERRITORY, NTI shall first submit the name of such country or countries to VOICETEK for VOICETEK's prior written approval, which approval shall not be unreasonably withheld. In the event a particular country is not approved by VOICETEK, the parties shall arrange to discuss the merits of proceeding with the proposed distribution in such country and the reservations and/or objections of VOICETEK in an effort to reach a mutually satisfactory resolution. 5.4 NTI understands and agrees that the PRODUCTS, and any copies thereof acquired or reproduced hereunder, and any direct product thereof, are subject to the export control laws and regulations of the United States, and any amendments thereof. NTI hereby assures (and shall require any NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES and/or AUTHORIZED DISTRIBUTORS receiving rights directly or indirectly from NTI hereunder) VOICETEK that it does not intend to and will not knowingly, without the prior written consent, if required, of the Office of Export Licensing of the U.S. Department of Commerce, P.O. Box 273, Washington, D.C. 20230, transmit directly or indirectly: (i) PRODUCTS and/or technical information provided in relation to PRODUCTS; or (ii) any immediate products (including processes and services) produced directly by the use of PRODUCTS and/or associated technical information; to (1) Afghanistan, The Federal Republic of Yugoslavia (Serbia and Montenegro), Haiti, Iraq, the People's Republic of China or any Group Q, S, W, Y or Z country specified in Supplement No. 1 to Part 370 of the Export Administration Regulations issued by the U.S. Department of Commerce or (2) any citizen or resident of the foregoing countries. Country Groups Q, S, W, Y and Z currently include the following: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, Cuba, the Czech Republic, Estonia, Laos, Latvia, Libya, Lithuania, Mongolia, North Korea, Poland, Romania, Page 11 10 Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan and Vietnam. NTI further assures VOICETEK that it will not transmit, sell, convey or transfer any PRODUCTS or any other commodities or technical information received under or in connection with the AGREEMENT to any individuals or entities listed in the Table of Denial orders as published in Supplement Nos. 1 and 2 to Part 788 of the above-referenced regulations. 5.5 NTI and all NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES agree to reproduce, upon each copy of the SOFTWARE PRODUCTS in object form and the USER DOCUMENTATION and MODIFIED USER DOCUMENTATION, respectively, made, the copyright notice attributing ownership of the copyright rights therein as delivered to NTI under Article VII of the AGREEMENT. In the event that NTI and/or a NORTHERN TELECOM COMPANY and/or a MANUFACTURING LICENSEE creates modifications to the USER DOCUMENTATION, NTI and/or such NORTHERN TELECOM COMPANY and/or such MANUFACTURING LICENSEE shall have the right to include its own copyright notice therewith in addition to VOICETEK's or VOICETEK's suppliers' copyright notice, if any, which VOICETEK requires to be used under the terms of this Section 5.5. 5.6 For SOFTWARE PRODUCTS in object form which NTI distributes either (i) directly to end-user customers, or (ii) indirectly through NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and through AUTHORIZED DISTRIBUTORS, NTI shall, as appropriate, require every such end-user customer to execute or contractually impose upon such NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS the obligation to distribute SOFTWARE PRODUCTS to their end-user customers under the software agreement (or an agreement in which such language is contained) that NTI uses in distributing NTI's own proprietary software applications, as set forth in Schedule H, which is attached hereto and is by this reference made a part of the AGREEMENT. Any MANUFACTURING LICENSEE receiving rights through NTI pursuant to Section 3.1 and Section 4.1 shall be bound in a written sublicense by terms and conditions no less stringent than those applicable to NTI herein. 5.7 The parties understand and acknowledge that NTI may elect to license the SOFTWARE PRODUCTS to United States government customers. In order to obviate the unintentional grant of rights to such customers pursuant to existing federal regulations, the parties hereby agree that the following legend shall appear on copies of the SOFTWARE PRODUCTS distributed to United States government customers: RESTRICTED RIGHTS LEGEND Use, duplication, or disclosure by the U.S. Government is subject to restrictions as set forth in subdivision (c)(1) of FAR 52.227-19 or (c)(1)(ii) of DFAR 52.227-7013. Northern Telecom Inc., 2305 Mission College Blvd., Dept. 0521, Santa Clara, CA 95054-1591. 5.8 NTI, and any NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS receiving rights to the SOFTWARE PRODUCTS directly or indirectly from NTI, may transfer rights to use copies of the SOFTWARE PRODUCTS in object form to their customers for any fee which NTI, and said NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS individually deem appropriate. 5.9 VOICETEK hereby grants to NORTHERN TELECOM COMPANIES the same scope of rights as are granted by VOICETEK to NTI in the AGREEMENT, subject to such NORTHERN TELECOM COMPANIES being bound in a written sublicense by NTI to terms and conditions equivalent to those set forth in the AGREEMENT or by manifesting their consent to abide by the terms and conditions of the AGREEMENT in a signed writing directed to VOICETEK referencing the name, date and parties to the AGREEMENT. Any MANUFACTURING LICENSEES receiving rights through NTI pursuant to Section 5.2 and Section 5.3 or through a NORTHERN TELECOM COMPANY pursuant to this Section 5.9 and/or Section 3.1 and/or Section 4.1 shall also be bound in a written sublicense by terms and conditions no less stringent than those applicable to Page 12 11 NTI herein. A grant of rights by NTI or a NORTHERN TELECOM COMPANY to a MANUFACTURING LICENSEE shall not relieve NTI or such NORTHERN TELECOM COMPANY of its obligations under the AGREEMENT. 5.10 Except as provided herein, VOICETEK reserves all rights, title and interest in and to the SOFTWARE PRODUCTS, including the underlying ideas, inventions, processes and data embodied in the SOFTWARE PRODUCTS, and NTI acknowledges that no rights, title or interest in or to the SOFTWARE PRODUCTS is granted under the AGREEMENT other than the specified limited rights set forth in Articles III and IV, which, subject to Section 18.4, shall continue only so long as the AGREEMENT remains in effect. ARTICLE VI - MARKS 6.1 VOICETEK warrants that it owns and/or has the right to use, as of the EFFECTIVE DATE, certain MARKS and VOICETEK's and/or VOICETEK's suppliers' goodwill of the businesses symbolized thereby. 6.2 VOICETEK hereby grants to NTI the nonexclusive right during the TERM to use for itself, and to grant directly or indirectly to NORTHERN TELECOM COMPANIES and AUTHORIZED DISTRIBUTORS, the right to use the MARKS listed in Schedule C of the AGREEMENT in association with the advertising and distribution of PRODUCTS in the AUTHORIZED TERRITORY subject to VOICETEK quality control review. Upon the request of VOICETEK, NTI, a NORTHERN TELECOM COMPANY or an AUTHORIZED DISTRIBUTOR shall deliver to VOICETEK any media containing the MARKS to be used by NTI or a NORTHERN TELECOM COMPANY or an AUTHORIZED DISTRIBUTOR, as the case may be, in advertising or promotional materials. NTI, NORTHERN TELECOM COMPANIES and AUTHORIZED DISTRIBUTORS shall abide by any and all guidelines promulgated by VOICETEK regarding use of the MARKS in such advertising and promotions. VOICETEK may advise NTI or a NORTHERN TELECOM COMPANY or an AUTHORIZED DISTRIBUTOR of any corrections or modifications to such use of the MARKS, and NTI or the NORTHERN TELECOM COMPANY or the AUTHORIZED DISTRIBUTOR shall effect such changes within a reasonable period of time. NTI, NORTHERN TELECOM COMPANIES and AUTHORIZED DISTRIBUTORS shall at least once in the most prominent first usage of the MARKS, cause "TM" to be placed adjacent to the MARKS on all advertising, marketing and other promotional material and, when so instructed by VOICETEK, shall cause "(R)" to replace "TM" within a reasonable period of time. 6.3 NTI and NORTHERN TELECOM COMPANIES hereby acknowledge and agree that nothing herein gives them any right, title or interest in the MARKS and that, upon termination of the AGREEMENT by expiration or for any other reason, NTI, NORTHERN TELECOM COMPANIES and AUTHORIZED DISTRIBUTORS shall no longer use the MARKS in advertising or in any other manner. NTI, NORTHERN TELECOM COMPANIES and AUTHORIZED DISTRIBUTORS shall not challenge the validity of VOICETEK's ownership of or right to use any of the MARKS, nor otherwise impair the interest of VOICETEK in the MARKS. NTI, NORTHERN TELECOM COMPANIES and AUTHORIZED DISTRIBUTORS shall not use any MARK which is confusingly similar to, or a colorable imitation of, any MARK. 6.4 In the event NTI and/or NORTHERN TELECOM COMPANIES discover apparent infringing activity involving the MARKS by third parties, then NTI, NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES, as the case may be, shall promptly notify VOICETEK of such apparent infringing activity. ARTICLE VII - ORDERING AND DELIVERY 7.1 With one exception, NTI may, but shall not be obligated to, issue ORDERS during the TERM. Regardless of other considerations, NTI shall issue an ORDER for RESELLER SUPPORT SERVICES as specifically enumerated in paragraph 1 of Schedule F no later than GENERAL AVAILABILITY. ORDERS may also be issued directly by one or more NORTHERN TELECOM COMPANIES that have been sublicensed by NTI pursuant to the terms of Section 5.9 of the AGREEMENT. In the event NTI provides VOICETEK with a forecast or estimate of the quantity Page 13 12 that may be ordered, whether set forth in Schedule B or otherwise, VOICETEK acknowledges that NTI shall not be obligated to submit an ORDER for any portion of such forecast or estimate. 7.2 VOICETEK shall accept any ORDER issued by NTI, provided such ORDER is consistent with the AGREEMENT. The AGREEMENT shall continue to apply to any ORDER issued during the TERM until all obligations herein are performed. The terms and conditions of the AGREEMENT shall supersede any preprinted terms and conditions appearing on any purchase order form used by NTI and/or any NORTHERN TELECOM COMPANY and/or MANUFACTURING LICENSEE. 7.3 An ORDER shall reference the AGREEMENT and shall set forth a description of the following: (a) PRODUCTS and/or TRAINING MATERIALS and/or TRAINING PROGRAMS ordered, (b) price, (c) DELIVERY LOCATION, (d) the location where the invoice shall be rendered for payment, (e) method of shipment, (f) quantity and (g) SHIPMENT DATE. 7.4 Within two (2) business days of the date of VOICETEK's receipt of an ORDER or an ORDER RELEASE or a modification by NTI to ORDERS or ORDER RELEASES, VOICETEK shall either provide verbal confirmation of the SHIPMENT DATE or propose an alternate SHIPMENT DATE. Any verbal confirmations issued by VOICETEK pursuant to this Section 7.4 shall be followed up by a written or electronic acknowledgment within ten (10) calendar days of the date of VOICETEK's receipt of such ORDER or ORDER RELEASE and/or modifications thereto. If VOICETEK fails to respond, it shall be deemed to have agreed to the SHIPMENT DATE and/or modification(s) set forth by NTI. If VOICETEK proposes an alternate SHIPMENT DATE, then NTI shall within two (2) business days of its receipt of notice of such alternate SHIPMENT DATE notify VOICETEK that either such alternate SHIPMENT DATE is acceptable or that such ORDER or ORDER RELEASE is canceled. Notwithstanding the above, VOICETEK shall comply with any SHIPMENT DATE specified by NTI which is to occur on or after the end of the MAXIMUM DELIVERY PERIOD. 7.5 An ORDER or an ORDER RELEASE may not be delivered in partial shipments unless otherwise specified by NTI. In the event VOICETEK fails to ship (or present in the case of TRAINING PROGRAMS) PRODUCTS and/or TRAINING MATERIALS and/or TRAINING PROGRAMS by the SHIPMENT DATE, NTI may cancel, without charge, the ORDER or ORDER RELEASE, as the case may be, or applicable portion thereof, seven (7) calendar days following the SHIPMENT DATE therefor. 7.6 Except as provided in Subsection 7.6.1 below, NTI may, without charge, postpone the SHIPMENT DATE for an ORDER or an ORDER RELEASE at any time during the RESCHEDULING PERIOD applicable to such ORDER or ORDER RELEASE. If NTI cancels an ORDER or an ORDER RELEASE during the CANCELLATION PERIOD for such ORDER or ORDER RELEASE there shall be no charge to NTI, except as provided in Subsection 7.6.1 below. No cancellations shall occur after a CANCELLATION PERIOD unless mutually agreed upon by the parties. 7.6.1 The following PRODUCTS are excepted out from the rescheduling and cancellation rights afforded to NTI in Section 7.6: Order Code Product Description ---------- ------------------- HL-5250-HW-S 5250 Synchronous Interface (SSI HW & SW) HL-5250-HW-TR 5250 Token Ring Interface (SSI HW & SW) HL-3270-HW-S 3270 Synchronous Interface (SSI HW & SW) HL-3270-HW-TR 3270 Token Ring Interface (SSI HW & SW) HCOM-SC08-VT100 VT100 for 8 ports on the PC HCOM-SC016-VT100 VT100 for 16 ports on the PC HCOM-SC032-VT100 VT100 for 32 ports on the PC 17-852066-02 2 Channel Fax Option 17-852066-01 4 Channel Fax Option 17-852066-00 8 Channel Fax Option 17-852062-00 DMX Option PMT-000-NT Notch Filter PAGE 14 13 Order Code Product Description ---------- ------------------- TTS-04-LH TTS 4-port Assembly 17-852072-00 Audio Interface Unit PT-30-E1 E1 Interface Card (Aculab) Also, single orders for 15 or more Rackmount units or 30 or more Tower units will not be candidates for unlimited rescheduling or cancellation without charge. 7.7 During the RESCHEDULING PERIOD NTI may modify ORDERS and/or ORDER RELEASES and VOICETEK shall confirm such ORDERS and/or ORDER RELEASES at the prices set forth in the AGREEMENT. 7.8 Upon providing VOICETEK at least thirty (30) days notice prior to the end of the TERM, NTI shall have the right to extend the TERM for the OPTION PERIOD, in which event NTI and VOICETEK shall have the rights and obligations in the AGREEMENT during the OPTION PERIOD, including, without limitation, NTI's right to purchase at the prices and applicable discount levels set forth or incorporated by reference, as the case may be, in Schedules B, D, E and/or G, the last of which is attached hereto and is by this reference made a part of the AGREEMENT. 7.9 Except in the case of a change for health or safety reasons, VOICETEK shall notify NTI at least one hundred twenty (120) days prior to implementing any change which affects the form, fit or function of any STANDARD PRODUCTS. Changes which do not affect form, fit or function, and changes made to HARDWARE PRODUCTS for health or safety reasons may be implemented at any time. In the event a change to HARDWARE PRODUCTS is made for health or safety reasons, VOICETEK shall retrofit NTI's existing inventory of such HARDWARE PRODUCTS purchased from VOICETEK, free of charge, with such retrofit being limited to the replacement of the specific item that is deemed to be the cause of the retrofit. Unless a change is designed by VOICETEK to eliminate or reduce a safety or health hazard, NTI, at its option, may issue ORDERS or ORDER RELEASES under the terms and conditions of the AGREEMENT for such PRODUCTS as they existed prior to the change in form, fit or function, for a period of at least one hundred eighty (180) days following the date of NTI's receipt of VOICETEK's change notification. ARTICLE VIII - PRICE, PAYMENT AND RISK OF LOSS 8.1 Prices for PRODUCTS, RESELLER SUPPORT SERVICES, TRAINING MATERIALS and TRAINING PROGRAMS, respectively, purchased and/or licensed hereunder shall be list price according to the then current PRICE LIST or the prices set forth in Schedule E, as the case may be, less the current discount level where applicable as established in Schedule 1, which is attached hereto and is by this reference made a part of the AGREEMENT. 8.2 Special pricing for PRODUCTS, RESELLER SUPPORT SERVICES, TRAINING MATERIALS and TRAINING PROGRAMS, respectively, purchased and/or licensed hereunder which may or may not be included in the then current PRICE LIST shall be as indicated in Schedule E. 8.3 Prices for SYSTEMS, RESELLER SUPPORT SERVICES, TRAINING MATERIALS and TRAINING PROGRAMS, respectively, for internal use by NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES shall be as set forth in Schedule D and shall be applicable only up to a total quantity of twenty-five (25) SYSTEMS. The allocation of SYSTEMS for internal use by NTI, NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES shall be as directed by the NTI contact designated in Section 26.2. 8.4 Subject to any applicable discount as enumerated in Schedule 1, prices for (i) products and/or services, and (ii) right-to-use fees not enumerated in Schedule B, Schedule D and/or Schedule E shall be as mutually agreed upon by the parties prior to the time NTI issues ORDERS and/or ORDER RELEASES therefor. Page 15 14 8.5 Prices and license fees set forth in Schedules B, D, and/or E or otherwise agreed upon pursuant to Section 8.4 are (a) in U.S. dollars and shall apply during the TERM; (b) exclusive of any applicable excise and sales taxes now existing or hereafter imposed by any applicable taxing authority; (c) exclusive of the transportation charges and duty applicable between the SHIPPING LOCATION and the DELIVERY LOCATION; and (d) inclusive of all other taxes, transportation charges, duties and charges for packaging and handling. Such taxes, transportation charges and duty for which NTI is liable shall be separately stated on the invoice. VOICETEK agrees not to assess any applicable excise or sales tax where NTI furnishes VOICETEK a tax exemption certificate, a certificate of authority, a direct pay permit and/or any equivalent acceptable to the applicable taxing authority. 8.6 VOICETEK may issue invoices to NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES, respectively, issuing ORDERS and/or ORDER RELEASES for PRODUCTS and/or TRAINING MATERIALS upon consignment to the carrier designated by NTI for such PRODUCTS and/or TRAINING MATERIALS. [*] 8.7 VOICETEK may issue invoices to NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES, respectively, issuing ORDERS and/or ORDER RELEASES for RESELLER SUPPORT SERVICES and/or TRAINING PROGRAMS at the beginning of an ANNUAL SUPPORT SERVICES PERIOD and, in the case of TRAINING PROGRAMS, upon presentation of such TRAINING PROGRAMS. [*] 8.8 For copies of SOFTWARE PRODUCTS manufactured by NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES, respectively, VOICETEK shall, upon receipt of quarterly notices from a copying location, as set forth in Section 9.1, invoice such copying location for the total amount of per copy fees due, if any, for the period covered by the notice. Any MANUFACTURING LICENSEE copying location shall be required to report its activity to the NORTHERN TELECOM COMPANY by which it was sublicensed to make copies of SOFTWARE PRODUCTS in sufficient time to enable such NORTHERN TELECOM COMPANY to include the details of such activity in its quarterly notice to VOICETEK. [*] ARTICLE IX - REPORTS; AUDITS 9.1 Within fifteen (15) calendar days after the end of each calendar quarter, each copying location will send to VOICETEK a written report summarizing its internal use and its external distribution of copies of the SOFTWARE PRODUCTS in object form manufactured under the AGREEMENT. Each quarterly report will specify: (a) The total number of copies of the SOFTWARE PRODUCTS by individual product in object form made and distributed during the reporting period by a copying location for any of the following purposes: - for internal use by NTI, or by NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES granted manufacturing rights directly or indirectly by such copying location; - for distribution by a copying location directly to end users; - for distribution by a copying location for further distribution by NORTHERN TELECOM COMPANIES, by MANUFACTURING LICENSEES or by AUTHORIZED DISTRIBUTORS to end users. Page 16 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS 15 (b) The total amount of license fees due to VOICETEK for the reporting period from the copying location submitting the report, which shall be determined by multiplying the total number of copies reported under Section 9.1 a) by the applicable license fee(s) referenced in Article VIII. 9.2 Upon VOICETEK's written request, NTI will, not more frequently than once during each twelve (12) month period of the AGREEMENT, cause an authorized representative of NTI to certify to VOICETEK the accuracy of the quarterly reporting of the number of copies of the SOFTWARE PRODUCTS in object form made by NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES for distribution to customers or to internal use sites during such twelve (12) month period. Further, upon VOICETEK's written request, NTI will permit, at the end of each twelve (12) month period of the AGREEMENT, a mutually acceptable independent certified public accountant paid by VOICETEK to examine the necessary books and records of NTI to audit such quarterly reporting, provided such accountant shall undertake in writing with NTI to protect the confidentiality of the business data and records of NTI and to disclose to VOICETEK only the accuracy or inaccuracy of the reporting hereunder. In the event an audit reveals a discrepancy between what is properly due to VOICETEK and what has been reported and paid to VOICETEK, and such discrepancy results in a shortfall in the amounts paid to VOICETEK that is both (i) a minimum of twenty (20) units, and (ii) at least ten percent (10%) of the amount actually due to VOICETEK for the twelve (12) months covered by the audit, then in addition to full payment by NTI of such shortfall NTI shall reimburse VOICETEK for all reasonable and customary costs incurred by VOICETEK related to such audit. 9.3 For all MANUFACTURING LICENSEES that are authorized by NTI or a NORTHERN TELECOM COMPANY to make copies of the SOFTWARE PRODUCTS in object form, NTI shall either: (i) retain for itself, or require that the NORTHERN TELECOM COMPANY granting rights to a MANUFACTURING LICENSEE retain, the right to audit the books and records of any such MANUFACTURING LICENSEE; or (ii) require that the MANUFACTURING LICENSEE agree, in writing, to permit, upon the written request of VOICETEK to NTI, a mutually acceptable independent certified public accountant paid by NTI or such MANUFACTURING LICENSEE to examine the necessary books and records of any such MANUFACTURING LICENSEE, provided that such accountant shall undertake in writing to such MANUFACTURING LICENSEE to protect the confidentiality of the business data and records of such MANUFACTURING LICENSEE and to disclose to VOICETEK only the accuracy or inaccuracy of the reporting required hereunder. Where such audits are requested by VOICETEK, they shall be arranged through NTI. In no event shall the identities of any MANUFACTURING LICENSEE and/or end-users be disclosed to VOICETEK. ARTICLE X - SOFTWARE PERFORMANCE WARRANTY 10.1 VOICETEK warrants that, during the WARRANTY PERIOD, SOFTWARE PRODUCTS, as delivered to NTI (i) will be compatible with and will operate in accordance with VOICETEK's then most current USER DOCUMENTATION delivered with SOFTWARE PRODUCTS for the then most recent release of SOFTWARE PRODUCTS, and (ii) to the best of VOICETEK's knowledge, shall be substantially free of CRITICAL PROBLEMS and SERIOUS PROBLEMS, and (iii) that the accompanying USER DOCUMENTATION shall be substantively complete and accurate. Page 17 16 10.2 During the WARRANTY PERIOD for SOFTWARE PRODUCTS, VOICETEK shall provide to NTI promptly, upon release by VOICETEK, a copy of all corresponding POINT RELEASES and UPDATES. 10.3 During the WARRANTY PERIOD, VOICETEK shall provide unlimited telephone support between the hours of 8:00 a.m. and 6:00 p.m. Monday through Friday (EDT or EST, as applicable) to the SUPPORT ORGANIZATION for SOFTWARE PRODUCTS. VOICETEK's telephone "hotline" shall be staffed by technical personnel with a detailed, working knowledge of the PRODUCTS. VOICETEK shall make all reasonable efforts to have each call made on the "hotline" returned by a qualified technical expert possessing the ability to discuss the details of problems as follows: (a) CRITICAL PROBLEMS = less than 30 minutes; (b) SERIOUS PROBLEMS = less than 2 hours; (c) MINOR PROBLEMS = less than 2 days; VOICETEK shall issue a call number to each problem reported by NTI. A bug report must contain sufficient information, on machine readable media if possible, for VOICETEK to reproduce the bug on VOICETEK premises. As a follow-up to any bug reports the SUPPORT ORGANIZATION may issue verbally to VOICETEK through the telephone "hotline," the SUPPORT ORGANIZATION shall provide such bug report details in writing to VOICETEK in a timely manner. VOICETEK's telephone "hotline' support shall be available for unlimited use by the SUPPORT ORGANIZATION for the PRODUCTS during the WARRANTY PERIOD. 10.4 Upon receiving notice from NTI of a bug or error in any SOFTWARE PRODUCTS during the WARRANTY PERIOD therefor, VOICETEK shall verbally acknowledge receipt of such notice. A bug report must contain sufficient information, on machine-readable media if possible, for VOICETEK to reproduce the bug on VOICETEK premises. VOICETEK's acknowledgment shall contain a unique number identifying the particular bug or error for tracking purposes. VOICETEK shall provide NTI with a status on any bug or error logged for NTI, provided that NTI identifies the particular bug or error by the tracking number assigned to it by VOICETEK. NTI may make inquiries regarding the status of any bug or error logged for NTI either orally or in writing. VOICETEK shall provide NTI with a response (i) verbally via the SUPPORT ORGANIZATION, or (ii) in writing, by number, describing the closing resolution of the bug or error, including the projected date that the necessary fix will be released and the nature of any known workaround. Each bug or error logged for NTI shall remain open until closure notification is received by NTI. 10.5 Patches or workarounds, made to fix reliability or specific performance deficiencies not reported by NTI in SOFTWARE PRODUCTS, may be made by VOICETEK when required, and, upon request, shall be either delivered to NTI within fourteen (14) days or made available to NTI through electronic means or electronic bulletin board (BBS) (e.g. Compuserve, Internet), if requested. Each patch and/or workaround requires a written description of the problem that the patch and/or workaround addresses and the requisite installation procedure. 10.6 VOICETEK shall make all reasonable efforts to provide a workaround or resolution for SOFTWARE PRODUCTS and any associated changes to the accompanying USER DOCUMENTATION, or MODIFIED USER DOCUMENTATION as applicable according to the following schedule: (a) CRITICAL PROBLEMS - within twenty-four (24) hours of receipt of notice of existence from NTI; (b) SERIOUS PROBLEMS - within five (5) days of receipt of notice of existence from NTI; (c) MINOR PROBLEMS - fixed in the next POINT RELEASE or UPDATE issued by VOICETEK. The parties acknowledge and understand the potentially idiosyncratic nature of any bug or error in SOFTWARE PRODUCTS. Recognizing this, the turnaround times set forth previously in this Page 18 17 Section 10.6 constitute targeted goals of warranty services to be provided by VOICETEK to NTI. Repetitive failure to meet these targeted goals, as implied by the language of Section 10.7, is required before NTI is entitled to pursue its remedies as set forth in Section 10.7 and/or Article XVIII of the AGREEMENT. Sporadic failures by VOICETEK to meet or beat these targeted turnaround times do not constitute a default on the AGREEMENT. 10.7 In the event that, while NTI is receiving services under Article X for any SOFTWARE PRODUCTS from VOICETEK during a WARRANTY PERIOD, VOICETEK repeatedly fails to perform its obligations (after written notice to VOICETEK to such effect and specification of the nature of such failures) or VOICETEK unilaterally decides to discontinue warranty support for one or more SOFTWARE PRODUCTS so as to seriously jeopardize the ability of NTI to support the use of SOFTWARE PRODUCTS by NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES, AUTHORIZED DISTRIBUTORS and/or end-user customers, then NTI shall have the right, after giving notice of its intentions to VOICETEK, to send one (1) or more qualified engineering personnel to VOICETEK's facilities, where such personnel shall have access to the source code form of the SOFTWARE PRODUCTS to which the failure to receive required warranty support pertains, the remaining SOURCE CODE MATERIALS related to such SOFTWARE PRODUCTS and the assistance of VOICETEK's engineering personnel in connection with such failure. VOICETEK's and NTI's engineering personnel shall have sixty (60) days from the date of arrival of the NTI engineering personnel to remedy the consequences of failure to receive the required warranty services from VOICETEK. Access to the source code form of any SOFTWARE PRODUCTS and the remaining SOURCE CODE MATERIALS related to such SOFTWARE PRODUCTS granted to NTI's engineering personnel pursuant to this Section 10.7 shall not include the right to retain any copies thereof upon leaving VOICETEK's facilities. 10.8 All notifications required pursuant to this Article X, except those sent pursuant to Section 10.7 shall be sent to NTI at the address set forth for other communications in Section 26.1. 10.9 VOICETEK has established a written formal escalation procedure, as set forth in Schedule J, which is attached hereto and is by this reference made a part of the AGREEMENT, that identifies contact persons and telephone numbers within VOICETEK's management that NTI may notify in the event VOICETEK personnel fail to: (a) provide a response within two (2) hours to a CRITICAL PROBLEM and/or a SERIOUS PROBLEM; (b) provide a workaround or resolution within twenty-four (24) hours to a CRITICAL PROBLEM; (c) deliver a workaround or resolution that fixes a SERIOUS PROBLEM within five (5) days. 10.10 The exclusive remedy of NTI or a NORTHERN TELECOM COMPANY and the sole measure of recoverable damage by NTI or a NORTHERN TELECOM COMPANY for breach of the performance warranty on SOFTWARE PRODUCTS is, in VOICETEK's sole discretion, to provide NTI with (i) instructions for curing such nonconformity, or (ii) updated versions of SOFTWARE PRODUCTS which are free of such nonconformity, or (iii) a functionally equivalent software package which is free of such nonconformity and which, following delivery, will be regarded as a particular STANDARD SOFTWARE PRODUCT and/or MODIFIED SOFTWARE PRODUCT under the AGREEMENT. In the event VOICETEK is unable to accomplish (i), (ii) and/or (iii) above, it shall accept a return of the SOFTWARE PRODUCTS in question and fully refund to NTI the license and/or sublicense fees paid therefor pursuant to Article VIII. ARTICLE XI - HARDWARE PERFORMANCE WARRANTY 11.1 VOICETEK warrants to NTI (or a NORTHERN TELECOM COMPANY) that each unit of HARDWARE PRODUCTS as delivered by VOICETEK hereunder will, under normal use and service, be free from defects in materials and workmanship during the WARRANTY PERIOD and shall conform to the SPECIFICATIONS in effect on the SHIPMENT DATE. VOICETEK's sole obligation and NTI's sole remedy under this HARDWARE performance warranty are limited to the Page 19 18 repair or replacement, at VOICETEK's option, of the defective HARDWARE PRODUCTS. VOICETEK's obligation and NTI's remedy under this Section 11.1 are conditioned upon: (a) VOICETEK's receipt of written notice of a defect in HARDWARE PRODUCTS from NTI within the WARRANTY PERIOD; and (b) the HARDWARE PRODUCTS not having been altered or repaired BY others without VOICETEK's written consent except in cases where NTI purchases hardware not manufactured BY VOICETEK direct from VOICETEK's suppliers) and such direct purchase and installation is undertaken by NTI or NTI's qualified technicians; and (c) the alleged defect not being the result of mishandling, improper servicing or improper operation (including use in conjunction with hardware electrically or mechanically incompatible). This warranty shall survive inspection, acceptance and payment. 11.2 VOICETEK warrants to NTI and/or NORTHERN TELECOM COMPANIES that all HARDWARE PRODUCTS shipped pursuant to the AGREEMENT will be manufactured and/or assembled from new and unused components. 11.3 No HARDWARE PRODUCTS shall be returned to VOICETEK without VOICETEK's authorization pursuant to an RMA issued by VOICETEK's designated repair coordinator. The costs and risk of loss associated with shipping defective HARDWARE PRODUCTS to VOICETEK's factory shall be borne by NTI, a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE. Costs and risk of loss associated with returning repaired or replacement HARDWARE PRODUCTS to NTI or a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE shall be borne by VOICETEK. VOICETEK shall return the repaired HARDWARE PRODUCTS or a replacement within the WARRANTY REPAIR PERIOD. In all cases, an RMA shall be issued within one (1) business day of a request therefor by NTI or a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE. 11.4 In the event NTI or a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE contacts VOICETEK and requests an RMA, and the defective HARDWARE PRODUCTS are circuit boards under warranty, VOICETEK shall upon request by NTI, NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES ship replacement boards within twenty-four (24) hours to the requesting office of NTI or NORTHERN TELECOM COMPANIES or MANUFACTURING LICENSEES or AUTHORIZED DISTRIBUTORS, as the case may be. In the event the original boards are not received by VOICETEK within ten (10) calendar days, VOICETEK shall have the right to invoice the NTI, NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE location requesting the replacement boards. ARTICLE XII - LIMITATION OF WARRANTY 12.1 EXCEPT IN THE CASE OF WARRANTIES OF OWNERSHIP SET FORTH IN ARTICLE II, THE WARRANTIES SET FORTH IN ARTICLE X AND ARTICLE XI OF THE AGREEMENT ARE MADE TO AND FOR THE BENEFIT OF NTI ONLY, EXCEPT THAT VOICETEK ACKNOWLEDGES THAT NTI SHALL RELY UPON SUCH WARRANTIES IN PROVIDING WARRANTIES TO NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES, AUTHORIZED DISTRIBUTORS AND END-USER CUSTOMERS. SUCH WARRANTIES CONSTITUTE THE ONLY LIABILITIES OF VOICETEK FOR BREACH OF WARRANTY AND ARE IN LIEU OF ALL OTHER WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED IN REGARD TO STANDARD PRODUCTS AND/OR MODIFIED PRODUCTS, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WHICH ARE HEREBY DISCLAIMED BY VOICETEK AND EXCLUDED FROM THE AGREEMENT. ARTICLE XIII - RESELLER SUPPORT SERVICES 13.1 Upon payment of the requisite annual fee by NTI, VOICETEK shall provide RESELLER SUPPORT SERVICES to NTI for an ANNUAL SUPPORT SERVICES PERIOD in accordance with Page 20 19 the terms and conditions of the support program set forth in Schedule F. RESELLER SUPPORT SERVICES shall not include support for application development which is available at standard rates as described in the PRICE LIST. 13.2 In consideration of the provision of RESELLER SUPPORT SERVICES, NTI shall pay VOICETEK in accordance with the RESELLER SUPPORT SERVICES pricing structure set forth in Schedule F. 13.3 During an ANNUAL SUPPORT SERVICES PERIOD for which NTI has paid the requisite annual fee, VOICETEK shall provide RESELLER SUPPORT SERVICES with respect to the current VERSION RELEASE and for the last two (2) VERSION RELEASES immediately prior to the current one. 13.4 From time to time VOICETEK may develop corrections, enhancements and major improvements to SOFTWARE PRODUCTS. After the WARRANTY PERIOD has expired and in the event NTI does not request and pay for RESELLER SUPPORT SERVICES, then VOICETEK shall be under no obligation to issue any further POINT RELEASES and UPDATES to NTI. However, promptly upon issuance of any such POINT RELEASES and UPDATES by VOICETEK to any licensee holding a license similar in scope to the AGREEMENT, VOICETEK shall offer such POINT RELEASES and UPDATES to NTI. 13.5 Fees for POINT RELEASES and UPDATES shall be included in the annual fee paid by NTI for an ANNUAL SUPPORT SERVICES PERIOD, but in the event NTI has elected not to purchase RESELLER SUPPORT SERVICES, then the applicable fee for POINT RELEASES and UPDATES shall be as specified in Schedule B or as otherwise agreed upon in writing by VOICETEK and NTI. Each POINT RELEASE and UPDATE shall be regarded as the applicable SOFTWARE PRODUCT as denoted in the PRICE LIST or elsewhere, and shall upon release to NTI be subject to all of the terms and conditions of the AGREEMENT. ARTICLE XIV - ACCEPTANCE 14.1 The acceptance of PRODUCTS is subject to inspection at the DELIVERY LOCATION and such acceptance shall be deemed to occur thirty (30) days after receipt of such PRODUCTS at the DELIVERY LOCATION unless NTI shall have provided VOICETEK with notice of nonacceptance within such period. 14.2 HARDWARE PRODUCTS will be inspected by NTI for major defects, with major defect being defined as (i) any functional failure, or (ii) a workmanship defect that is highly likely to cause infant mortality or significantly reduced product life, or (iii) a cosmetic or visual defect that is highly likely to cause the customer to request a replacement unit. 14.3 SOFTWARE PRODUCTS will be inspected by NTI for major defects, with major defects being defined as (i) SOFTWARE PRODUCTS missing labels, or (ii) SOFTWARE PRODUCTS with labels lacking accurate information as to the identity and POINT RELEASE, UPDATE or VERSION RELEASE contained therein, or (iii) defective media. 14.4 It any unit of PRODUCT does not conform to the requirements of an ORDER or an ORDER RELEASE or to the warranties set forth in Articles X and XI, as determined by NTI's inspection pursuant to the terms stated in Section 14.2 and Section 14.3, the entire quantity delivered with such PRODUCT may be returned to VOICETEK at VOICETEK's expense, subject to failure verification by VOICETEK, unless the only defect found by NTI's inspection pursuant to the terms of Section 14.3 is a quantity of media with labels missing in which case NTI shall work with VOICETEK to obtain such label(s) without returning the entire quantity of PRODUCTS to VOICETEK. Payment shall neither be deemed to constitute acceptance nor be a waiver to NTI's right to cancel any ORDER or ORDER RELEASE. ARTICLE XV - INTELLECTUAL PROPERTY INFRINGEMENT INDEMNITY 15.1 VOICETEK shall defend, indemnify and hold NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS receiving rights directly or Page 21 20 indirectly (from NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and/or AUTHORIZED DISTRIBUTORS) through NTI harmless from any and all claims, costs, expenses, damages or other liability, including reasonable and customary attorneys' fees, which is the result of patent, trademark or copyright infringement claims or claims based on misappropriation OF trade secret rights arising out of or relating to the use, copying or distribution of any of the SOFTWARE PRODUCTS in the AUTHORIZED TERRITORY or damages resulting from use of the MARKS in connection with such distribution in the AUTHORIZED TERRITORY. NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and/or AUTHORIZED DISTRIBUTORS shall notify VOICETEK promptly, in writing, In the event of any such claim, and grant to VOICETEK the right, at VOICETEK's expense, to control the defense thereof, including the sole right to settle any such claim or suit on such terms as VOICETEK shall deem desirable. If the use, copying or distribution of any SOFTWARE PRODUCTS or use of the MARKS under which the SOFTWARE PRODUCTS are distributed is held to constitute an infringement and enjoined in one or more countries within the AUTHORIZED TERRITORY, VOICETEK shall, at its own expense and option, (i) procure for NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS the right to continue using and distributing the allegedly infringing SOFTWARE PRODUCTS, or (ii) modify the allegedly infringing SOFTWARE PRODUCTS so that they become noninfringing, while maintaining to the extent possible the same form and function, or (iii) replace the allegedly infringing SOFTWARE PRODUCTS with noninfringing substitutes, while maintaining to the extent possible the same form and function, or (iv) arrange for the return of all allegedly infringing SOFTWARE PRODUCTS shipped to NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and/or AUTHORIZED DISTRIBUTORS the total amount of license fees paid therefor plus all transportation and handling costs incurred for cooperating in the return effort. 15.1.1 VOICETEK shall not have any liability to NTI under Section 15.1 for infringement and/or misappropriation, or claims thereof, that are based upon (i) the use of SOFTWARE PRODUCTS in combination with hardware and/or software furnished to NTI or a NORTHERN TELECOM COMPANY or a MANUFACTURING LICENSEE or an AUTHORIZED DISTRIBUTOR by a third party (unless approved by VOICETEK) if such infringement and/or misappropriation, or claim thereof, would have been avoided by the use of SOFTWARE PRODUCTS in combination with different hardware and/or software or, to the extent such use is possible, use of the SOFTWARE PRODUCTS without any combination, or (ii) the modification and/or enhancement of the SOFTWARE PRODUCTS by NTI, a NORTHERN TELECOM COMPANY, a MANUFACTURING LICENSEE, an AUTHORIZED DISTRIBUTOR or an end-user customer of any of the foregoing if such infringement and/or misappropriation, or claim thereof, would have been avoided by using the SOFTWARE PRODUCTS in their unmodified or unenhanced form. 15.2 VOICETEK shall defend, indemnify and hold NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES, AUTHORIZED DISTRIBUTORS and, if applicable, their end-user customers harmless from any and all claims, costs, expenses, damages or other liability, including reasonable and customary attorneys' fees, which is the result of patent or trademark infringement claims arising out of or relating to the use, sale and/or distribution of HARDWARE PRODUCTS in the AUTHORIZED TERRITORY or damages resulting from use of the MARKS in connection with such distribution in the AUTHORIZED TERRITORY. NTI, a NORTHERN TELECOM COMPANY, a MANUFACTURING LICENSEE or an AUTHORIZED DISTRIBUTOR, as the case may be, shall notify VOICETEK promptly, in writing, in the event of any such claim, and grant to VOICETEK the right, at VOICETEK's expense, to control the defense thereof, including the sole right to settle any such claim or suit on such terms as VOICETEK shall deem desirable. If the use, sale and/or distribution of HARDWARE PRODUCTS or use of the MARKS under which the HARDWARE PRODUCTS is distributed are held to constitute an infringement and enjoined in one or more countries within the AUTHORIZED TERRITORY, VOICETEK shall, at its own expense and option, (i) procure for NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS the right to continue using, selling and distributing the allegedly infringing HARDWARE PRODUCTS, or (ii) modify the allegedly infringing HARDWARE PRODUCTS so that it becomes noninfringing, while maintaining to the extent possible the same form and function, or (iii) provide a noninfringing substitute for HARDWARE PRODUCTS which is acceptable to NTI, or (iv) arrange for the return of all allegedly infringing HARDWARE PRODUCTS Page 22 21 shipped to NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS pursuant to the AGREEMENT in the countries within the AUTHORIZED TERRITORY in which the injunction is in effect and reimburse NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and/or AUTHORIZED DISTRIBUTORS the total purchase price therefor plus all transportation and handling costs incurred for cooperating in the return effort. 15.2.1 VOICETEK shall not have any liability to NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and/or AUTHORIZED DISTRIBUTORS under Section 15.2 for infringement, or claims thereof, that are based upon the use of HARDWARE PRODUCTS in combination with hardware and/or software furnished to NTI or a NORTHERN TELECOM COMPANY or a MANUFACTURING LICENSEE or an AUTHORIZED DISTRIBUTOR by a third party if such infringement, or claim thereof, would have been avoided by the use of HARDWARE PRODUCTS in combination with different hardware and/or software or, to the extent such use is possible, use of the HARDWARE PRODUCTS without any combination, or (ii) the modification of the HARDWARE PRODUCTS by NTI, a NORTHERN TELECOM COMPANY, a MANUFACTURING LICENSEE, an AUTHORIZED DISTRIBUTOR or an end-user customer of any of the foregoing if such infringement and/or misappropriation, or claim thereof, would have been avoided by using the HARDWARE PRODUCTS in its unmodified or unenhanced form. 15.3 SECTION 15.1 THROUGH SUBSECTION 15.2.1 INCLUSIVE STATE THE ENTIRE AND SOLE LIABILITY OF VOICETEK TO NTI AND OF NTI TO VOICETEK WITH RESPECT TO INFRINGEMENT AND/OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY RIGHTS PURSUANT TO THIS AGREEMENT. 15.4 The indemnity obligations set forth in Section 15.1 through Subsection 15.2.1, inclusive, of the AGREEMENT shall survive the termination or expiration of the AGREEMENT. ARTICLE XVI - LIMITATION OF LIABILITY AND DAMAGES 16.1 EXCEPT AS PROVIDED IN ARTICLE II AND ARTICLE XV, RESPECTIVELY, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGE OR LOSS OF ANY NATURE (e.g., DAMAGE TO PROPERTY, LOSS OF PROFITS, BUSINESS INTERRUPTION, LOST SAVINGS, LOSS OF USE, LOST OR DAMAGED FILES OR DATA, INJURY TO PERSON, OR ANY CLAIMS OF THOSE NOT A PARTY TO THE AGREEMENT) WHICH MAY ARISE IN CONNECTION WITH THE USE, ADAPTATION, MERGER, INCORPORATION, DISTRIBUTION, INSTALLATION, REMOVAL OR SUPPORT OF STANDARD PRODUCTS AND/OR MODIFIED PRODUCTS (SEPARATELY OR IN COMBINATION WITH OTHER HARDWARE OR SOFTWARE NOT PROVIDED BY VOICETEK) BY NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES AND AUTHORIZED DISTRIBUTORS PURSUANT TO THE AGREEMENT, REGARDLESS OF WHETHER SUCH CLAIMS ARE BASED OR REMEDIES ARE SOUGHT IN WARRANTY, CONTRACT, NEGLIGENCE, STRICT TORT, PRODUCTS LIABILITY OR OTHERWISE, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR LOSS. EXCEPT AS PROVIDED IN ARTICLE II AND ARTICLE XV, RESPECTIVELY, THE MAXIMUM LIABILITY FOR ANY BREACH OF THE AGREEMENT BY EITHER PARTY SHALL IN NO EVENT EXCEED THE SUM OF ONE MILLION DOLLARS ($1,000,000.00) OR THE AGGREGATE AMOUNT OF PRICES AND/OR LICENSE FEES PAID UNDER THE AGREEMENT OVER THE IMMEDIATELY PRECEDING FOUR CONSECUTIVE QUARTERS, WHICHEVER IS GREATER. ARTICLE XVII - REGULATORY COMPLIANCE 17.1 To the extent applicable, and unless otherwise provided in Schedule B and/or Schedule D and/or Schedule E, all HARDWARE PRODUCTS delivered to NTI or a NORTHERN TELECOM COMPANY by VOICETEK under the AGREEMENT shall : (a) be approved and listed by Underwriter's Laboratories ("U.L.") and bear appropriate U.L. approval labeling; PAGE 23 22 (b) be approved and listed by the Canadian Standards Association ("C.S.A.") and bear appropriate C.S.A. approval labeling; (c) be verified, accepted, approved and in compliance with Class A limits, as applicable, under Part 15 of the Regulations of the U.S. Federal Communications Commission and bear the appropriate labels and warning notices as required; (d) be verified, accepted, approved and in compliance with Part 68 of the Regulations of the U.S. Federal Communications Commission and bear the appropriate labels and warning notices as required; (e) be verified, accepted, approved and in compliance with each of the following European Union (EU) regulatory requirements: (i) EN 60 950 Safety (ii) EN 55 022 Class B EMC (iii) EN 50 082-1 EMC (f) be verified, accepted, approved and in compliance with other EU regulatory requirements provided that NTI has requested VOICETEK to secure such compliance and has paid to VOICETEK the requisite fee specified in the applicable development agreement and applicable annexes and addenda thereto to cover (TUV) testing and administrative costs as agreed by NTI and VOICETEK thereunder. 17.2 To the extent applicable, all user manuals or other operator manuals and/or written material supplied with the HARDWARE PRODUCTS shall contain any warning notices required by any of the regulatory or testing bodies referenced in Section 17.1. 17.3 Upon the EFFECTIVE DATE, both parties acknowledge that if all approvals have not been issued by the appropriate agencies as defined in Section 17.1 above, and in the event any of the agencies fail to certify such HARDWARE PRODUCTS within ninety (90) days of the EFFECTIVE DATE, provided any delay in approvals is attributable solely to VOICETEK's obligations hereunder and not delayed by the appropriate agencies or NTI, the AGREEMENT may be terminated at the option of NTI. VOICETEK agrees that it shall ship no HARDWARE PRODUCTS prior to issuance of the approvals as set forth in Section 17.1 without the prior written consent of NTI. 17.4 Subject to the terms of Subsection 17.4.1, VOICETEK agrees that any HARDWARE PRODUCTS shipped prior to securing all of the necessary certificates, as defined in Section 17.1 above, will be made to comply with those respective agency requirements. VOICETEK will bear any cost necessary to modify or update any STANDARD HARDWARE PRODUCTS delivered to meet those specifications relative to any HARDWARE delivered to NTI, a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE. VOICETEK shall indemnify and hold NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS harmless from any and all claims, suits, or actions brought against NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES, and/or AUTHORIZED DISTRIBUTORS by end-user customers for any damages, including reasonable and customary attorney's fees, for the failure of VOICETEK to obtain the necessary certificates, as defined in Section 17.1, prior to shipment of any STANDARD HARDWARE PRODUCTS. 17.4.1 In the event of any shipment having been made at NTI's written request, as described in Section 17.3, NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES, or AUTHORIZED DISTRIBUTORS shall indemnify and hold VOICETEK harmless from any and all claims, suits, or actions brought against NTI, NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES, or AUTHORIZED DISTRIBUTORS by end-user customers, for any damages including reasonable and customary attorney's fees, for the failure of VOICETEK to obtain the necessary certificates as defined in Section 17.1, prior to the shipment of any STANDARD HARDWARE PRODUCTS. Page 24 23 ARTICLE XVIII - DEFAULT AND TERMINATION 18.1 Any of the following shall constitute sufficient cause for a party to the AGREEMENT to seek the remedies available to a nondefaulting party, as provided in Sections 18.2 through 18.4: (a) The failure of the other party to perform any material term, condition or covenant of the AGREEMENT, which shall constitute a default of the AGREEMENT, and such default has not been corrected within thirty (30) days of the date of receipt of written notice of such default given by the nondefaulting party; (b) The other party is or becomes insolvent, or a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition of such other party, or seeks to make a compromise, arrangement or assignment for the benefit of its creditors, or ceases doing business in the normal course. 18.2 In the event any act of default constituting sufficient cause pursuant to either Section 18.1(a) or Section 18.1(b) shall occur, the party not in default shall have the right to and may elect any or all of the following remedies, which shall be cumulative and not exclusive: (a) Declare the AGREEMENT to be immediately terminated; (b) Pursue each and every remedy available at law and in equity. 18.3 In the event VOICETEK is the defaulting party pursuant to Section 18.1(b) above, NTI shall, in lieu of terminating the AGREEMENT, have the option of furnishing written notice to VOICETEK of NTI's intention to continue to perform the AGREEMENT under the following terms and conditions: (i) Each end-user customer's rights, with respect to any and all copies of SOFTWARE PRODUCTS distributed directly or indirectly (through NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES or AUTHORIZED DISTRIBUTORS) to end-user customers, pursuant to the AGREEMENT, shall remain in full force and effect; (ii) With the exception of any SOURCE CODE MATERIALS not proprietary to VOICETEK (unless the required rights to such have been granted to VOICETEK by VOICETEK's suppliers), NTI shall have a right of access, by written notice given to VOICETEK, to gain possession of the source code form of the SOFTWARE PRODUCTS and the remaining SOURCE CODE MATERIALS and make use of them free of charge solely for the purposes of directly granting rights to use copies of SOFTWARE PRODUCTS incorporated into HARDWARE PRODUCTS to customers and for support activities. Upon receipt of written notice, VOICETEK or its trustee or receiver in bankruptcy, as the case may be, shall immediately and forthwith deliver SOURCE CODE MATERIALS, including specifically the source code form of SOFTWARE PRODUCTS, to NTI. NTI shall have the right to use, make bug fixes in and recompile the source code form of SOFTWARE PRODUCTS and the right to distribute object code copies of SOFTWARE PRODUCTS to customers in the AUTHORIZED TERRITORY, either directly or through NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS, provided NTI pays to VOICETEK right-to-use fees for such SOFTWARE PRODUCTS at the prices set forth in Schedule B or Schedule E, subject to application of the applicable discount levels set forth in Schedule H. VOICETEK hereby agrees and acknowledges that either the failure of VOICETEK or its trustee or receiver in bankruptcy to deliver all SOURCE CODE MATERIALS, including specifically the source code form of SOFTWARE PRODUCTS hereunder or, in the event SOURCE CODE MATERIALS for SOFTWARE PRODUCTS are deposited in escrow, affirmative actions or omissions by VOICETEK in any way hindering the release of SOURCE CODE MATERIALS from escrow will cause irreparable harm to NTI for which there is no adequate remedy at law and, therefore, NTI shall be entitled to specific performance of such delivery obligation and, in addition, and without being an election of remedies, NTI may pursue each and every remedy available at law or in equity; Page 25 24 (iii) In the event VOICETEK's Section 18.1(b) default is resolved in such a way that VOICETEK resumes its operations as they pertain to NTI in a manner substantially equivalent to its operations prior to the occurrence of such default, NTI shall promptly return the source code form of SOFTWARE PRODUCTS and the other SOURCE CODE MATERIALS made available to NTI by VOICETEK solely pursuant to Section 18.2(b), Section 18.3(ii) and/or Section 19.2, but not otherwise. 18.4 In the event the AGREEMENT is terminated by VOICETEK for default by NTI, VOICETEK shall permit NTI to retain limited rights to use the SOFTWARE PRODUCTS thereafter for up to one (1) year following the date of termination of the AGREEMENT by VOICETEK in order to allow NTI to satisfy its then existing contractual obligations for support for SOFTWARE PRODUCTS to NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES, AUTHORIZED DISTRIBUTORS and end-user customers. Exceptions to VOICETEK's obligation to permit NTI to continue to exercise such limited rights shall include the case where such default by NTI relates to the payment of applicable prices or license fees, as set forth in Sections 8.1 through 8.8 inclusive, which are not reasonably in dispute, or any obligation that would unreasonably jeopardize VOICETEK's intellectual property rights in one or more SOFTWARE PRODUCTS or VOICETEK's confidential information in which event only the SOFTWARE PRODUCTS to which intellectual property rights in jeopardy and/or VOICETEK's confidential information pertain would not be subject to the continued exercise of limited rights by NTI. The limited rights to use the SOFTWARE PRODUCTS, as provided in this Section 18.4, shall survive the termination or expiration of the AGREEMENT for up to one (1) year. 18.5 Subject to the provisions of Section 18.3 and Section 18.4, respectively, it is understood that, upon termination of the AGREEMENT, NTI shall, within thirty (30) days following such termination, destroy its copies of the SOFTWARE PRODUCTS and any whole or partial reproductions thereof in any form, and all materials related to the SOFTWARE PRODUCTS which are still under the control of NTI, and so certify in writing to VOICETEK, except that NTI may retain a sufficient number of copies of such SOFTWARE PRODUCTS as is reasonably necessary for NTI to fulfill its contractual obligations, as set forth in Section 18.4. ARTICLE XIX - SOURCE CODE ESCROW OPTION 19.1 NTI shall, in its sole discretion, have the option to require that the SOURCE CODE MATERIALS (excluding those not proprietary to VOICETEK unless the right to deposit them in escrow has been granted to VOICETEK by VOICETEK's suppliers) for any or all SOFTWARE PRODUCTS be deposited in escrow. If requested by NTI, the parties shall, in good faith, negotiate the selection of a fair, impartial and competent escrow agent and deposit the SOURCE CODE MATERIALS for any or all SOFTWARE PRODUCTS in escrow for the benefit of NTI or, if such SOURCE CODE MATERIALS were previously deposited by VOICETEK, designate NTI as a registered beneficiary. The express purpose for depositing the SOURCE CODE MATERIALS in escrow or designating NTI as a registered beneficiary, as the case may be, shall be to secure a means of access to all materials reasonably necessary or useful in enabling NTI to maintain, modify, enhance and/or support the SOFTWARE PRODUCTS in order to maintain the functionality of the SOFTWARE PRODUCTS with limited assistance or without assistance from VOICETEK. In any event, NTI shall pay the costs and expenses assessed for the deposit of any SOURCE CODE MATERIALS not proprietary to VOICETEK into escrow. In no event shall NTI be required to pay more than the proportionate costs and expenses attributable to the deposit of VOICETEK's proprietary SOURCE CODE MATERIALS into escrow, if all or any portion of VOICETEK's proprietary SOURCE CODE MATERIALS have been, or during the TERM are, deposited into escrow at the request of and for the benefit of any third party. 19.2 In the event VOICETEK is or becomes insolvent, or a party to any bankruptcy or receivership proceeding or any similar action affecting the financial condition of VOICETEK, or seeks to make a compromise, arrangement or assignment for the benefit of its creditors, or ceases doing business in the normal course, and NTI provides written notice to VOICETEK, as required by Section 18.3(ii), NTI shall be given access to and rights to use the SOURCE CODE MATERIALS held in escrow, beginning ten (10) days after receipt by VOICETEK of NTI's written notice demanding access to such SOURCE CODE MATERIALS. Page 26 25 ARTICLE XX - FORCE MAJEURE 20.1 If the performance of the AGREEMENT (including, without limitation, any deliveries hereunder) is interfered with by reason of any circumstance beyond the reasonable control of the party affected including, without limitation, fire, act of God, labor unrest, and discontinuance of manufacture of sole-sourced components, then the party affected shall be excused from such performance on a day-for-day basis to the extent of such interference (and the other party shall likewise be excused from performance on a day-for-day basis to the extent such party's obligations relate to the performance so interfered with; provided that the party so affected shall use reasonable efforts to remove such causes of nonperformance. ARTICLE XXI - CONFIDENTIALITY 21.1 Any information designated as "Confidential", "Restricted" or "Proprietary" in writing by the disclosing party prior to disclosure shall be considered confidential information under the AGREEMENT. In the case of any oral disclosure of confidential information, such information shall be treated as confidential if the disclosing party (a) states that such information is confidential at the time of disclosure, and (b) summarizes such information in a writing setting forth the date, nature and extent of the oral disclosure and indicating the same to be confidential, and delivers such written summary to the other party within thirty (30) days after the date of such oral disclosure. 21.2 The parties shall use reasonable efforts and at least the same care that each uses to protect its own confidential information of like importance, to prevent unauthorized dissemination or disclosure of the other party's confidential information during and for three (3) years following the last day of the TERM. 21.3 The confidentiality obligations set forth in this Article XXI will not apply to any information that: (a) becomes known to the general public without fault or breach on the part of the receiving party; (b) either party, disclosing its own confidential information, customarily provided to others without restriction on disclosure; (c) the receiving party obtains from a third party without breach of a nondisclosure obligation and without restriction on disclosure; (d) is furnished to a third party by the disclosing party without a similar restriction on such third party's rights; (e) can by written records be shown to have been known by the receiving party at the time of disclosure; (f) can by written records be shown to have been developed independently by the receiving party without using any information as defined in Section 21.1 which is received from the disclosing party. 21.4 The parties agree and acknowledge that any confidential and proprietary information of the other party in its possession shall, upon termination of the AGREEMENT and upon the request of the other party, be returned to the disclosing party. 21.5 Neither party shall publicly disclose any information regarding the terms and conditions contained herein without having received prior approval, in writing, from the other party. 21.6 NTI agrees not to (a) attempt to reverse engineer, decompile, or reverse assemble the SOFTWARE PRODUCTS, or create or attempt to create any derivative work of the SOFTWARE PRODUCTS, nor (b) directly or indirectly, through a third party, use the SOFTWARE PRODUCTS, or a derivative thereof, or any confidential or proprietary information of VOICETEK to create any computer software program or documentation which is functionally, visually, or otherwise Page 27 26 substantially similar to any SOFTWARE PRODUCT, whether or not such SOFTWARE PRODUCT is then available for license or sale by VOICETEK. ARTICLE XXII - LAWS AND REGULATIONS 22.1 At no additional charge to NTI, VOICETEK shall comply with and obtain all licenses and permits required by, and PRODUCTS shall be in conformance with, all applicable laws and governmental orders and regulations in effect at the time of shipment of PRODUCTS including without limitation the following United States laws and regulations: Comprehensive Environmental Response, Compensation and Liability Act of 1980, Consumer Product Safety Act, Toxic Substances Control Act, Occupational Safety and Health Act of 1970, Radiation Control for Health and Safety Act of 1968, Resource Conservation and Recovery Act of 1976, Clean Air Act, Clean Water Act, Hazardous Materials Transportation Act, Vietnam Era Veterans Readjustment Assistance Act of 1972, Rehabilitation Act of 1973 and the clauses set forth in Federal Acquisition Regulations (subject to "Contractor," "Subcontractor" and "Contract' used in such clauses meaning NTI, VOICETEK and AGREEMENT, respectively) 52.219-8, 52.219-9, 52.219-13, 52.220-3, 52.220-4, 52.222-1, 52.222-4, 52.222-20, 52.222-21, 52.222-26 (subparagraphs b(l) - b(11), 52.222-35 and 52.222-36, which clauses are incorporated by reference, with the same force and effect as it they were given in full text. ARTICLE XXIII - INSURANCE 23.1 VOICETEK shall maintain during its performance under the AGREEMENT General Liability Insurance, including contractual, products liability and broad form vendors' property damage endorsement with the limits of either $5,000,000.00 combined single limit per occurrence for bodily injury and property damage or $3,000,000.00 bodily injury per occurrence and $2,000,000.00 property damage per occurrence. 23.2 Insurance requirements stated in Section 23.1 shall be primary and noncontributory with respect to any insurance which NTI may have, and NTI shall under such insurance be named as an additional insured with a cross-liability endorsement. Prior to the commencement of the TERM, VOICETEK shall furnish to NTI a certificate of insurance evidencing that such insurance is in effect. The certificate shall also state that NTI shall be notified by VOICETEK's insurance carrier(s) within thirty (30) days of any cancellation, material change or exhaustion of the aforementioned limits. VOICETEK shall in such event furnish a new certificate in the event of cancellation or expiration of any insurance. ARTICLE XXIV - EXPORTERS CERTIFICATE OF ORIGIN 24.1 With the assistance of NTI, VOICETEK shall initially provide and update, as necessary, any certificates as may be required for any PRODUCTS which qualify under the North American Free Trade Agreement between the United States, Canada, and Mexico, or to any other Free Trade Agreements of which the United States is or may become a party. ARTICLE XXV - INDEPENDENT CONTRACTORS 25.1 VOICETEK and NTI are independent contractors in all relationships and actions under and contemplated by the AGREEMENT. The AGREEMENT is not to be construed to create, or to authorize the creation of, any employment, partnership, or agency relation or to authorize NTI or any NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES or AUTHORIZED DISTRIBUTORS to enter into any commitment or agreement binding on VOICETEK or to allow one party to accept service of any legal process addressed to, or intended for, the other party. NTI and the NORTHERN TELECOM COMPANIES, MANUFACTURING LICENSEES and AUTHORIZED DISTRIBUTORS shall not make any warranties, guarantees or any other commitments on behalf of VOICETEK pursuant to the AGREEMENT. Page 28 27 ARTICLE XXVI - NOTICES AND REQUESTS 26.1 All official or formal notices required or otherwise provided under the AGREEMENT shall be sent by certified or registered mail (return receipt requested), postage prepaid, or by cable, telegram, facsimile, telex or hand delivery to the other party at the address listed below for the other party and addressed as follows: NTI: NORTHERN TELECOM INC. 2305 Mission College Boulevard Santa Clara, California 95054-1591 Attention: Manager, Technology Acquisition Dept. 0521 VOICETEK: VOICETEK CORPORATION 19 Alpha Road Chelmsford, Massachusetts 01824-4175 Attention: Contracts Manager or to such other address as the party to receive the notice so designates by written notice to the other party. 26.2 All other written communications required or otherwise provided hereunder by one party to the other shall be mailed by First Class Mail, postage prepaid, to the following addresses or to such changed address as either party entitled to notice hereunder shall have communicated in writing to the other party: NTI: NORTHERN TELECOM INC. 2305 Mission College Boulevard Santa Clara, California 95054-1591 Attention: Art Hazeldine Dept. 0521 VOICETEK: VOICETEK CORPORATION 19 Alpha Road Chelmsford, Massachusetts 01824-4175 Attention: Contracts Manager 26.3 Except in the case of notices sent by certified or registered mail (return receipt requested), notices given pursuant to Article XXVI shall be deemed to have been received five (5) days after mailing if given by First Class Mail, and one (1) business day after sending if given by cable, telegram, facsimile, telex and upon delivery if given by hand. ARTICLE XXVII - GENERAL 27.1 The interpretation of the AGREEMENT and the rights and obligations of the parties shall be governed by the laws of the State of California, except as to patent, copyright and trademark matters, which are governed by federal law. The parties agree that Santa Clara, California, is both the place of making and the place of performance of the AGREEMENT for all purposes. 27.2 The AGREEMENT, including all applicable Schedules constitutes the entire agreement between the parties and supersedes any and all prior or contemporaneous oral and written communications, understandings or agreements relating to the subject matter hereof. Any amendments, or alternative or supplementary provisions, must be made in writing and be duly executed by an authorized representative or agent of each of the parties hereto. The provisions of the Software License and Distribution Agreement dated 31 July 1992 shall not be superseded Page 29 28 in any respect by the AGREEMENT. The parties hereby agree that a resolution to any and all unfulfilled obligations of the parties, as set forth in Technology Development Agreement 2 between them, shall be mutually agreed upon, with the results being set forth in a Master Technology Development Agreement and Annexes applicable to specific projects, which is to be executed by NTI and VOICETEK. 27.3 The AGREEMENT shall inure to the benefit of and be binding upon the respective successors and assigns, if any, of the parties hereto. 27.4 The invalidity of any provision of the AGREEMENT shall not affect the validity of any other provision thereof. 27.5 Neither party shall, in any advertising, sales promotion materials, press releases or any other publicity matters use the name of the other party, any subsidiary or affiliate of the other party or any variation of the foregoing or language from which the connection of said names may be implied without such other party's prior written approval. 27.6 The AGREEMENT may be executed in one or more counterparts, each of which shall constitute one and the same instrument. 27.7 Neither party shall assign the AGREEMENT or any rights received hereunder without the prior written consent of the other party. Notwithstanding the foregoing, either party may assign the AGREEMENT or any rights received hereunder to a subsidiary or affiliate in which it owns at least a majority interest or to an affiliate that owns a majority interest in such party without such prior written consent, but upon notice to the other party. In addition, VOICETEK may assign the AGREEMENT or any rights received hereunder to its successor in interest by virtue of a merger or corporate reorganization or to the purchaser of substantially all of VOICETEK's assets, without prior written consent, but upon notice to NTI. In the event VOICETEK should merge with, or be acquired by, or sell substantially all its assets to, a direct competitor of NTI, NTI may terminate the AGREEMENT, subject only to the obligations set forth in those provisions of the AGREEMENT which, by their terms or clear intent, survive termination hereof. 27.8 No provision of the AGREEMENT shall be deemed waived, amended or modified by either party, unless such waiver, amendment or modification be in writing and signed by the party against whom enforcement of the waiver, amendment or modification is sought. Any such amendment or modification shall be binding with or without tender of any consideration. 27.9 The headings used herein are for convenience only and shall not be deemed to be part of the AGREEMENT or used to construe or interpret any of the provisions hereof. 27.10 Each party to the AGREEMENT hereby represents to the other that it has full power and authority to enter into and perform the AGREEMENT and that the person signing the AGREEMENT on its behalf has been properly authorized and empowered to do so. Each party further acknowledges that it has read the AGREEMENT, that it understands the terms and conditions hereof, and that it agrees to be bound by the AGREEMENT. IN WITNESS WHEREOF, the parties hereto have, by their duly authorized representatives, executed the AGREEMENT as of the day and year of the latter signature set forth below. Page 30 29 NORTHERN TELECOM INC. VOICETEK CORPORATION By: /s/J. Michael Camp By: /s/Roger Tuttle _______________________________ _______________________________ Name: J. Michael Camp Name: Roger Tuttle _____________________________ _____________________________ (type/print) (type/print) Title: Vice President Title: V.P. Finance ____________________________ ____________________________ (type/print) (type/print) Date: 6/16/95 Date: 16 JUNE 1995 _____________________________ ______________________________ - ------------------------ | APPROVED AS | | TO LEGAL FORM | |--------------------- | | BY: Joel M. Erickson | - ------------------------ 15 JUNE 1995 Page 31 30 SCHEDULE A AUTHORIZED TERRITORY Canada United States (U.S.) NORTHERN TELECOM INC. VOICETEK CORPORATION BY: /s/J. Michael Camp By: /s/Roger Tuttle ____________________________ ________________________________ Name: J. Michael Camp Name: Roger Tuttle __________________________ ______________________________ (type/print) (type/print) Title: Vice President Title: V.P. Finance _________________________ _____________________________ (type/print) (type/print) Date: 6/16/95 Date: 16 June 1995 __________________________ ______________________________ - ------------------------ | APPROVED AS | | TO LEGAL FORM | |--------------------- | | BY: Joel M. Erickson | - ------------------------ 15 JUNE 1995 Page 32 31 SCHEDULE B PRICE LIST PAGE 33 32 SCHEDULE C MARKS Voicetek(R) VTK(R) Generations(TM) Page 34 33 SCHEDULE D INTERNAL USE PRICING Under the terms of the AGREEMENT, NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES may purchase SYSTEMS to be used internally at the prices enumerated in Schedule B and/or Schedule E, as qualified by the applicable discount level set forth in Schedule 1. The prices for SYSTEMS for NTI's internal use will include: - VTK-Base System with twelve (12) ports Loopstart eight (8) ports ISDN/BRI, or twenty-four (24) ports T1 and forty (40) hours of voice storage - GENERATIONS Development/Runtime Licenses - All optional software features enabled - Full set of USER DOCUMENTATION (including all optional features USER DOCUMENTATION) - Warranties as provided by VOICETEK under the AGREEMENT Under the terms of the AGREEMENT, NTI, NORTHERN TELECOM COMPANIES and MANUFACTURING LICENSEES may purchase GENERATIONS Development licenses for SELF-HOSTED UNITS to be used internally at the prices set forth in Schedule B and/or Schedule E, as qualified by the applicable discount level set forth in Schedule 1. The price for the GENERATIONS Development license intended for use with SELF-HOSTED UNITS to be used internally will include: - GENERATIONS Development License; - All Optional software features enabled; and - Warranties as provided by VOICETEK under the AGREEMENT. Page 35 34 SCHEDULE E * PRICING
Order Code Product Description Price PT-04-ESC D-41ESC 4-Port Assembly $ * PT-12-LS Loopstart 12-Port Assembly $ * PT-08-BRI BRI8-Port Assembly $ * VR-02-VCS Continuous ASR $ * (2-Port Assembly) VR-02-VCSE Continuous ASR Expansion $ * (2-Port Expansion) PT-24-T1 T1 24-Port Assembly $ * PT-30-E1 E1 30-Port Assembly $ * PT-60-E1 E1 60-Port Assembly $ * PT-04-NS D41 Northstar Assembly $ * TSP-SW TSP Runtime License $ * TTS-04-LH TTS 4-Port Assembly $ * (HW & SW) TTS-04-LE TTS 4-Port Expansion $ * (SW only) VR-04-VCS-D Discrete ASR 4-Port Expansion $ * (HW & SW) HL-5250-HW-S 5250 Synchronous I/F $ * (SSI HW & SW) HL-5250-HW-TR 5250 Token Ring I/F $ * (SSI HW & SW) HL-3270-HW-S 3270 Synchronous I/F $ * (SSI HW & SW) HL-3270-HW-TR 3270 Token Ring I/F $ * (SSI HW & SW) HL-5250-SW TRS 5250 Software $ * HL-3270-SW TRS 3270 Software $ * HL-VT100-SW TRS VT100 Software $ * RED-AP-SW Redundant AP Software $ *
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Page 36 35 SCHEDULE E * PRICING (Continued)
Order Code Product Description Price RW-OPT Report Writer Software * (Customized Version) PBX-RM Rolm ACD I/F * PBX-NT Ml ACD I/F * PBX-C1 Customized PBX I/F * VR-04-VCS-DSO Discrete ASR SW Only * TTS-04-LHSO TTS Software Only * FAX-02-BTSO Fax SW Only * RM-CAB-01 Rack Cabinet * PT-12-DID 12-Port Assembly * (D(D) TBD SMDI Software * TBD UPS Software Support * N Non-discountable
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Page 37 36 Page 38 37 SCHEDULE G REPRODUCTION SERVICES AGREEMENT THIS REPRODUCTION SERVICES AGREEMENT (hereinafter 'Agreement") is made and executed by and between , a corporation with offices at (hereinafter "CONTRACTOR") and N0RTHERN TELEC0M INC., a Delaware corporation with offices at (hereinafter "NTI") this _ day of 199___. RECITALS WHEREAS, NTI requires the services of a contractor to perform certain reproduction tasks involving computer programs, user documentation and technical documentation, among other things; AND WHEREAS, CONTRACTOR is in the business of providing services such as volume reproduction of an assortment of items, including computer programs and written materials of various kinds; NOW THEREFORE, in consideration of the mutual terms and conditions hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, THE PARTIES HERETO AGREE AS FOLLOWS: ARTICLE I - DEFINITIONS 1.1 "CAMERA-READY COPY" or "CAMERA-READY COPIES" shall mean a professional quality reproducible master copy of a WORK OF AUTHORSHIP other than a COMPUTER PROGRAM. 1.2 "COMPUTER PROGRAM" or "COMPUTER PROGRAMS" shall mean a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result. 1.3 "REPRODUCIBLE MASTER" or "REPRODUCIBLE MASTERS" shall mean a reproducible master copy of a COMPUTER PROGRAM. 1.4 "WORK OF AUTHORSHIP" or "WORKS OF AUTHORSHIP" shall mean works expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature of the material objects, such as books, periodicals, manuscripts, tapes, disks, or cards in which they are embodied. ARTICLE II - NTI WARRANTIES AND REPRESENTATIONS 2.1 NTI warrants and represents that, as of the date of delivery of a REPRODUCIBLE MASTER and/or a CAMERA-READY COPY by NTI to CONTRACTOR hereunder, the COMPUTER PROGRAM embodied in such REPRODUCIBLE MASTER and/or the WORK OF AUTHORSHIP embodied in such CAMERA-READY COPY is/are not known by NTI to be the subject of any claims of infringement of any patent, trademark, copyright and/or trade dress or of any claims of misappropriation of any trade secret of any third party. NTI warrants and represents that, to the best of its knowledge, NTI either owns or otherwise has been granted the necessary rights to authorize and/or grant all necessary rights to make reproductions of each REPRODUCIBLE MASTER and/or CAMERA-READY COPY provided to CONTRACTOR hereunder. ARTICLE III - GRANT OF RIGHTS 3.1 In accordance with and subject to the terms and conditions of this Agreement, NTI hereby grants to CONTRACTOR a personal, nonexclusive, nontransferable license: (a) to make copies from each REPRODUCIBLE MASTER delivered by NTI to CONTRACTOR for such purpose. Page 40 38 (b) to make copies from each CAMERA-READY COPY delivered by NTI to CONTRACTOR for such purpose. ARTICLE IV - DELIVERABLES 4.1 NTI shall deliver purchase orders to CONTRACTOR either accompanied by the REPRODUCIBLE MASTER and/or CAMERA-READY COPY of which copies are being ordered or referencing the appropriate REPRODUCIBLE MASTER and/or CAM- ERA-READY COPY already in the custody of the CONTRACTOR to the following address: ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- ARTICLE V - PRICE; PAYMENT 5.1 Upon the latter of the actual date of delivery of copies of COMPUTER PROGRAMS and/or WORKS OF AUTHORSHIP to NTI and the date of receipt of the invoice therefor by NTI, payment for such copies shall be due and payable by NTI to CONTRACTOR within forty-five (45) days. NTI shall make its payments to CONTRACTOR as provided herein, in lawful United States currency at the registered office of CONTRACTOR in . ARTICLE VI - DISCLAIMER OF WARRANTY AND LIMITED WARRANTY 6.1 THE REPRODUCIBLE MASTERS AND/OR CAMERA-READY COPIES ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND BY NTI TO CONTRACTOR IN THE FIRST INSTANCE AND BY CONTRACTOR TO NTI DURING THE RETURN OF SUCH REPRODUCIBLE MASTERS AND/OR CAMERA-READY COPIES. NEITHER PARTY WARRANTS, GUARANTEES, OR MAKES ANY REPRESENTATIONS TO THE OTHER REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE REPRODUCIBLE MASTERS AND/OR CAMERA-READY COPIES IN TERMS OF CORRECTNESS, ACCURACY, RELIABILITY, CURRENTNESS OR OTHERWISE. 6.2 THE ENTIRE RISK AS TO COST OF ALL REPAIR AND/OR CORRECTION OF DEFECTIVE COPIES OF COMPUTER PROGRAMS AND/OR WORKS OF AUTHORSHIP ASSUMED HEREUNDER SHALL BE ALLOCATED TO NTI IF IT CAN BE ESTABLISHED THAT THE REPRODUCIBLE MASTER AND/OR CAMERA-READY COPY WAS DEFECTIVE AT THE TIME OF ITS DELIVERY TO CONTRACTOR. THE ENTIRE RISK AS TO COST OF ALL REPAIR AND/OR CORRECTION OF DEFECTIVE COPIES OF COMPUTER PROGRAMS AND/OR WORKS OF AUTHORSHIP ASSUMED HEREUNDER SHALL BE ALLOCATED TO CONTRACTOR IF IT CAN BE ESTABLISHED THAT THE REPRODUCIBLE MASTER AND/OR THE CAMERA-READY COPY WAS NOT DEFECTIVE AS OF THE DATE OF ITS DELIVERY BY NTI TO CONTRACTOR PURSUANT TO SECTION 4.1 OF THIS AGREEMENT. 6.3 CONTRACTOR warrants to NTI that each unit of storage media on which a copy of a COMPUTER PROGRAM is recorded is free from defects in materials and workmanship under normal use and service for a period of ninety (90) days from the date of delivery of such unit of storage media to NTI, as evidenced by a copy of the packing slip. Further, CONTRACTOR hereby limits the duration of any implied warranty on each unit of storage media to the period stated above. 6.4 In the case where risk as to cost of all repair and/or correction of defective copies of COMPUTER PROGRAMS is allocated to CONTRACTOR under Section 6.2 of this Agreement, CONTRACTOR's entire liability and NTI's exclusive remedy as to the units of storage media shall be replacement of the units of storage media that do not meet CONTRACTOR's Limited Warranty as set forth in Section 6.3 and which are returned to CONTRACTOR. If failure of a unit of storage media has resulted from accident, abuse, or misapplication, CONTRACTOR shall have no responsibility to replace such unit of storage media. Any replacement unit of storage media will be warranted for the remainder of the original warranty period or thirty (30) days, whichever is longer. Page 41 39 6.5 EXCEPT AS SET FORTH IN ARTICLE II OF THIS AGREEMENT, THE ABOVE ARE THE ONLY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, THAT ARE MADE BY CONTRACTOR TO NTI AND BY NTI TO CONTRACTOR PURSUANT TO THIS AGREEMENT. ARTICLE VII - ALLEGATION OF INFRINGEMENT; LITIGATION 7.1 In the event a COMPUTER PROGRAM embodied in a REPRODUCIBLE MASTER and/or a WORK OF AUTHORSHIP embodied in a CAMERA-READY COPY provided by NTI to CONTRACTOR for reproduction under this Agreement becomes the subject of claims of intellectual property infringement and/or infringement litigation, CONTRACTOR shall have the right to cease performance of its obligations pursuant to this Agreement, except with respect to CONTRACTOR's confidentiality obligations, declare this Agreement to be immediately terminated and return to NTI all REPRODUCIBLE MASTERS and all CAMERA-READY COPIES received from NTI together with any existing inventory of COMPUTER PROGRAMS and/or WORKS OF AUTHORSHIP already reproduced for NTI ARTICLE VIII - LIMITATION OF LIABILITY 8.1 IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER ARISING OUT OF THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ARTICLE IX - TERM 9.1 This Agreement shall become effective on the date of signature by the latter of the parties to sign, and extend for a period of five (5) years, unless earlier terminated pursuant to the terms of Section 10.1. ARTICLE X - CONFIDENTIALITY 10.1 CONTRACTOR understands that the REPRODUCIBLE MASTERS and the CAMERA-READY COPIES supplied by NTI to CONTRACTOR pursuant to this Agreement contain proprietary information of NTI and/or NTI's suppliers, and that such REPRODUCIBLE MASTERS and CAMERA-READY COPIES are protected by copyright. CONTRACTOR agrees not to use, copy and/or distribute copies made from such REPRODUCIBLE MASTERS and/or CAMERA-READY COPIES other than as authorized to do so by NTI pursuant to this Agreement. ARTICLE XI - MARKING; LABELING 11.1 CONTRACTOR agrees to affix, upon each copy of each COMPUTER PROGRAM made from a REPRODUCIBLE MASTER delivered by NTI, the appropriate label, including the copyright notice, which copyright notice and/or label either appears on the REPRODUCIBLE MASTER of such COMPUTER PROGRAM supplied by NTI to CONTRACTOR or is provided to CONTRACTOR along with instructions regarding placement by CONTRACTOR on all copies of such COMPUTER PROGRAM made by CONTRACTOR for NTI. 11.2 In connection with its handling and reproduction of the COMPUTER PROGRAMS and/or WORKS OF AUTHORSHIP supplied to CONTRACTOR by NTI pursuant to this Agreement, CONTRACTOR shall not alter or modify the copyright notice supplied by NTI for placement by CONTRACTOR on each copy of such COMPUTER PROGRAMS and/or WORKS OF AUTHORSHIP made by CONTRACTOR for NTI in accordance with the provisions of the U.S. Copyright Act, 17 U.S.C. 101, et. seq., specifically 17 U.S.C. 401 through 406. ARTICLE XII - OWNERSHIP OF TRADEMARKS AND COPYRIGHTS 12.1 CONTRACTOR hereby acknowledges and agrees that nothing herein gives CONTRACTOR any right, title or interest in the trademarks and/or copyrights of NTI and/or NTI's suppliers pertaining to Page 42 40 the REPRODUCIBLE MASTERS and/or CAMERA-READY COPIES supplied by NTI to CONTRACTOR, nor in any copies of the same made by CONTRACTOR at the direction of NTI. Upon termination of this Agreement by expiration or for any other reason, CONTRACTOR shall no longer use the trademarks and copyrights associated with the REPRODUCIBLE MASTERS and/or CAMERA-READY COPIES supplied by NTI to CONTRACTOR in the making of any copies the same or in any other manner. Except as set forth in Section 3.1 of this Agreement, no license or other grant is expressed or implied to CONTRACTOR to produce, reproduce, copy or in any other manner use the REPRODUCIBLE MASTERS and/or the CAMERA-READY COPIES supplied to CONTRACTOR by NTI pursuant to this Agreement. ARTICLE XIII - INSPECTION; ACCEPTANCE 13.1 The acceptance by NTI of copies of COMPUTER PROGRAMS and/or WORKS OF AUTHORSHIP reproduced by CONTRACTOR is subject to inspection at the delivery location and such acceptance shall be deemed to occur ten (10) days after receipt of such copies at the delivery location unless NTI shall have provided CONTRACTOR with notice of nonacceptance within such period. If one or more copies do not conform to the requirements of a purchase order issued by NTI to CONTRACTOR or, in the case of COMPUTER PROGRAMS, to the warranty set forth in Section 6.3, the entire quantity of copies delivered with the defective copy or copies may be returned to CONTRACTOR at CONTRACTOR's expense. ARTICLE XIV - TERMINATION; REMEDIES 14.1 Except as provided to the contrary in Section 7.1, in the event either party fails to perform any term, condition or covenant of this Agreement and such failure continues uncorrected for at least fifteen (15) days following the date of receipt by the nonperforming party of written notice of the specific failure to perform from the other party, the nonperforming party shall be deemed to be in default of this Agreement. Upon the occurrence of a default of this Agreement, the party not in default shall have the right to and may elect to declare this Agreement to be immediately terminated and/or pursue each and every available remedy at law and in equity. 14.2 CONTRACTOR acknowledges that the COMPUTER PROGRAMS and/or WORKS OF AUTHORSHIP provided by NTI to CONTRACTOR hereunder are the confidential and proprietary property of NTI and/or NTI's suppliers, that a violation in any material respect of Section 10.1, 11.1 and 11.2, respectively, of this Agreement by CONTRACTOR would cause NTI irreparable injury for which NTI would have no adequate remedy at law, and that NTI shall be entitled to preliminary and other injunctive relief against any such violation by CONTRACTOR. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other rights and remedies which NTI may have at law or in equity. ARTICLE XV - INDEPENDENT CONTRACTORS 15.1 CONTRACTOR and NTI are independent contractors in all relationships and actions under and contemplated by this Agreement. This Agreement is not to be construed to create, or to authorize the creation of, any employment, partnership, or agency relation or to authorize CONTRACTOR to enter into any commitment or agreement binding on NTI or to allow one party to accept service of any legal process addressed to, or intended for, the other party. ARTICLE XVI - NOTICES 16.1 All notices required or provided hereunder by one party to the other party shall be in writing and shall be mailed by First Class United States Mail, postage prepaid, and in the case of a notice of default or termination also by Certified or Registered Mail, return receipt requested, to the following addresses or to such changed address as either party entitled to notice herein shall have communicated in writing to the other party: Page 43 41 For CONTRACTOR: ---------------------------------------- ---------------------------------------- ---------------------------------------- Attn: --------------------------------- For NTI: Northern Telecom Inc. ---------------------------------------- ---------------------------------------- Attn: --------------------------------- All written notices, properly addressed and mailed, shall be deemed given when actually received by the addressee. ARTICLE XVII - GENERAL 17.1 This Agreement shall inure to the benefit of and be binding upon the respective successors and assigns, if any, of the parties hereto. 17.2 This Agreement constitutes the entire understanding and agreement between the parties and supersedes any and all prior or contemporaneous oral and written communications, understandings or agreements relating to the subject matter hereof. To the extent that the terms and conditions appearing on any purchase order issued by NTI to CONTRACTOR or on any acknowledgement issued by CONTRACTOR to NTI conflict with the terms and conditions set forth in this Agreement, the terms and conditions of this Agreement shall be deemed to control and the conflicting terms appearing in any such purchase order or acknowledgement shall be null and void. 17.3 Neither party shall either (a) assign this Agreement or any purchase order or any rights under either, or (b) subcontract any of its obligations under this Agreement or any purchase order, without the prior written consent of the other party. Notwithstanding the foregoing, NTI may assign this Agreement or any purchase order or any rights under either to its parent company, Northern Telecom Limited, or to any company which is majority owned on a class by class basis of its voting stock by Northern Telecom Limited without such prior written consent but upon notice to CONTRACTOR. 17.4 The interpretation of this Agreement and the rights and obligations of the parties shall be governed by the laws of the State of California. 17.5 Each party to this Agreement hereby represents to the other that it has full power and authority to enter into and perform this Agreement and that the person signing this Agreement on its behalf has been properly authorized and empowered to do so. Each party further acknowledges that it has read this Agreement, that it understands the terms and conditions hereof, and that it agrees to be bound by this Agreement. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by their duly authorized corporate officers and consider this Agreement to be effective as of the day and year first set forth above. Page 44 42 NORTHERN TELECOM INC. CONTRACTOR: By: By: --------------------------- -------------------------------- Name: Name: ----------------------- ---------------------------- Title: Title: ----------------------- ---------------------------- Date: Date: ----------------------- ---------------------------- Page 45 43 SCHEDULE H END-USER SOFTWARE LICENSE AGREEMENT Page 46 44 ANNEX G MERIDIAN SOFTWARE LICENSE NORTHERN TELECOM INC. ("NTI") TELECOMMUNICATIONS PRODUCTS THIS LEGAL DOCUMENT IS A LICENSE AGREEMENT ("LICENSE") BETWEEN YOU, THE END-USER ("CUSTOMER") AND NORTHERN TELECOM INC. ("NTI"). BY OPENING THE SEALED DISK PACKAGE WHICH CONTAINS THE SOFTWARE DISKETTE(S), OR BY EXECUTING A CONTRACT FOR PURCHASE OF A SYSTEM WHICH INCORPORATES THIS USER SOFTWARE AGREEMENT, YOU, THE CUSTOMER, AGREE TO BE BOUND BY THE TERMS OF THIS LICENSE. Subject to the terms hereinafter set forth, NTI grants to CUSTOMER and/or representatives, with a "need to know," a personal, non-exclusive license (1) to use certain Licensed Software, proprietary to NTI or its suppliers, contained as an integral part of the Hardware; and (2) to install and use each item of Licensed Software not an integral part of the Hardware; and (3) to use the associated documentation. CUSTOMER is granted no title or ownership rights, in or to the Licensed Software, in whole or in part, and CUSTOMER acknowledges that title to and all copyrights, patents, trade secrets and/or any other intellectual property rights to and in all such Licensed Software and associated documentation are and shall remain the property of NTI and/or NTI's suppliers. The right to use Licensed Software may be restricted by a measure of usage of applications based upon number of lines, number of ports, number of terminal numbers assigned, number of users, or some similar measure. Expansion beyond the specified usage level may require payment of an incremental charge or another license fee. NTI considers the Licensed Software to contain "trade secrets" of NTI and/or its suppliers. Such "trade secrets" include, without limitation thereto, the specific design, structure and logic of individual Licensed Software programs, their interactions with other portions of Licensed Software, both internal and external, and the programming techniques employed therein. In order to maintain the "trade secret" status of the information contained within the Licensed Software, the Licensed Software is being delivered to CUSTOMER in object code form only. NTI or any of its suppliers holding any intellectual property rights in any Licensed Software, and/or any third party owning any intellectual property rights in software from which the Licensed Software was derived, are intended third party beneficiaries of this License. All grants of rights to use intellectual property intended to be accomplished by this License are explicitly stated. No other grants of such rights shall be inferred or shall arise by implication. CUSTOMER warrants to NTI that CUSTOMER is not purchasing the rights granted by this License in anticipation of reselling those rights. CUSTOMER shall: - - Hold the Licensed Software in confidence for the benefit of NTI and/or NTI's suppliers using no less a degree of care than it uses to protect its own most confidential and valuable information; and - - Keep a current record of the location of each copy of Licensed Software made by it; and - - Use each copy of Licensed Software only on a single CPU at a time (for this purpose, single CPU shall include systems with redundant processing units); and - - Affix to each copy of Licensed Software made by it, in the same form and location, a reproduction of the copyright notices, trademarks, and all other proprietary legends and/or logos of NTI and/or NTI's suppliers, appearing on the original copy of such Licensed Software delivered to CUSTOMER; and retain the same without alteration on all original copies; and - - Issue instructions to each of its authorized employees, agents,. and/or representatives to whom Licensed Software is disclosed, advising them of confidential nature of such Licensed Software and to provide them with a summary of the requirements of this License; and - - Return the Licensed Software and all copies through an Authorized Distributor to NTI at such time as CUSTOMER chooses to permanently cease using it. CUSTOMER shall not: - - Use licensed Software (i) for any purpose other than CUSTOMER's own internal business purposes and (ii) other than as provided by this License; or - - Allow anyone other than CUSTOMER's employees, agents and/or representatives with a "need to know" to have physical access to Licensed Software; or - - Make any copies of Licensed Software except such limited number of object code copies in machine readable form only, as may be reasonably necessary for execution or archival purposes only; or - - Make any modifications, enhancements, adaptations, or translations to or of Licensed Software, except as may result from those CUSTOMER interactions with the Licensed Software associated with normal use and explained in the associated documentation; or - - Attempt to reverse engineer, disassemble, reverse translate, decompile, or in any other manner decode Licensed Software, in order to derive the source code form or for any other reason; or - - Make full or partial copies of any documentation or other similar printed or machine-readable matter provided with Licensed Software unless the same has been supplied in a form by NTI intended for periodic reproduction of partial copies; or - - Export or re-export Licensed Software and/or associated documentation from the fifty states of the United States and the District of Columbia. - - NOTE: notwithstanding the above restrictions, if Customer has licensed the Licensed Software under a "site license" option as set forth in Customer's Purchase Agreement, Customer is authorized to make a limited number of copies of the Licensed Software and documentation to support additional users as specified in Customer's Purchase Agreement. CUSTOMER may assign collectively its rights under this License to any subsequent owner of the Hardware, but not otherwise, subject to the payment of the then current license fee for new users, if any. No such assignment shall be valid until CUSTOMER (1) has delegated all of its obligations under this License to the assignee; and (2) has obtained from the assignee an unconditional written assumption of all such obligations; and (3) has provided NTI a copy of such assignment, delegation and assumption; and (4) has transferred physical possession of all Licensed Software and all associated documentation to the assignee and destroyed all archival copies. Except as provided, neither this License nor any rights acquired by CUSTOMER through this License are assignable. Any attempted assignment of rights and/or transfer of Licensed Software not specifically allowed shall be void and conclusively presumed a material breach of this License. If NTI (i) claims a material breach of this License, and (ii) provides written notice of such claimed material breach to CUSTOMER and (iii) observes that such claimed material breach remains uncorrected and/or unmitigated more than thirty (30) days following CUSTOMER's receipt of written notice specifying in reasonable detail the nature of the claimed material breach, then CUSTOMER acknowledges that this License may be immediately terminated by NTI and CUSTOMER further acknowledges that any such termination shall be without prejudice to any other rights and remedies that NTI may have at law or in equity. EXPRESS LIMITED WARRANTIES FOR ANY ITEM OF LICENSED SOFTWARE, IF ANY, WILL BE SOLELY THOSE GRANTED DIRECTLY TO CUSTOMER BY DISTRIBUTOR AS DESCRIBED IN THE BODY OF THE AGREEMENT TO WHICH THIS LICENSE IS ATTACHED OR, IN THE CASE OF LICENSED SOFTWARE DISTRIBUTED IN A SEALED DISK PACKAGE, THOSE WHICH APPEAR AT THE END OF THIS LICENSE AGREEMENT. OTHER THAN AS SET FORTH THEREIN, THIS LICENSE DOES NOT CONFER OR GRANT ANY WARRANTY TO CUSTOMER FROM OR BY NTI; THE LICENSED SOFTWARE IS PROVIDED BY NTI "AS IS" AND WITHOUT WARRANTY OF ANY KIND OR NATURE, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING (WITHOUT LIMITATION) THE IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE. THIS LIMITATION OF WARRANTIES WAS A MATERIAL FACTOR IN THE ESTABLISHMENT OF THE LICENSE FEE CHARGED FOR EACH SPECIFIC ITEM OF SOFTWARE LICENSED. IN NO EVENT WILL NTI AND/OR NTI'S SUPPLIERS AND THEIR DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS BE LIABLE TO OR THROUGH CUSTOMER FOR INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING LOST PROFITS, LOSS OF BUSINESS OR BUSINESS INFORMATION, BUSINESS INTERRUPTION, OR OTHER ECONOMIC DAMAGE, AND FURTHER INCLUDING INJURY TO PROPERTY, AS A RESULT OF USE OR INABILITY TO USE THE LICENSED SOFTWARE OR PLEASE REFER TO THE REVERSE SIDE 45 BREACH OF ANY WARRANTY OR OTHER TERM OF THIS LICENSE, REGARDLESS OF WHETHER NTI AND/OR NTI'S SUPPLIERS WERE ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE POSSIBILITY THEREOF, CUSTOMER ACKNOWLEDGES THAT THE FOREGOING SENTENCE REFLECTS AN INFORMED, VOLUNTARY ALLOCATION BETWEEN THE PARTIES OF THE RISKS (KNOWN AND UNKNOWN) THAT MAY EXIST IN CONNECTION WITH THIS LICENSE, THAT SUCH VOLUNTARY RISK ALLOCATION WAS A MATERIAL PART OF THE BARGAIN BETWEEN THE PARTIES, AND THAT THE ECONOMIC AND OTHER TERMS OF THIS LICENSE WERE NEGOTIATED AND AGREED TO BY THE PARTIES IN RELIANCE ON SUCH VOLUNTARY RISK ALLOCATION. IN THE EVENT CUSTOMER HAS NOT EXECUTED A SEPARATE PURCHASE AGREEMENT WITH A DISTRIBUTOR, AND THIS LICENSE BECOMES EFFECTIVE BY REASON OF YOUR OPENING A SEALED DISK PACKAGE, THE ADDITIONAL WARRANTY PROVISIONS AND LIMITATIONS LISTED BELOW APPLY: - - "LICENSED SOFTWARE" SHALL MEAN THE COMPUTER PROGRAMS WHICH ARE EITHER OWNED BY OR LICENSED TO NTI AND WHICH ARE CONTAINED ON THE DISKS SUPPLIED TO CUSTOMER. "HARDWARE" SHALL MEAN EQUIPMENT ON WHICH CUSTOMER USES THE LICENSED SOFTWARE. - - NTI WARRANTS THAT THE DISKS ON WHICH THE LICENSED SOFTWARE IS RECORDED WILL BE FREE FROM DEFECTS IN MATERIALS AND WORKMANSHIP UNDER NORMAL USE FOR A PERIOD OF NINETY (90) DAYS AS EVIDENCED BY A COPY OF THE RECEIPT. NTI'S ENTIRE LIABILITY AND YOUR EXCLUSIVE REMEDY WILL BE REPLACEMENT OF THE DISK NOT MEETING NTI'S LIMITED WARRANTY AND WHICH IS RETURNED TO NTI OR AN NTI AUTHORIZED REPRESENTATIVE WITH A COPY OF THE RECEIPT. NTI WILL HAVE NO RESPONSIBILITY TO REPLACE A DISK DAMAGED BY ACCIDENT, ABUSE OR MISAPPLICATION. - - IN PARTICULAR, NO WARRANTY IS BEING PROVIDED ON SOFTWARE DEVELOPED BY THIRD PARTY SOFTWARE SUPPLIERS. SUCH SOFTWARE SUPPLIERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, REGARDING THE SOFTWARE. NTI'S SOFTWARE SUPPLIERS DO NOT WARRANT, GUARANTEE OR MAKE ANY REPRESENTATIONS REGARDING THE USE OR THE RESULTS OF THE USE OF THE SOFTWARE IN TERMS OF ITS CORRECTNESS, ACCURACY, RELIABILITY, OR OTHERWISE. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF ANY SUCH SOFTWARE DEVELOPED BY SOFTWARE SUPPLIERS IS ASSUMED BY YOU. THE EXCLUSION OF IMPLIED WARRANTIES IS NOT PERMITTED BY SOME JURISDICTIONS. THE ABOVE EXCLUSION MAY NOT APPLY TO YOU. - - BECAUSE SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, THE ABOVE LIMITATIONS MAY NOT APPLY TO YOU. NTI'S AND NTI'S SOFTWARE SUPPLIERS COMBINED LIABILITY TO YOU FOR ACTUAL DAMAGES FROM ANY CAUSE WHATSOEVER, AND REGARDLESS OF THE FORM OF THE ACTION (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY OR OTHERWISE), WILL BE LIMITED TO $50. - - THE RIGHTS AND OBLIGATIONS ARISING UNDER THIS LICENSE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS. CUSTOMER HEREBY AGREES TO ADHERE TO THE TERMS AND CONDITIONS OF THIS MERIDIAN SOFTWARE LICENSE AGREEMENT: CUSTOMER SIGNATURE: ------------------------------------ PRINTED NAME: ------------------------------------------ DATE: --------------------------------------------------- NORTHERN TELECOM INC. Rick P. Faletti President, Multimedia Communication Systems Northern Telecom Inc. Meridian Software License Version 5.00 Northern Telecom Inc. Products 1994 46 SCHEDULE I DISCOUNT LEVEL ***** Base Systems ***** Discountable standard products: - including all discountable products listed in Schedule B - including all discountable products listed in Schedule F ***** Discountable spares and spares kits
Page 47 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 47 SCHEDULE J ESCALATION PROCEDURE 1. First point of contact Voicetek Corporation Hotline 2. Second point of contact Technical Support Manager 3. Third point of contact Engineering Manager 4. Fourth point of contact Senior Staff 5. Fifth point of contact Chief Operating Officer
Page 48 48 SCHEDULE F RESELLER SUPPORT SERVICES PART I: SOFTWARE PRODUCTS (EXCLUDING GENERATIONS DEVELOPER) A. VOICETEK shall provide RESELLER SUPPORT SERVICES which shall be identical in scope to the software support services set forth in Article XIII together with the additional out-of-warranty HARDWARE repair services set forth in Part III of this Schedule F to SUPPORT ORGANIZATION(s) for each ANNUAL SUPPORT SERVICES PERIOD during the TERM for which NTI, or any NORTHERN TELECOM COMPANY or any MANUFACTURING LICENSEE, as the case may be, elects to pay the requisite annual fee(s) for the desired level(s) of service, the available options of which are enumerated for the respective calendar years as indicated in the tables below: RESELLER SUPPORT SERVICES fees for calendar year 1995 are as follows:
Service Level Hours (EDT or Days NTI Price Additional Northern EST as applicable) Per Week Telecom Company Direct Support Price Basic 8:00 a.m. - 6:00 p.m. M-F * * Optional 7:00 a.m. - 10:00 p.m. M-F * * Extended Twenty-four Twenty-four hours M-Su * * hour
* Not available at this price if NTI is not paying for RESELLER SUPPORT SERVICES at the time this service is ordered. Renewal fees for RESELLER SUPPORT SERVICES for calendar year 1996 will be as follows:
Service Level Hours (EDT or Days NTI Price Additional Northern EST as applicable) Per Week Telecom Company Direct Support Price Basic 8:00 a.m. - 6:00 p.m. M-F * * Optional 7:00 a.m. - 10:00 p.m. M-F * * Extended Twenty-four Twenty-four hours M-Su * * hour
*Not available at this price if NTI is not paying for RESELLER SUPPORT SERVICES at the time this service is ordered. Fees for RESELLER SUPPORT SERVICES can be paid to VOICETEK by NTI and/or NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES, as the case may be, on a quarterly basis. In the event any entity ordering RESELLER SUPPORT SERVICES elects to pay the requisite fee to VOICETEK on a quarterly basis, then VOICETEK shall invoice such ordering entity for each quarterly payment forty-five (45) days prior to the start of each calendar quarter and such ordering entity shall pay such invoices, pursuant to the payment terms set forth in Section 8.7. Renewal fees for RESELLER SUPPORT SERVICES for calendar years 1997 and beyond will be based on the total software revenue to VOICETEK generated during the last calendar quarter immediately preceding a now ANNUAL SUPPORT SERVICES PERIOD. The renewal fees will be as follows:
Previous Quarter Service Level NTI Annual Additional Northern software revenue Renewal Fee Telecom Company Direct Support Price * Basic $* $* " " " " Optional extended $* $*
Page 38 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 49 " " " " Twenty-four hours ***** ***** ***** Basic ***** ***** " " " " Optional extended ***** ***** " " " " Twenty-four hours ***** ***** ***** Basic ***** ***** " " " " Optional extended ***** ***** " " " " Twenty-four hours ***** ***** Less than $***** Basic ***** ***** " " " " Optional extended ***** ***** " " " " Twenty-four hours ***** *****
For the purpose of determining how to apply the software revenue levels set forth in the table above, software revenue generated will be calculated on all software licenses (development and runtime), software-only options and the software-only component of hardware/software packaged PRODUCTS (e.g., ASR, TTS and FAX). B. Under all service level options, VOICETEK shall provide unlimited telephone consultation on the use of PRODUCTS including, but not limited to, advice on use, diagnosis of user problems, diagnosis of possible problems in PRODUCTS and direction or remedies to be employed until problems are corrected. POINT RELEASES and UPDATES are to be included at no additional charge as part of RESELLER SUPPORT SERVICES. PART II: OUT-OF-WARRANTY HARDWARE REPAIR A. During an ANNUAL SUPPORT SERVICES PERIOD for which NTI or any NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE has/have paid to VOICETEK the requisite annual fee for any level of RESELLER SUPPORT SERVICES, VOICETEK shall provide out-of-warranty repair service to such entity on any and all HARDWARE ordered during the TERM in accordance with the terms set forth in Section 11.3, provided that such entity (requesting an RMA for out-of-warranty repair) simultaneously issues to VOICETEK a "no charge" ORDER. Subsequently, VOICETEK, within three (3) business days following receipt of the HARDWARE for out-of-warranty repair services, shall provide to the requesting entity a quotation for the out-of-warranty repair of such HARDWARE, which quotation may either be accepted or rejected by the requesting entity. In the event the out-of-warranty repair quotation is accepted by NTI, or a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE, then the requesting entity shall issue a change to the applicable "no charge" ORDER which sets forth the price quoted by VOICETEK for the out-of-warranty repair. In the event a requesting entity decides not to proceed with the out-of-warranty repair, then such entity shall direct VOICETEK to return the out-of-warranty HARDWARE in question to the requesting entity F.O.B. VOICETEK, freight colled to NTI, or the NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE, as the case may be. NORTHERN TELECOM INC. VOICETEK CORPORATION By: By: /s/ Sheldon L. Dinkes ------------------------------ ---------------------------- Name: Name: SHELDON L. DINKES --------------------------- -------------------------- (type/print) (type/print) Title: Title: President --------------------------- -------------------------- (type/print) (type/print) Date: Date: June 20, 1995 --------------------------- -------------------------- APPROVED AS TO LEGAL FORM BY: /s/ Joel M.Erickson ----------------------- 16 June 1995 Page 39 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 50 SCHEDULE F RESELLER SUPPORT SERVICES PART I: SOFTWARE PRODUCTS (EXCLUDING GENERATIONS DEVELOPER) A. VOICETEK shall provide RESELLER SUPPORT SERVICES which shall be identical in scope to the software support services set forth in Article XIII together with the additional out-of-warranty HARDWARE repair services set forth in Part III of this Schedule F to SUPPORT ORGANIZATION(s) for each ANNUAL SUPPORT SERVICES PERIOD during the TERM for which NTI, or any NORTHERN TELECOM COMPANY or any MANUFACTURING LICENSEE, as the case may be, elects to pay the requisite annual fee(s) for the desired level(s) of service, the available options of which are enumerated for the respective calendar years as indicated in the tables below: RESELLER SUPPORT SERVICES fees for calendar year 1995 are as follows:
Service Level Hours (EDT or Days NTI Price Additional Northern EST as applicable) Per Week Telecom Company Direct Support Price Basic 8:00 a.m. - 6:00 p.m. M-F $********* $********** Optional 7:00 a.m. - 10:00 p.m. M-F $********* $********** Extended Twenty-four Twenty-four hours M-Su $********* $********** hour
* Not available at this price if NTI is not paying for RESELLER SUPPORT SERVICES at the time this service is ordered. Renewal fees for RESELLER SUPPORT SERVICES for calendar year 1996 will be as follows:
Service Level Hours (EDT or Days NTI Price Additional Northern EST as applicable) Per Week Telecom Company Direct Support Price Basic 8:00 a.m. - 6:00 p.m. M-F $********** $********** Optional 7:00 a.m. - 10:00 p.m. M-F $********** $********** Extended Twenty-four Twenty-four hours M-Su $********** $********** hour
*Not available at this price if NTI is not paying for RESELLER SUPPORT SERVICES at the time this service is ordered. Fees for RESELLER SUPPORT SERVICES can be paid to VOICETEK by NTI and/or NORTHERN TELECOM COMPANIES and/or MANUFACTURING LICENSEES, as the case may be, on a quarterly basis. In the event any entity ordering RESELLER SUPPORT SERVICES elects to pay the requisite fee to VOICETEK on a quarterly basis, then VOICETEK shall invoice such ordering entity for each quarterly payment forty-five (45) days prior to the start of each calendar quarter and such ordering entity shall pay such invoices, pursuant to the payment terms set forth in Section 8.7. Renewal fees for RESELLER SUPPORT SERVICES for calendar years 1997 and beyond will be based on the total software revenue to VOICETEK generated during the last calendar quarter immediately preceding a now ANNUAL SUPPORT SERVICES PERIOD. The renewal fees will be as follows:
Previous Quarter Service Level NTI Annual Additional Northern software revenue Renewal Fee Telecom Company Direct Support Price $********** or greater Basic $********* $*********
Page 1 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 51 " " " " Optional extended [*] [*] " " " " Twenty-four hours [*] [*] $[*] Basic [*] [*] " " " " Optional extended [*] [*] " " " " Twenty-four hours [*] [*] $[*] Basic [*] [*] " " " " Optional extended [*] [*] " " " " Twenty-four hours [*] [*] Less than $[*] Basic [*] [*] " " " " Optional extended [*] [*] " " " " Twenty-four hours [*] [*]
For the purpose of determining how to apply the software revenue levels set forth in the table above, software revenue generated will be calculated on all software licenses (development and runtime), software-only options and the software-only component of hardware/software packaged PRODUCTS (e.g., ASR, TTS and FAX). B. Under all service level options, VOICETEK shall provide unlimited telephone consultation on the use of PRODUCTS including, but not limited to, advice on use, diagnosis of user problems, diagnosis of possible problems in PRODUCTS and direction or remedies to be employed until problems are corrected. POINT RELEASES and UPDATES are to be included at no additional charge as part of RESELLER SUPPORT SERVICES. PART II: OUT-OF-WARRANTY HARDWARE REPAIR A. During an ANNUAL SUPPORT SERVICES PERIOD for which NTI or any NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE has/have paid to VOICETEK the requisite annual fee for any level of RESELLER SUPPORT SERVICES, VOICETEK shall provide out-of-warranty repair service to such entity on any and all HARDWARE ordered during the TERM in accordance with the terms set forth in Section 11.3, provided that such entity (requesting an RMA for out-of-warranty repair) simultaneously issues to VOICETEK a "no charge" ORDER. Subsequently, VOICETEK, within three (3) business days following receipt of the HARDWARE for out-of-warranty repair services, shall provide to the requesting entity a quotation for the out-of-warranty repair of such HARDWARE, which quotation may either be accepted or rejected by the requesting entity. In the event the out-of-warranty repair quotation is accepted by NTI, or a NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE, then the requesting entity shall issue a change to the applicable "no charge" ORDER which sets forth the price quoted by VOICETEK for the out-of-warranty repair. In the event a requesting entity decides not to proceed with the out-of-warranty repair, then such entity shall direct VOICETEK to return the out-of-warranty HARDWARE in question to the requesting entity F.O.B. VOICETEK, freight collect to NTI, or the NORTHERN TELECOM COMPANY or MANUFACTURING LICENSEE, as the case may be. NORTHERN TELECOM INC. VOICETEK CORPORATION By: /s/ J. Michael Camp By: /s/ Sheldon Dinkes ------------------------------ ---------------------------- Name: J. Michael Camp Name: Sheldon Dinkes --------------------------- -------------------------- (type/print) (type/print) Title: Vice President, MBA Title: President --------------------------- -------------------------- (type/print) (type/print) Date: 8/31/95 Date: 8-28-95 --------------------------- -------------------------- APPROVED AS TO LEGAL FORM BY: /s/ Joel M.Erickson ----------------------- 24 August 1995 Page 2 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATEY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS 52 ADDENDUM This Addendum ("ADDENDUM") to the OEM Agreement between Northern Telecom Inc. ("NTI") and Voicetek Corporation ("VOICETEK") which was executed on June 16,1995 (the "AGREEMENT") hereby adds the substantive terms of support pertaining only to the SOFTWARE PRODUCT identified as GENERATIONS Developer and addresses an upgrade offer pertaining to the SOFTWARE PRODUCTS identified as GENERATIONS and VRS, respectively. The entirety of the ADDENDUM shall constitute the text of what shall be called Schedule F-1, which shall be attached to and become a part of the AGREEMENT as of the date of the latter signature set forth below. SCHEDULE F-1 PART I: OPTIONAL GENERATIONS DEVELOPER SUPPORT SERVICE AND FEE A. VOICETEK shall provide to NTI optional support services covering GENERATIONS Developer which shall be equivalent in scope to RESELLER SUPPORT SERVICES pertaining to all other SOFTWARE PRODUCTS in consideration of, and in the event NTI elects to remit NTI's payment of the requisite annual optional support services fee ("Requisite Annual Fee"). The Requisite Annual Fee payable for the support of GENERATIONS Developer shall be calculated by determining the amount equal to seven percent (7%) of the total of all GENERATIONS Developer software license fees paid cumulatively by NTI from the EFFECTIVE DATE until the date upon which NTI notifies VOICETEK of its desire to have VOICETEK commence the provision of optional support services covering GENERATIONS Developer. The Requisite Annual Fee for renewing optional support services covering GENERATIONS Developer shall be determined by establishing a total of GENERATIONS Developer licenses in place on the anniversary date of the commencement of optional support services for GENERATIONS Developer and using the seven percent (7%) multiplier with the new total of GENERATIONS Developer software license fees. B. In contrast to the arrangement for RESELLER SUPPORT SERVICES for the balance of SOFTWARE PRODUCTS, which expressly excludes VERSION RELEASES, NTI shall receive, when commercially available, a copy of all VERSION RELEASES for GENERATIONS Developer and for VRS, respectively, released during any ANNUAL SUPPORT SERVICES PERIOD for which NTI has paid the Requisite Annual Fee, as described in Paragraph A. PART II: ONE-TIME UPGRADE OFFER As part of the AGREEMENT, when the first VERSION RELEASE of the SOFTWARE PRODUCTS known as GENERATIONS and VRS, respectively, (referred to as 2.1/3.0) to be released following the EFFECTIVE DATE becomes commercially available from VOICETEK, VOICETEK will allow NTI six (6) months from the date of NTI's receipt of a copy of such VERSION RELEASE to migrate NTI's installed base customers to such VERSION RELEASE at no charge to NTI. IN WITNESS WHEREOF, the parties hereto have, by their duly authorized representatives, executed this ADDENDUM to the AGREEMENT as of the day and year set forth below. NORTHERN TELECOM INC. VOICETEK CORPORATION By: /s/ J. Michael Camp By: /s/ Sheldon Dinkes ------------------------------ ---------------------------- Name: J. Michael Camp Name: Sheldon Dinkes --------------------------- -------------------------- (type/print) (type/print) Title: Vice President, MBA Title: President --------------------------- -------------------------- (type/print) (type/print) Date: 8/31/95 Date: 8-28-95 --------------------------- -------------------------- APPROVED AS TO LEGAL FORM BY: /s/ Joel M.Erickson ----------------------- 24 August 1995 Page 1 53 SCHEDULE A AUTHORIZED TERRITORY Canada United States (U.S.)
Europe Region CALA Region Asia/Pacific Region United Kingdom Brazil Australia France Mexico Bahrain Holland Chile Hong Kong Sweden Columbia India Denmark Argentina Indonesia Norway Antigua Japan Iceland Bahamas Kuwait Germany Barbados Malaysia Switzerland Br. Virgin Islands Oman Austria Costa Rica Pakistan Belgium Dominica China Finland Dominican Republic Philippines United Arab Emirates Ecuador Russia Greece El Salvador Saudi Arabia Ireland Guadeloupe Singapore Israel Guatemala South Korea Italy Honduras Syria Netherlands Jamaica Taiwan Poland Jordan Thailand Portugal Martinique New Zealand Spain Netherlands Antilles Turkey St. Kitts & Nevis Trinidad St. Lucia Nicaragua St. Vincent Turks & Caicos Is. Panama Paraguay Peru Puerto Rico Virgin Islands U.S. Virgin Islands
NORTHERN TELECOM INC. VOICETEK CORPORATION By: /s/ John A. Ryan By: /s/ Sheldon L. Dinkes ------------------------------ ---------------------------- Name: John A. Ryan Name: Sheldon L. Dinkes --------------------------- -------------------------- (type/print) (type/print) Title: VP/GM, MBA Title: President --------------------------- -------------------------- (type/print) (type/print) Date: 2/5/96 Date: January 1, 1996 --------------------------- -------------------------- APPROVED AS TO LEGAL FORM BY: /s/ Joel M.Erickson ----------------------- Page 1 EX-10.2 6 AMENDEMENT NO.1 TO OEM AGREEMENT 1 EXHIBIT 10.2 AMENDMENT NO. 1 THIS AMENDMENT NO. 1 effective as of the date of the latter signature set forth below, hereby modifies and amends the OEM Agreement between Northern Telecom Inc. (hereinafter "NTI") and Voicetek Corporation (hereinafter "VOICETEK") effective 16 June 1995, including the Addendum dated 31 August 1995 hereinafter the "ADDENDUM") and the revised Schedule A effective 7 February 1996 (collectively referred to hereinafter as the "AGREEMENT"). RECITALS WHEREAS, NTI and VOICETEK have negotiated and agreed upon new pricing for a number of VOICETEK's products and/or services; AND WHEREAS, NTI and VOICETEK elect to have such new pricing set forth in Schedule E of the AGREEMENT; NOW THEREFORE, in consideration of the mutual promises and obligations hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, THE AGREEMENT IS HEREBY AMENDED AS FOLLOWS: 1. Revised Schedule A, in effect from and after 7 February 1996, is hereby deleted in its entirety and is replaced by a new Schedule A, which is attached hereto and is by this reference made a part of the AGREEMENT. 2. The existing language of Schedule E is hereby deleted in its entirety and is replaced by the following language resulting in new pages 36 through 42, with the pages containing the existing Schedule F being renumbered as pages 43 and 44, the ADDENDUM containing Schedule F-1 renumbered as page 45, Schedule G being renumbered as pages 46 through 51, Schedule H being renumbered as pages 52 through 54, Schedule I being renumbered as page 55 and Schedule J being renumbered as page 56, respectively: Page 1 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS 2 SCHEDULE A AUTHORIZED TERRITORY Antigua Malaysia Argentina Martinique Australia Mexico Austria Netherlands Bahamas Netherlands Antilles Bahrain New Zealand Barbados Nicaragua Belgium Norway Bolivia Brazil Oman British Virgin Islands Pakistan Canada Panama Chile Paraguay Colombia People's Republic of China Costa Rica Peru Philippines Denmark Poland Dominica Portugal Dominican Republic Puerto Rico Ecuador Russia El Salvador Saudi Arabia Finland Singapore France South Korea Spain Germany St. Kitts & Nevis Greece St. Lucia Grenada St. Vincent Guadeloupe Sweden Guatemala Switzerland Guyana Syria Haiti Taiwan Honduras Thailand Hong Kong Trinidad & Tobago Turkey Iceland Turks & Caicos Islands India Indonesia United Arab Emirates Ireland United Kingdom Israel United States (U.S.) Italy U.S. Virgin Islands Uraguay Jamaica Japan Venezuela Jordan Virgin Islands Kuwait Page 2 3 NORTHERN TELECOM, INC. VOICETEK CORPORATION By: /s/ R.L. Kelly By: /s/ Sheldon Dinkes --------------------------- ------------------------- Name: Radford L. Kelly Name: Sheldon Dinkes ----------------------- --------------------- (type/print) (type/print) Title: AVP, Contracts and Title: President Market Channel Mgmt. --------------------- --------------------- (type/print) (type/print) Date: 12/03/96 Date: November 11, 1996 --------------------- --------------------- Approved as to legal form By: Joel M. Erickson 8 November 1996 Page 3 4 Except as set forth herein, all other terms and conditions of the AGREEMENT remain unchanged. In the event that a conflict arises between the language of the AGREEMENT and this Amendment No. 1 to the AGREEMENT, the language of this Amendment No. 1 shall take precedence over the Addendum dated 31 August 1995, and the AGREEMENT dated 16 June 1995 in descending order in the resolution of any such conflict. All unmodified terms and conditions of the AGREEMENT shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have, by their duly authorized representatives, executed this Amendment No. 1 to the AGREEMENT as of the date of the latter signature set forth below. NORTHERN TELECOM, INC. VOICETEK CORPORATION By: /s/ R.L. Kelly By: /s/ Sheldon Dinkes --------------------------- ------------------------- Name: Radford L. Kelly Name: Sheldon Dinkes ------------------------- ----------------------- Title: AVP, Contracts and Title: President Market Channel Mgmt. ---------------------- ----------------------- Date: 12/03/96 Date: November 11, 1996 ----------------------- --------------------- Approved as to legal form By: Joel M. Erickson 8 November 1996 Page 11 5 SCHEDULE E SPECIAL PRICING
SYSTEMS PRODUCT DESCRIPTION PRICE - ------- ------------------- ----- MRS/Tower Base Includes: VTK 2000 (either 486 or Pentium), LSI/120 [*] System (12 port LS) network card, D/121B voice card, 12 TSP and 12 RSP licenses, modem (28.8K bps or faster) and cable, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable, Loopstart cable. MRS/Tower Base System Includes: VTK 2000 (either 486 or Pentium), [*] (24 port Tl) D/240SC-Tl network/voice interface, 24 TSP licenses, 24 RSP licenses, modem (28.8K bps or faster) and cable, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. MRS/Tower Base System Includes: VTK 2000 (486 or Pentium), Acculab El [*] (30 port El) network card with or without daughter card, D/32OSC voice card, 30 TSP and 30 RSP licenses, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable, DPNSS License. MRS/Tower Base System Includes: VTK 2000 (486 or Pentium), Acculab El [*] (60 port El) network card with or without daughter card, 2 x D/320SC voice card, 60 TSP and 60 RSP licenses, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable, DPNSS License. MRS/Rack AC Base Includes: VTK AC Rack (486 or Pentium), LSI/l20 [*] System (12 port LS) network interface, D/121B voice card, 12 TSP and 12 RSP licenses, modem (28.8K bps or faster) and cable, Hard Disk (1 GB or higher), PEB cable (1O drops), Terminal cable, Loopstart cable. MRS/Rack AC Base Includes: VTK AC Rack (486 or Pentium), D/240SC-Tl [*] System (24 port Tl) network interface card, 24 TSP and 24 RSP licenses, modem (28.8K bps or faster) and cable, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. MRS/Rack AC Base Includes: VTK AC Rack (486 or Pentium), Acculab [*] System (30 port El) El network card with or without daughter card, D/32OSC voice card, 30 TSP & 30 RSP licenses, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. MRS/Rack AC Base Includes: VTK AC Rack (486 or Pentium), Acculab [*] System (60 port El) El network interface with or without daughter card, 2 x D/320SC voice card, 60 TSP & 60 RSP licenses, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. MRS/Rack DC Base Includes: VTK DC Rack (486 or Pentium), LSI/120 [*] System (12 port LS) network interface, D/121B voice card, 12 TSP and 12 RSP licenses, modem (28.8K bps or faster) and cable, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable, Loopstart cable. MRS/Rack DC Base Includes: VTK DC Rack (486 or Pentium), D/240SC-Tl [*] System (24 port T1) network interface card, 24 TSP and 24 RSP licenses, modem (28.8K bps or faster) and cable, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. MRS/Rack DC Base Includes: VTK DC Rack (486 or Pentium), Acculab El [*] System (30 port El) network card with or without daughter card, D/320SC voice card, 30 TSP & 30 RSP licenses, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable.
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SYSTEMS PRODUCT DESCRIPTION PRICE ------- ------------------- ----- MRS/Rack DC Base Includes: VTK DC Rack (486 or Pentium), Acculab El [*] System (60 port El) network interface with or without daughter card, 2 x D/320SC voice card, 60 TSP & 60 RSP licenses, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. Zero Port International Includes: VTK 2000 (either 486 or Pentium), Hard [*] Tower Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. Note. Orders for zero port systems must include the appropriate network interface card ordered as a separate line item. Zero Port International Includes: VTK AC or DC Rack (486 or Pentium), Hard [*] Rack Disk (1 GB or higher), PEB cable (10 drops), Terminal cable. Note: Orders for zero port systems must include the appropriate network interface card ordered as a separate item. 8-Port Loopstart Includes: VTK 2000 (either 486 or Pentium), LSI/80 [*] International Tower network card, D/81 A voice card, 8 TSP and 8 RSP licenses, Hard Disk (1 GB or higher), PEB cable (10 drops), Terminal cable, Loopstart cable. 16-Port Loopstart Includes: VTK 2000 (either 486 or Pentium), 2 x [*] International Tower LSI/80 network card, 2 x D/81A voice card, 16 TSP and 16 RSP licenses, Hard Disk (lGB or higher), PEB cable (10 drops), Terminal cable, 2 x Loopstart cable. 24-Port Loopstart Includes: VTK 2000 (either 486 or Pentium), 3 x [*] International Tower LSI/80 network card, 3 x D/81 A voice card, 24 TSP and 24 RSP licenses, Hard Disk (lGB or higher), PEB cable (10 drops), Terminal cable, 3 x Loopstart cable. PORT ASSEMBLIES PRODUCT DESCRIPTION PRICE --------------- ------------------- ----- (INCLUDING TSP AND RSP LICENSES) Loopstart Port Assembly Includes: LSI/120 network card, D/121B voice card, 12 [*] (12 ports) TSP & 12 RSP licenses, Loopstart cable, PEB cable (10 drops). Loopstart Port Assembly Includes: LSI/80 network card, D/81A voice card, 8 [*] (8 ports) TSP & 8 RSP licenses, Loopstart cable, PEB cable (10 drops). Tl Port Assembly Includes: D/240SC-T1 Network/Voice card, 24 TSP & 24 [*] (24 ports) RSP licenses, PEB cable (10 drops). El Port Assembly Includes: Acculab El network card with or without [*] (30 ports) daughter card, D/320SC voice card, 30 TSP & 30 RSP licenses, PEB cable (10 drops), DPNSS License. El Port Assembly Includes: Acculab (60 port) El network card with or [*] (60 ports) without daughter card, D/320SC voice card, 60 TSP & 60 RSP licenses, PEB cable (10 drops), DPNSS License. D/41 ESCPort Includes: D/41 ESC Network/Voice card, 4 TSP & 4 RSP [*] Assembly (4 Ports) licenses, PEB cable (10 drops).
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PORT ASSEMBLIES PRODUCT DESCRIPTION PRICE - --------------- ------------------- ----- (WITHOUT TSP AND RSP LICENSES) Loopstart Port Assembly Includes: LSI/120 network card, D/121 B voice card, [*] (12 ports) without TSP Loopstart cable, PEB cable (10 drops). and RSP licenses Loopstart Port Assembly Includes: LSI/80 network card, D/81 A voice card, [*] (8 ports) without TSP Loopstart cable, PEB cable (10 drops). and RSP licenses Tl Port Assembly Includes: D/240SC-Tl Network/Voice card, PEB cable [*] (24 ports) without TSP (10 drops). and RSP licenses El Port Assembly Includes: Acculab El network card with or without [*] (30 ports) without TSP daughter card, D/320SC voice card, DPNSS License. and RSP licenses El Port Assembly Includes: Acculab (60 port) El network card with or [*] (60 Ports) without TSP without daughter card, D/320SC voice card, PEB cable and RSP licenses (10 drops), DPNSS License. D/41 ESC Port Includes: D/41 ESC Network/Voice card, PEB cable (10 [*] Assembly (4 Ports) drops). without TSP and RSP licenses SOFTWARE PRODUCT DESCRIPTION PRICE - -------- ------------------- ----- (DEVELOPMENT AND RUNTIME LICENSES) IVR Generator 2.0/S Single User SCO Generations Developers License for [*] Developer Single-User MRS/Tower or MRS/Rack configurations (no RSP). License IVR Generator 2.0/S Four-User SCO Generations Developers License for [*] Developer 4-user MRS/Tower or MRS/Rack configurations (no RSP). License IVR Generator 2.0/S Four-User SCO Generations Developers License for [*] Developer 4-user Nortel VADs ONLY. Includes Prompt Manager. License for VADs ***SPECIAL**' IVR Generator 2.0/S Generations RSP License (per port). Price when [*] Runtime License purchased in quantities less than 336 ports (per port). MRS Software License TSP License (per port). Price when purchased in [*] (per port) quantities less than 336 ports. IVR Generator Runtime Per Port Runtime Licenses will be reduced to [*] per [*] and MRS License BULK port for each of TSP and Generations RSP when PURCHASES purchased in quantities of combined licenses [*] [*]).
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SOFTWARE PRODUCT DESCRIPTION PRICE - -------- ------------------- ----- (DEVELOPMENT AND RUNTIME LICENSES) IVR Generator 2.0/S Single user development license will be reduced to [*] Developer Single-User [*] when purchased in quantities of 25 [*] License BULK [*] PURCHASES HOST PRODUCT DESCRIPTION PRICE - ---- ------------------- ----- COMMUNICATIONS OPTIONS VT100 Communications Includes: VT100 Communications board (8 ports), [*] (8 ports) and TRS VOICETEK's Host Link Software ([*]/port). VT100 Communications Includes: VT100 Communications board (16 [*] (16 ports) and TRS ports), VOICETEK's Host Link Software ([*]/port). VT100 Communications Includes: VT100 Communications board (32 ports), & [*] (32 ports) and TRS VOICETEK's Host Link Software ([*]/port). 32 Session Expansion Includes: Apertus 32 session (LU) software license [*] for 3270 or 5250 and VOICETEK 32 session Host Link software. 3270 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (4 LUs, TRS, TR or Apertus 3270 software, Apertus 4 session (LU) SDLC) software license, 4 session VOICETEK Host Link software license ([*]/port). 3270 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (8 LUs, TRS, TR or Apertus 3270 software, Apertus 8 session (LU) SDLC) software license, 8 session VOICETEK Host Link software license ([*]/port). 3270 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (16 LUs, TRS, TR or Apertus 3270 software, Apertus 16 session (LU) SDLC) software license, 16 session VOICETEK Host Link software license ([*]/port). 3270 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (32 LUs, TRS, TR or Apertus 3270 software, Apertus 32 session (LU) SDLC) software license, 32 session VOICETEK Host Link software license ([*]/port). 5250 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (4 LUs, TRS, TR or Apertus 5250 software, Apertus 4 session (LU) SDLC software license, 4 session VOICETEK Host Link software license ([*]/port). 5250 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (8 LUs, TRS, TR or Apertus 5250 software, Apertus 8 session (LU) SDLC) software license, 8 session VOICETEK Host Link software license ([*]/port). 5250 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (16 LUs, TRS, TR or Apertus 5250 software, Apertus 16 session (LU) SDLC) software license, 16 session VOICETEK Host Link software license ([*]/port). 5250 Communications Includes: Apertus Sync. or Token Ring Adapter, [*] (32 LUs, TRS, TR or Apertus 5250 software, Apertus 32 session (LU) SDLC) software license, 32 session VOICETEK Host Link software license ([*]/port).
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HOST PRODUCT DESCRIPTION PRICE - ---- ------------------- ----- COMMUNICATIONS OPTIONS 4 to 8 Port LU Expansion Includes: Apertus 4 session (LU) software license, 4 session [*] VOICETEK Host Link software license. 8 to 16 Port LU Includes: Apertus 8 session (LU) software license, 8 session [*] Expansion VOICETEK Host Link software license. 16 to 32 Port LU Includes: Apertus 8 session (LU) software license, 16 session [*] Expansion VOICETEK Host Link software license. ADVANCED PRODUCT DESCRIPTION PRICE - -------- ------------------- ----- OPTIONS Text-to-Speech Includes: Antares DSP card & configured KEYLOCK, 4 port L&H TTS [*] (4 ports) license, 4 port Generations TTS License ([*]/port). Text-to-Speech Includes: Newly configured KEYLOCK, 4 port L&H TTS license, 4 port [*] Expansion (4 ports) Generations TTS License ([*]/port). Discrete Speech Rec Includes: VRP base board, VRM/40 daughter card, 4 port Generations [*] (4 ports) Discrete Voice Recognition License ([*]/port). Discrete Speech Rec Includes: VRM/40 daughter card, 4 port Generations Discrete Voice [*] Expansion (4 ports) Recognition License ([*]/port). Continuous Speech Rec Includes: VRP base board, VRM/2C daughter card, 2 port Generations [*] (2 ports) Continuous Voice Recognition License ([*]/port). Continuous Speech Rec Includes: VRM/2C daughter card, 2 port Generations Continuous [*] Expansion (2 ports) Voice Recognition License ([*]/port). Fax (2 ports) Includes: Brooktrout 2-port fax card, 2 port Generations Fax License [*] ([*]/port). Fax (4 ports) Includes: Brooktrout 4-port fax card, 4 port Generations Fax License [*] ([*]/port). Fax (8 ports) Includes: Brooktrout 8-port fax card, 8 port Generations Fax License [*] ([*]/port). SQL Link Software Includes: License (per AP) for VOICETEK Generations SQL Link [*] software on SCO for Ingres, Informix, Oracle, or Sybase. SQL Link Software SQL License will be reduced to [*] per Application Processor when [*] BULK PURCHASE purchased in quantities of 20 ([*]). ADSI Software Support Includes: License (per AP) for VOICETEK Generations ADSI software [*] for SCO. ADSI Software Support ADSI license will be reduced to [*] per Application Processor [*] BULK PURCHASE when purchased in quantities of 5 ([*]).
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ADVANCED PRODUCT DESCRIPTION PRICE - -------- ------------------- ----- OPTIONS Disk Mirroring Includes: License for VOICETEK Disk Mirroring software option (based [*] on Veritas software). Redundant Power Includes: Redundant power supply and associated components, [*] Supply for DC-powered VOICETEK License for redundant DC power software option. MRS/Rack Prompt Manager Includes: License for VOICETEK Prompt Management software. [*] Software Audio Interface Unit Includes: Audio interface unit. [*] OTHER PRODUCT DESCRIPTION PRICE - ----- ------------------- ----- Rack Cabinet Includes: Rack cabinet, one set of Rack Cabinet Rails. [*] Rack Cabinet Rails Includes: One set of Rack Cabinet Rails. [*] 1 GB Hard Disk for Includes: 1GB hard disk drive. [*] MRS/Tower or MRS/Rack Security KEYLOCK Includes: Security KEYLOCK. [*] DMX Option Includes: DMX card, VOICETEK DMX support software. [*] Tower Spares Kit Includes: CPU (486 or Pentium) module and 32MB memory, AC [*] Power Supply, Serial I/0 card, SCSI controller, Ethernet controller, SCSI cable, Floppy cable. AC Rack Spares Kit Includes: CPU (486 or Pentium) module and 32MB memory, AC Power [*] Supply, Serial I/0 card, SCSI controller, Ethernet controller, SCSI cable, Floppy cable. DC Rack Spares Kit Includes: CPU (486 or Pentium) module and 32MB memory, AC Power [*] Supply, Serial I/0 card, SCSI controller, Ethernet controller, SCSI cable, Floppy cable. RETAINED FROM PREVIOUS VERSION SCHEDULE E PRODUCT DESCRIPTION PRICE - ------------- ------------------- ----- D41 (Norstar) Norstar PT-04-NS [*] Voice Port Assembly Redundant AP Software RED-AP-SW [*] Report Writer Software RW-OPT [*] (Customized Version) Rolm ACD Interface PBX-RM [*] Meridian 1 ACD Interface PBX-NT [*]
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RETAINED FROM PRODUCT DESCRIPTION PRICE - ------------- ------------------- ----- PREVIOUS VERSION SCHEDULE E Customized PBX PBX-C1 [*] Interface SMDI Software Includes: RTU License for Voicetek SMDI support software. [*] UPS Software Support Includes: RTU License for Voicetek UPS support software on MRS. [*]
[*] Page 10 [*] CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. EX-10.3 7 VOLUME PURCHASE AGREEMENT 1 EXHIBIT 10.3 [DIALOGIC LOGO] 201-993-3000 201-993-3093 FAX DIALOGIC CORPORATION 1515 Route Ten, Parsippany, New Jersey 07054 DIALOGIC VOLUME PURCHASE AGREEMENT This Agreement is between Dialogic Corporation ("Dialogic"), headquartered at 1515 Route 10 East, Parsippany, New Jersey, and Voicetek Corporation, located at 19 Alpha Road, Chelmsford, Massachusetts, further known for the purposes of this Agreement as "Buyer". The purpose of this Agreement is to afford Buyer the opportunity to obtain a volume discount based on the total amount of purchases of certain products over a one-year period. This Agreement is intended for use by Buyer if Buyer has demonstrated the ability consistently to purchase products totaling at least 400 ports per year. The parties hereby agree as follows: Attachment #1 contains the pricing schedule for, and a list of the products that may be covered by this Volume Purchase Agreement ("Products"). In order to take advantage of a volume discount, Buyer must present Dialogic with a completed Equipment Delivery Schedule (in the form provided by Dialogic, a copy of which is attached) for each Product Buyer will purchase. Each completed Equipment Delivery Schedule will represent Buyer's good faith forecast of the quantity of each Product Buyer intends to purchase over the course of this Agreement. In addition, Buyer will present to Dialogic, upon execution of this Agreement, a written purchase order detailing exact quantities and ship dates for all Products forecasted for shipment within the first three months of the Agreement. Buyer will also issue to Dialogic, 30 days prior to the end of a quarter, a written purchase order detailing the exact quantities and ship dates for all Product forecasted for the subsequent quarter. There is one Equipment Delivery Schedule included in this Agreement, all of which taken together is Attachment #2 to this Agreement. * Voicetek agrees to provide written statement of indirect sales, including customer and Dialogic products sold, within 1 month after the end of each quarter. This Agreement will be retroactive to the date of September 20, 1995. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 2 Dialogic Volume Purchase Agreement, page 2 1. SALES CONDITIONS All purchases of Products by Buyer from Dialogic shall reference this Agreement and shall be governed by the terms and conditions of this Agreement notwithstanding the presence of different or additional provisions on Buyer's standard purchase order form. Buyer represents that all purchases of Products under this Agreement are for end use or for resale only when sold with Buyer's software or system. Buyer further represents that Products purchased under this Agreement will not be sold independently of software or systems except in the case of supplying spare parts. 2. ORDERING AND TITLE The Equipment Delivery Schedule(s) for each Product on Attachment #2 of this Agreement represent Buyer's good faith forecast for the term of the Agreement. UPON EXECUTION OF THE AGREEMENT BUYER IS REQUIRED TO FURNISH DIALOGIC WITH A WRITTEN PURCHASE ORDER FOR PRODUCTS FORECASTED FOR SHIPMENT WITHIN THE FIRST 90 DAYS OF THIS AGREEMENT. Buyer shall also issue written purchase orders to Dialogic, for the subsequent 90-day periods of this Agreement at least 30 days prior to the start of that 90-day period. Dialogic will ship Products covered by this Agreement in accordance with instructions on Buyer's written purchase order. Changes to the written purchase order shall be made in accordance with Section 6 of this Agreement. No Equipment Delivery Schedule or purchase order is accepted until Dialogic issues a written confirmation thereof to Buyer. Confirmation shall not be unreasonably withheld, but Dialogic reserves the right to reject any Equipment Delivery Schedule with a growth rate of 5% or more per month. All shipments by Dialogic are F.O.B. point of shipment by Dialogic. Title to Products and risk of loss pass to Buyer upon delivery to carrier at shipping point. Dialogic will select the carrier if Buyer does not. Claims for shortages must be made within ten (10) days after arrival. In the event of foreign delivery, Buyer shall be responsible for obtaining any and all export licenses and other international trade documents required by United States laws and all applicable laws of other jurisdictions and Buyer shall at all times comply with all such laws regarding the Products. 3 Dialogic Volume Purchase Agreement, page 3 3. TERM The term of this Agreement shall commence on the first day of the earliest month listed on Attachment #2 and continue for a term of 12 months. 4. PAYMENT TERMS AND CONDITIONS Payment to Dialogic from Buyer for all Products shall be made in certified funds prior to shipment of Products unless other payment terms are negotiated between Buyer and Dialogic. 5. PRICING The unit price Dialogic shall charge Buyer for the Products is calculated using the Volume Price Schedule (Attachment #1), and all of the Equipment Delivery Schedules for each Product. The sum of all the port totals for all the Products specified on Attachment #2 shall determine, for the first 90 days of this Agreement, the unit price, as shown on Attachment #1, for each Product. Instructions for calculating the total number of ports are included on Attachment #2. 6. SCHEDULE CHANGES Buyer may cancel or reschedule any order for standard Products, provided written notice is received by Dialogic 30 days before scheduled ship date. If 30-day notice is not received by Dialogic, the following cancellation/reschedule charges shall apply: A charge of 20% of the purchase price for the Product(s) in the affected shipment will be applicable for cancellation/reschedule notices received less than 14 days before the scheduled ship date, and a charge of 10% will be applicable for notices received less than 30, but more than 14 days before the scheduled ship date. Products not scheduled in the original Attachment #2 may be added at any time during the term of this Agreement, upon the following conditions: Buyer may be required to amend Attachment #2 or one or more Equipment Delivery Schedule(s) to include added Product if (a) Dialogic determines that the added Product represents a large volume that is being shipped on a regular basis; or (b) Dialogic determines that the quantity of added Product requested affects Dialogic's ability to supply the Product; or (c) the total number of ports specified in the original Attachment #2 plus the added Product quantity results in a change in the price level. Equipment Delivery Schedules for added Product are required only for the remainder of the term of this Agreement. 4 Dialogic Volume Purchase Agreement, page 4 Other changes to the Equipment Delivery Schedules may result in changes in the unit price of Products under the terms and conditions of Section 7 of this Agreement. 7. MINIMUM PURCHASE REQUIREMENTS Buyer is required to meet minimum quarterly purchase requirements in order to maintain the volume pricing determined under Section 5. Table 1 lists these quarterly minimum purchase requirements. The quarterly figures are cumulative. TABLE 1. Minimum Quarterly Port Purchase to Maintain Discount
By end of Per cent of quarter total port commitment ------------------------------------------------- Q1 * Q2 * Q3 *
Progress toward the stated goal will be measured at the end of each quarter (90 days; 180 days; and 270 days from the effective date of this Agreement). If, at any measuring point, Buyer has not achieved the minimum quarterly purchase requirement, subsequent shipments will be priced at the level shown in Attachment #1 that reflects actual shipment history. Notification of any pricing change, if applicable, will occur within seven (7) days of each measuring point. If actual purchases of Products by Buyer during any one quarter result in a price increase of more than one level, as shown in Attachment #1, this Agreement will be void and of no further effect and Buyer shall not be entitled to any subsequent volume discount. Buyer may achieve a greater discount if, at any measuring point, Buyer has purchased sufficient ports to meet the minimum purchase requirements for a lower price shown on Attachment #1. In order to obtain this higher discount, Buyer must present to Dialogic one or more amended Equipment Delivery Schedule(s) covering the balance of the term of this Agreement. The total number of ports outlined in the amended Equipment Delivery Schedule(s), added to the total number of ports already purchased by Buyer, must equal the number of ports required for the lower price. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 5 Dialogic Volume Purchase Agreement, page 5 8. WARRANTY Products purchased under this Agreement are subject to all the terms and conditions set forth in the Limited Warranty published in the documentation for the individual Products. 9. PATENTS AND COPYRIGHTS Neither this Agreement nor the sale of any Product or part thereof by Dialogic in accordance with this Agreement confers upon Buyer any license or other right under any patent, trademark, copyright or other intellectual property right pertaining to that Product. Dialogic computer programs and documentation therefore are patented or are copyrighted or both, and all rights are reserved by Dialogic Corporation. No Dialogic Product or documentation may, in whole or in part, be copied, photocopied, translated, or reduced to any electronic medium without the express prior written permission of Dialogic Corporation. 10. LIABILITY Dialogic shall not be liable for any costs or damages, and Buyer will indemnify, defend, and hold Dialogic harmless from any expenses, damages, costs, or losses resulting from any suit or proceeding based upon a claim arising from (a) a modification of any Product by a party other than Dialogic after delivery by Dialogic; or (b) compliance with Buyer's designs, specifications, or instructions; or (c) the use of any Product or part thereof furnished hereunder with any other product. 11. CONTINGENCIES Dialogic shall not be responsible for any failure to perform under this Agreement due to unforeseen circumstances or causes beyond Dialogic's reasonable control. Dialogic may defer delivery for a period equal to the delay caused by such an unforeseen or uncontrollable contingency. 6 Dialogic Volume Purchase Agreement, page 6 12. MODIFICATION AND JURISDICTION This Agreement sets forth the entire understanding of the parties and supersedes all prior agreements and understandings relating to the subject matter hereof. No modifications or additions to or deletions from these terms shall be binding upon either party unless accepted in writing by an authorized representative of each party. Buyer shall not delegate any obligations hereunder nor assign any interest or rights without prior written consent of Dialogic. This Agreement shall be governed by the laws of the State of New Jersey, and this Agreement shall be deemed to have been entered into and wholly performed in New Jersey. BUYER'S SHIPPING ADDRESS: Company Name: Voicetek Corporation ------------------------------------------------------------------ Street: 19 Alpha Road ------------------------------------------------------------------------ City: Chelmsford St: MA Zip: 01824-4175 ---------- -- ---------- BILLING ADDRESS: Company Name: Same as Above ------------------------------------------------------------------ Address ------------------------------------------------------------------------ City St. Zip ---------------------------------- --------------- ---------------- PURCHASING CONTACT: Name: Michael Stahl Title: Operations Manager ------------- ------------------ Telephone (508) 250-7949 Ext. -------------- -------------------- FOR DIALOGIC CORPORATION: FOR BUYER: 7 Dialogic Volume Purchase Agreement, page 7 Signed: /s/ Michael Stahl Signed: /s/ --------------------------------- --------------------------- Name: Michael Stahl Name: ----------------------------------- ----------------------------- Title: Manager of Operations Title: ---------------------------------- ---------------------------- Date: 11-3-95 Date: 10/14/95 ----------------------------------- --------------------------------- 8 Attachment #2 ------------- Equipment Delivery Schedule * CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 9 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ========================================================================================= ISA VOICE PRODUCTS W/ ON BOARD TELEPHONE INTERFACE Quickstart Development Platform * D/240SC-T1 24.0 * D/160SC-LS 16.0 * D/300SC-E1 30.0 * D/320SC+DTI/212 pkg 30.0 * D/21D 2.0 * D/41D 4.0 * D/41E 4.0 * D/41ESC 4.0 * D/42-NS 4.0 * D/42-SL 4.0 * D/41D Starter Kit 4.0 * D/41E Starter Kit 4.0 * ISA TELEPHONE NETWORK INTERFACES DTI/240SC **New Product** 12.0 A * DTI/241SC **New Product** 16.0 A * DTI/300SC **New Product** 15.0 A * DTI/301SC **New Product** 20.0 A * LSI/161SC **New Product** 8.0 A * LSI/81SC **New Product** 4.0 A * DID/120 12.0 * DID/120-PM 2.0 * DTI/124 12.0 * DTI/211 12.0 * LSI/120 6.0 * ISA SHARABLE VOICE RESOURCES D/121B 6.0 * D/240SC 12.0 * D/320SC 16.0 * D/81A 4.0 * D/160SC **New Product** 8.0 A * D/80SC **New Product** 4.0 A *
**Note: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware All PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Page 1 10 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ================================================================= ISA SWITCHING COMPONENTS MSI/160SC - Preliminary 16.0 * MSI/240SC - Preliminary 24.0 * MSI/80SC - Preliminary 8.0 * SI/80 - Preliminary 8.0 * AMX/81 2.0 * DMX 4.0 * MSI Baseboard 12.0 * MSI Power Module * MSI Station Interface 2.0 * SA/240 Station Adapter * AMX ESD Assy * VME VOICE PRODUCTS V/S24T1 - Preliminary 24.0 * V/S30E1 - Preliminary 30.0 * OPEN DSP PLATFORMS Antares DOS Software 6.0 * Antares SDK 80.0 * Antares/2000x33 12.0 * Lernout & Hauspie ASR 0.5 * Lernout & Hauspie TTS 0.5 * Spox Debugger 20.0 * Spox Kernel 40.0 * ISA COMPLEMENTARY PRODUCTS D/41E-IDPD 8.0 * FAX/120 12.0 * TTS/20 8.0 * TTS/40 16.0 * TTS/80 24.0 * VR/40 12.0 * VRP 8.0 * VRM/40 4.0 * VR/40p 12.0 *
**Note: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Page 2 11 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ======================================================================== VR/80p 16.0 * VR/120p 20.0 * VR/160p 24.0 * VRM2C 4.0 * VFX/40SC 8.0 * VFX40ESC 8.0 * MICRO CHANNEL PRODUCTS D/81-MC 4.0 * LSI/80-MC 4.0 * TTS/40-MC 4.0 * TTS/80-MC 8.0 * VR/81-MC 16.0 * ENHANCED PLATFORMS DTP 486/33-AC 12.0 C * DTP 486DX2/66-AC 12.0 C * DTP Pentium 90-AC 12.0 C * DTP 486/33-DC 12.0 C * DTP 486DX2/66-DC 12.0 C * DTP Pentium 90-DC 12.0 C * DTP/FR 486/33-AC 12.0 C * DTP/FR 486DX2/66-AC 12.0 C * DTP/FR Pentium 90-AC 12.0 C * DTP/FR 486/33-DC 12.0 C * DTP/FR 486DX2/66-DC 12.0 C * DTP/FR Pentium 90-DC 12.0 C * i486 256k cache upgrade OPEN DEVELOPMENT PROGRAM AEB Interface Development Package * PEB Interface Development Package * SCSA Spec Updates Service * SC2000 Development Kit * SC2000 chip only *
**Note: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 Page 3 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 12 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ======================================================================================= SYSTEMS SOFTWARE Dos Voice Driver Z OS/2 Voice Driver $ * Unix Voice Driver $ * App Server Lite 4.0 $ * App Server Plus 8.0 $ * AIX Voice Driver $ * Win NT Voice Driver $ * Solaris Voice Driver $ * Extra Driver Packages $ * Extra Documentation Packages $ * CT - DIVISION SOFTWARE PRODUCTS CT Connect V1.0 Full System C $ * CT Connect V1.0 Full System Maintenance C $ * CT Connect V1.0 Desk Top System C $ * CT Connect V1.0 Desk Top System Maintenance C $ * CT Connect V1.0 Desk Top Lite System C $ * CT Connect V1.0 Desk Top Lite System Maintenance C $ * CT Connect Documentation Set $ * CT Site Implementation Services $ * TOOLS/UTILITIES AC/101 Audio Coupler $ * AIA/2 Audio Interface Adapter $ * DID/120 Station Adapter $ * SA/120 Station Adapter (LSI/120) $ * SA/102 Station Adapter (AMX/81) $ * PHED (Phase Editor for Unix) 1.0 $ * VFEdit (Windows Prompt Editor) 1.0 $ * VBASE/40 (DOS Prompt Editor) $ * Promptmaster (Audio Coupler) 1.0 $ * Voice Editing Toolkit $ * ISA INTERNATIONAL PRODUCTS D/21D-AN 2.0 $ *
**NOTE: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 Page 4 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS 13 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ================================================== D/21D-JP 2.0 * D/21D-SG 2.0 * D/21E-CH 2.0 * D/21E-DE 2.0 * D/21E-DK 2.0 * D/21E-FR 2.0 * D/21E-NL 2.0 * D/21E-SE 2.0 * D/21E-UK 2.0 * D/41D-AN 4.0 * D/41D-CY 4.0 * D/41D-CZ 4.0 * D/41D-DK 4.0 * D/41D-ES 4.0 * D/41D-HK 4.0 * D/41D-HU 4.0 * D/41D-IL 4.0 * D/41D-IT 4.0 * D/41D-JP 4.0 * D/41D-KR 4.0 * D/41D-MA 4.0 * D/41D-NO 4.0 * D/41D-PT 4.0 * D/41D-SE 4.0 * D/41D-TR 4.0 * D/41E-AN 4.0 * D/41E-AT 4.0 * D/41E-BE 4.0 * D/41E-CH 4.0 * D/41E-DE 4.0 * D/41E-FI 4.0 * D/41E-FR 4.0 * D/41E-JP 4.0 * D/41E-LU 4.0 * D/41E-NL 4.0 * D/41E-NO 4.0 * D/41E-PO 4.0 * D/41E-SE 4.0 * D/41E-SG 4.0 * D/41E-UK 4.0 * D/41ESC-AT 4.0 * D/41ESC-DEN 4.0 * D/41ESC-ES 4.0 * D/41ESC-FI 4.0 *
**NOTE: A. Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US , FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Page 5 14 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ======================================================= D/41ESC-IT 4.0 * D/41ESC-LUX 4.0 * D/41ESC-NO 4.0 * D/41ESC-MY 4.0 * D/41ESC-PO 4.0 * D/41ESC-SG 4.0 * DID/120-HK 12.0 * DPD/120-JP 12.0 * DTI/212 15.0 * DTI/212-AN 15.0 * DTI/212-AT 15.0 * DTI/212-AU 15.0 * DTI/212-BE 15.0 * DTI/212-CZ 15.0 * DTI/212-ES 15.0 * DTI/212-FI 15.0 * DTI/212-HU 15.0 * DTI/212-IL 15.0 * DTI/212-IT 15.0 * DTI/212-LU 15.0 * DTI/212-NL 15.0 * DTI/212-NO 15.0 * DTI/212-SE 15.0 * DTI/212-TK 15.0 * DTI/212-UK 15.0 * D/300SC-E1-AN 30.0 * FM/80 1.0 * LSI/120-ES 6.0 * LSI/120-HK 6.0 * LSI/120-JP 6.0 * LSI/80-AT 4.0 * LSI/80-AU 4.0 * LSI/80-BE 4.0 * LSI/80-CH 4.0 * LSI/80-DE 4.0 * LSI/80-FI 4.0 * LSI/80-IT 4.0 * LSI/80-LU 4.0 * LSI/80-NL 4.0 * LSI/80-UK 4.0 * PRI/212-DE 15.0 * PRI/212-NL 15.0 *
**NOTE: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. Page 6 15 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ==================================================================== GAMMAFAX SINGLE LINE HARDWARE CPI 2.0 * CPi/100 *New Product* 2.0 * XPI 1.0 * CPIMC 2.0 * CPD 2.0 * CP 2.0 * XP 1.0 * CP MC 2.0 * GAMMAFAX MULTI-LINE HARDWARE CP-4/AEB (14.4) 8.0 * CP4/LSI 8.0 * CP-4/MVIP 8.0 * CP-4/MVIP/E 8.0 * ML-MVIP (Daughterboard) 0.0 * ML-MVIP/E (Daughterboard) 0.0 * CP4/SC 8.0 * CP-6/SC 12.0 * CP-12/SC 24.0 * CP-12/SC Daughterboard 12.0 * GAMMAFAX SOFTWARE Gammapage 0.0 * GPI for MS-DOS, 5.1 0.0 * GPI for MS-DOS, 5.0 0.0 * GPI for MS-DOS, 4.5 0.0 * GPI for OS/2, 5.1 0.0 * GPI for OS/2, 5.0 0.0 * GPI for OS/2, 4.5 0.0 * GDK for SCO Unix 0.0 * GDK for Interactive Unix 0.0 * GDK for UnixWare 0.0 * GAMMAFAX UPGRADES Hardware and Software upgrade 0.0 *
**NOTE: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTES OMISSIONS Page 7 16 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ====================================================================== CP GFax SW & Manuals DOS 5.2 0.0 * Gammapage upgrade 5.2 0.0 * GPF for MS-DOS, 5.2 0.0 * GPI upgrade for MS-DOS, 5.0 0.0 * GPI upgrade for MS-DOS, 4.5 0.0 * GPI upgrade for OS/2, 5.1 0.0 * GPI upgrade for OS/2, 5.0 0.0 * GPI upgrade for OS/2, 4.5 0.0 * GFax SW & Manuals OS/2 5.1 0.0 * GAMMAFAX SPECIAL VARIATIONS CPI - KDK 2.0 * CP - KDK 2.0 * CPI Canon 2.0 * RFAX/4000 4.0 * CPI bundle for Optus FACSYS 2.0 * XPI bundle for Optus FACSYS 1.0 * CPI bundle for Rightfax 2.0 * XPI bundle for Rightfax 1.0 * CPI bundle for Alcom 2.0 * XPI bundle for Alcom 1.0 * GAMMAFAX INTERNATIONAL VERSIONS CPI-AU 2.0 * XPI-AU 1.0 * CP-AU 2.0 * XP-AU 1.0 * CP MC-AU 2.0 * CPI-AU (w/ PTT label) 2.0 * XPI-AU (w/ PTT label) 1.0 * CP-AU (w/ PTT label) 2.0 * XP-AU (w/ PTT label) 1.0 * CP MC-AU (w/ PTT label) 2.0 * CP-AT 2.0 * XP-AT 1.0 * CPMC-AT 2.0 * CP-AT (w/ PTT label) 2.0 * XP-AT (w/ PTT label) 1.0 * CPMC-AT (w/ PTT label) 2.0 *
**NOTE: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 Page 8 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 17 ATTACHMENT 1: Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price =============================================================== CPI-BH 2.0 * CP-BE 2.0 * XP-BE 1.0 * CP MC-BE 2.0 * CPI-CA 2.0 * XPI-CA 1.0 * CPI MC-CA 2.0 * CPD-CA 2.0 * CP4/LSI-CA 8.0 * CP-CS 2.0 * XP-CS 1.0 * CP-DK 2.0 * XP-DK 1.0 * CP MC-DK 2.0 * CP-DK (w/ PTT label) 2.0 * XP-DK (w/ PTT label) 1.0 * CP MC-DK (w/ PTT label) 2.0 * CP-FI 2.0 * XP-FI 1.0 * CP-FR 2.0 * XP-FR 2.0 CPI-FR 2.0 * CP-DE 2.0 * XP-DE 1.0 * CPI-GB 2.0 * XPI-GB 1.0 * CP-HK 2.0 * XP-HK 1.0 * CP MC-HK 2.0 * CP-HU 2.0 * XP-HU 1.0 * CP-IS 2.0 * XP-IS 1.0 * CP-IN 2.0 * XP-IN 1.0 * CP-IL 2.0 * CPI-IT 2.0 * XPI-IT 1.0 * CP-IT 2.0 * XP-IT 1.0 * CP MC-IT 2.0 * CP-IT (w/ PTT label) 2.0 * XP-IT (w/ PTT label) 1.0 * CP MC-IT (w/ PTT label) 2.0 *
**NOTE: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTES OMISSIONS Page 9 18 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ================================================================= CP-JP 2.0 * XP-JP 1.0 * CP-JP (w/ PTT label) 2.0 * XP-JP (w/ PTT label) 1.0 * CPI-KO 2.0 * XPI-KO 1.0 * CP-LU 2.0 * XP-LU 1.0 * CP MC-LU 2.0 * CP-MY 2.0 * XP-MY 1.0 * CP MC-MY 2.0 * CP-MX 2.0 * XP-MX 1.0 * CP-NL 2.0 * XP-NL 1.0 * CP MC-NL 2.0 * CP-NL (w/ PTT label) 2.0 * XP-NL (w/ PTT label) 1.0 * CP-NL (w/ PTT label) 2.0 * CPI-NZ 2.0 * XPI-NZ 1.0 * CP MC-NZ 2.0 * CPI-NZ (w/ PTT label) 2.0 * XPI-NZ (w/ PTT label) 1.0 * CP MC-NZ(w/ PTT label) 2.0 * CP-NO 2.0 * XP-NO 1.0 * CP-NO (w/ PTT label) 2.0 * XP-NO (w/ PTT label) 1.0 * CP-SG 2.0 * XP-SG 1.0 * CPI-ZA 2.0 * XPI-ZA 1.0 * CP-ES 2.0 * XP-ES 1.0 * CPISE 2.0 * XPI-SE 1.0 * CP-TH 2.0 * XP-TH 1.0 * CPI-Non USA and Canada 2.0 * XPI Non USA and Canada 1.0 * CPIMC-Non USA and Canada 2.0 * CPMC-Non USA and Canada 2.0 *
**NOTE: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 Page 10 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 19 ATTACHMENT 1: ------------- Dialogic Volume Pricing Schedule
Product Ports **Note 15000 Port Price ============================================================ CP Non USA and Canada 2.0 * XP Non USA and Canada 1.0 *
**NOTE: A: Call your Dialogic Sales Representative for further details C: Additional price discounts available, please contact your Dialogic Sales Representative for more details Z: First copy at no additional cost with the purchase of Dialogic hardware ALL PRICES ARE IN US $, FOR STANDARD BOARDS, FOB PARSIPPANY. SHIPPING AND HANDLING NOT INCLUDED. PRICES SUBJECT TO CHANGE WITHOUT NOTICE. Dialogic Corporation: July 1995 Page 11 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. EX-10.4 8 DISTRIBUTION AGREEMENT 1 EXHIBIT 10.4 DISTRIBUTOR AGREEMENT BETWEEN ROCKWELL INTERNATIONAL, SSD AND VOICETEK CORPORATION 9/26/96 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 2 DISTRIBUTOR AGREEMENT................................................................... 4 RECITALS................................................................................ 4 1.0 SOLE AND ENTIRE AGREEMENT........................................................... 4 2.0 DEFINITIONS......................................................................... 4 3.0 LICENSE AND APPOINTMENT AS RESELLER................................................. 5 4.0 TERM................................................................................ 6 5.0 DUTIES OF VOICETEK.................................................................. 6 6.0 DUTIES OF ROCKWELL.................................................................. 8 7.0 TRADE NAMES, TRADEMARKS AND PRIVATE LABELS.......................................... 9 8.0 PRICING AND DISCOUNTS............................................................... 9 9.0 FIELD TESTING....................................................................... 10 10.0 SALES AND PRE-SALES SUPPORT........................................................ 11 11.0 ORDERING AND DELIVERY.............................................................. 11 12.0 WARRANTY........................................................................... 13 13.0 INDEMNIFICATION.................................................................... 13 14.0 TRAINING........................................................................... 14 15.0 TERMINATION........................................................................ 15 16.0 CONFIDENTIALITY.................................................................... 15 17.0 ESCROW............................................................................. 16 18.0 CUSTOM APPLICATIONS AND SCRIPTING.................................................. 17
2 9/26/96 3 19.0 LIMITED LIABILITY............................................. 18 20.0 GENERAL TERMS................................................. 18 21.0 SURVIVAL...................................................... 19 EXHIBIT A UNIT PRICE LIST AND DISCOUNT TERMS.............. 21 EXHIBIT B TERRITORY....................................... 22 EXHIBIT C TRAINING AND CONSULTING PRICE SCHEDULE.......... 23 EXHIBIT D CANCELLATIONS................................... 24 EXHIBIT E HARDWARE WARRANTY............................... 25 EXHIBIT F SOFTWARE PROGRAM LICENSE AND WARRANTY........... 26 EXHIBIT G ROCKWELL GENERAL TERMS AND CONDITIONS........... 30 EXHIBIT I VOICETEK SUPPORT SERVICE........................ XX 3 4 DISTRIBUTOR AGREEMENT This Agreement is made and entered into this 1st day of October, 1996, by and between VOICETEK CORPORATION, a Massachusetts corporation with its principal place of business at 19 Alpha Road, Chelmsford, MA 01824 ("VOICETEK") and ROCKWELL International Corporation, Switching Systems Division, a Delaware corporation with its principal place of business at 1431 Opus Place, Downers Grove, Illinois 60515 ("ROCKWELL"). RECITALS WHEREAS, Rockwell manufactures, markets and sells Automatic Call Distributor ("ACD") products known as Galaxy and Spectrum ACD Systems; WHEREAS, Voicetek manufactures, markets, and sells certain computer hardware and licenses certain software families known as Generations which can be used in connection with the ROCKWELL Galaxy and Spectrum ACD systems: NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree to enter into this Agreement as follows: 1.0 SOLE AND ENTIRE AGREEMENT This Agreement, which constitutes the entire agreement between the parties, supersedes and replaces any and all prior or contemporaneous understandings or agreements. This Agreement may be amended, modified, or revoked only by a written instrument executed by both ROCKWELL and VOICETEK. 2.0 DEFINITIONS As used in this Agreement, the following terms shall have the designated meaning detailed below: 2.1 "ROCKWELL PRODUCT" shall mean the Galaxy and Spectrum ACDs as the same may be modified, revised, or enhanced from time to time. 2.2 "VOICETEK SOFTWARE" shall mean the Generations family of software and firmware (in object code form) as described in Exhibit A including all modifications, revisions, and enhancements thereto. 2.3 "VOICETEK HARDWARE" shall mean the hardware as listed in Exhibit A, including all modifications, revisions, and enhancements thereto. 4 5 2.4 "VOICETEK PRODUCT" shall mean the VOICETEK Hardware and the VOICETEK Software. 2.5 "VOICETEK PRODUCT DOCUMENTATION" shall mean the user documentation for the VOICETEK Hardware and VOICETEK Software, including but not limited to the VOICETEK Installation, Training, Users', and Maintenance Manual, release notes and updated installation instructions and user guides. 2.6 "CUSTOMER" shall mean ROCKWELL'S direct-end users customers to whom Product(s) are supplied and licensed for internal use, and also shall mean ROCKWELL's agents appointed for distribution or resale of Product(s), and referred to in this Agreement as "End User/Agent. 3.0 LICENSE AND APPOINTMENT AS RESELLER 3.1 NON-EXCLUSIVE LICENSE TO ROCKWELL Subject to the terms and conditions hereinafter set forth, VOICETEK hereby grants to and ROCKWELL hereby accepts from VOICETEK, an unrestricted worldwide, non-exclusive, and non-transferable license to resell, directly or indirectly, the VOICETEK Hardware and a worldwide, non-exclusive and non-transferable license to sublicense the VOICETEK Software, for use with standalone and networked Rockwell ACD equipment, and/or applications, to End User/Agent during the term of this Agreement. 3.2 NATURE OF AGREEMENT The license granted in Section 3.1 only grants to ROCKWELL a license to distribute VOICETEK Software and does not transfer any right, title or interest to any VOICETEK Software to ROCKWELL or ROCKWELL'S End User/Agents. VOICETEK will transfer title only to the VOICETEK Hardware. The VOICETEK Software will be licensed to Rockwell and its End User/Agents on a right to use in perpetuity basis with all intellectual property rights remaining the property of VOICETEK. Use of the terms "sell," "license," "purchase," "license fees" and "price" will be interpreted in accordance with this Section. 3.3 INDEPENDENT CONTRACTORS The parties have entered into this Agreement solely as independent Contractors and nothing contained herein shall be construed as giving rise to a partnership, joint venture, or any other form of business organization. Nothing contained in this Agreement shall be construed as giving either party any exclusive rights to any products or technology of the other party, as all rights and obligations under this Agreement are of a nonexclusive nature. Subject to their respective confidentiality and related obligations set forth in this Agreement, each party shall be free to market and sell its products to and in conjunction with, and disclose its own unrestricted technology to, competitors of the other party hereto. 3.4 ASSIGNMENT This Agreement is not assignable by either party in whole or in part without prior written consent of both parties. Such consent shall not be unreasonably withheld 5 6 by either party. Neither change in ownership or control of either party nor assignment of this Contract by either party shall be a valid basis for termination of this Agreement. 3.5 ADDED DEVELOPMENT This Agreement may be altered from time to time by mutually agreed to tasks for development by the parties. Costs for such development as well as a definitive statement of the work to be accomplished will be reduced to writing and signed by both parties in advance of any actual work accomplishment or payment of funds. 3.6 APPROVAL OF SUBCONTRACTORS It is expressly agreed by the Parties that VOICETEK intends, where applicable and reasonable, to effect manufacture of assemblies through contract manufacturers who are ISO 9000 certified/registered. It is agreed by the Parties that VOICETEK will inform ROCKWELL if VOICETEK enters into any major long term relationship with a manufacturing contractor who is not ISO 9000 certified/registered. VOICETEK shall manage subcontractor(s) issues and to fully execute the Contractual obligations of VOICETEK, including but not limited to cost and schedule matters, under this Agreement. It is expressly agreed that VOICETEK may obtain emergency components and assemblies to support immediate production requirements from vendors VOICETEK deems appropriate. 4.0 TERM 4.1 The initial term of this Agreement shall be for a period of three (3) years from the date of execution by both parties and, upon expiration of such term, shall renew itself for (2) successive periods of one (1) year each unless the parties mutually agree in writing a minimum of 90 days in advance that the Agreement shall be canceled. 5.0 DUTIES OF VOICETEK VOICETEK shall, at its own expense and without remuneration from ROCKWELL, perform the following during the term and the option period, if exercised, of this Agreement: 5.1 DEMONSTRATION SETS VOICETEK shall supply for ROCKWELL'S use for the period of this Agreement, and, upon ROCKWELL request, may continue to supply during the extensions thereto, one (1) demonstration system and one (1) application system, complete product documentation, installation instructions, user manuals, and suitable quantities of sales support materials to perform application development, and demonstrate the system in ROCKWELL'S demo center. Up to 50 copies of additional collateral material and 2 manuals may be reasonably requested by ROCKWELL and be supplied by VOICETEK. All copies will be updated by VOICETEK within a reasonable time after the effective date of each release. ROCKWELL at its own expense with prior permission by VOICETEK, reproduce for internal use only any such printed or electronically recorded material pertaining to Demonstration Sets and manuals which were 6 7 originally supplied by VOICETEK. VOICETEK may, at its option and its expense, lease a communication link to establish a connection with ROCKWELL'S test bed, the use of which shall be coordinated and approved by ROCKWELL in advance. VOICETEK shall not have access to any embedded software in ROCKWELL'S test bed. Upon the expiration or termination of the Agreement, each party will return to the other party in good condition, wear and tear excepted, all supplied hardware and software. All documentation, whether in hard copy or soft files, shall be returned by each party to the other party or destroyed, as the other party may direct. 5.2 MARKETING REPORTS VOICETEK shall provide ROCKWELL on-line or physical access to reports detailing marketing or technical information on products competitive comparisons, special sales or service suggestions, competitive announcements, and new marketing or technical support material for the VOICETEK Product. VOICETEK shall respond reasonably to all inquiries and reasonable requests for sales support from ROCKWELL. 5.3 WARRANTY SUPPORT VOICETEK will provide Hardware warranty support to ROCKWELL'S End User/Agent for a 1 year period of warranty measured from the date product is installed and accepted or fifteen (15) months from date of shipment by VOICETEK, which ever period occurs first. Software will be warranted from 90 days after customer acceptance or 180 days from shipment, which ever occurs first. In the event a Customer chooses to purchase support services directly from VOICETEK, VOICETEK will also be responsible to take first call during any warranty period. The procedural steps for warranty service shall be as set forth in Exhibits E, F and I of this Agreement. 5.4 VOICETEK PRODUCT SUPPORT VOICETEK shall provide to ROCKWELL enhancements and updates to the VOICETEK Product when changes occur. All proposed enhancements and updates will be subjected to a reasonable compatibility check with the ROCKWELL Product prior to release. Such compatibility test shall be conducted by VOICETEK and verified by ROCKWELL. VOICETEK will provide a Product Change Notice a minimum of thirty (30) days in advance of a new release or the deletion of any feature(s). Engineering Change Notices and adequate sustaining technical support for all interfaces encompassed under this Agreement for its term shall be provided to ROCKWELL at no cost so long as VOICETEK continues to support such interfaces. 5.5 PRODUCT DISCONTINUANCE VOICETEK may discontinue the production or availability of any Product at any time during the term of the Agreement by twelve (12) months prior written notice. In the event of a Product discontinuance hereunder, VOICETEK shall at the option of ROCKWELL either provide substitute Products which under normal and proper use: (i) shall not materially or adversely affect physical or functional interchangeability or performance 7 8 (except where there is written agreement between the parties that specific characteristics will be so affected), (ii) shall not detract from the safety of the Product or allow ROCKWELL to make an end of cycle buy of such discontinued product the manufacture of which shall not extend beyond twenty four (24) months from the time notice is given. VOICETEK agrees to provide repair services of any such product for a period of five (5) years from date of notification. 6.0 DUTIES OF ROCKWELL ROCKWELL shall, at its own expense and without remuneration from VOICETEK, perform the following during the entire period of this Agreement: 6.1 SALES AND MARKETING ROCKWELL shall maintain a sufficient world-wide marketing and sales program augmented by outside third party sales and marketing arrangements as Rockwell may determine to be appropriate to sell the VOICETEK Products, perform all necessary promotion and advertising of the VOICETEK Products, and use its diligent efforts to effect the maximum amount of gross sales of the VOICETEK Products. This will include provisions for VOICETEK to participate in Rockwell sponsored trade shows, user group forums and product demonstrations subject to availability and approval by Rockwell. 6.2 SALES FORECASTS ROCKWELL shall submit a rolling six-month non-binding sales forecast as specified in Exhibit A, solely for the purpose of VOICETEK internal planning. 6.3 TERMS AND CONDITIONS OF RESALE For each unit of the VOICETEK Product sold ROCKWELL will obtain from End User/Agent its customer a fully executed ROCKWELL standard General Terms and Conditions of Sale document attached hereto as Exhibit G. End User/Agents shall receive no interest in the VOICETEK Software other than a sublicense. Title to the VOICETEK Software shall not be transferred to End User/Agent. All ROCKWELL End Users will be prohibited from re-license of the VOICETEK Software or further distribution of the VOICETEK Hardware. 6.4 PRODUCT SUPPORT ROCKWELL will promptly provide information regarding enhancements and updates of the ROCKWELL Products to the extent they will impact the operation or functionality of the VOICETEK Product, when such changes occur. Pertinent Engineering Change Notices and adequate sustaining technical support shall be provided to VOICETEK at no cost so long as ROCKWELL continues to support such interfaces. 6.5 ASSIGNMENT OF LIAISON ROCKWELL agrees to assign a technical, service and sales individual to act as the focal point and liaison with VOICETEK. 8 9 6.6 SEMIANNUAL REVIEWS ROCKWELL agrees to meet with representatives on a semiannual basis to review the relationship between ROCKWELL and VOICETEK, sales opportunities, service status and product requirement. This meeting will take place at a mutually agreed upon time and location, the location to alternate between each companies facilities. 7.0 TRADE NAMES, TRADEMARKS AND PRIVATE LABELS 7.1 USE OF VOICETEK TRADEMARKS During the term of this Agreement, ROCKWELL shall have the right to use the trade names and trademarks of VOICETEK applied to the VOICETEK Products by VOICETEK whether registered or not, in advertising and promotional literature solely in connection with ROCKWELL's sales of the VOICETEK Products. Such use shall identify the trade names and trademarks as the exclusive property of VOICETEK. Upon termination or expiration of this Agreement, ROCKWELL shall immediately cease and desist from use of all trade names and trademarks of VOICETEK in any manner whatsoever for new installations. VOICETEK shall have the same rights to Rockwell Tradenames and Trademarks with respect to this section, except that such use shall be subject to prior review and approval by Rockwell. 7.3 PROPRIETARY RIGHTS ROCKWELL acknowledges that VOICETEK owns and retains all trade names and trademarks and other proprietary rights in or associated with the VOICETEK Product, and agrees that it will not at any time during or after this Agreement assert or claim any interest in or do anything that may adversely affect the validity of, or cause confusion in the ownership of, any Mark or copyright belonging to or licensed to VOICETEK (including, without limitation, any act which may infringe or lead to the infringement of any of VOICETEK'S proprietary rights). 7.4 OBLIGATION TO PROTECT ROCKWELL agrees to use reasonable efforts to protect VOICETEK's proprietary rights and to cooperate in VOICETEK'S efforts to protect its proprietary rights. ROCKWELL agrees to promptly notify VOICETEK of any known or suspected breach of VOICETEK's proprietary rights that comes to ROCKWELL's attention. 8.0 PRICING AND DISCOUNTS 8.1 PRICE STABILITY * from date the Agreement is signed, after which VOICETEK may adjust prices for increased production costs, but limited to a * for the prior year, upon no less than ninety (90) days prior written notice to ROCKWELL. No such increase shall be effective for any ROCKWELL order accepted from an End User/Agent or for any proposal to an End User/Agent which was dated prior to the date notice of such increase was received by ROCKWELL, provided that ROCKWELL notifies VOICETEK upon receipt of notice of such increase which End User/Agent orders and/or 9 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 10 proposals are outstanding, and provided further that ROCKWELL places all orders to VOICETEK resulting from such outstanding orders and/or proposals within 180 days of the date notice of such increase was received by ROCKWELL. 8.2 MOST FAVORED CUSTOMER VOICETEK represents that the charges, fees, costs, and discounts set forth in this Agreement are no less favorable to ROCKWELL than the most favorable terms given to any other distributor or like type of strategic alliance with like quantities and commitments and with similar terms and conditions entered into by VOICETEK as of the Effective Date of this Agreement. If, during the term of this Agreement, VOICETEK, in its sales to other End User/Agents, reduces prices for like quantities of the same or essentially the same component or materials or labor embodied in the VOICETEK Product under similar terms and conditions to a level below the prices established by this Agreement and detailed in Exhibit A, then VOICETEK will immediately adjust its price(s) to ROCKWELL for any open or future orders to equal the levels charged to such other customer(s) providing ROCKWELL's purchases represent similar terms, quantities, and conditions. 8.3 DISCOUNTS VOICETEK agrees that sales and licenses of VOICETEK Products to ROCKWELL shall be at the "ROCKWELL Purchase Price" as detailed in Exhibit A. VOICETEK agrees to explore and identify cost reduction opportunities in the Products provided. Any cost savings generated by Voicetek shall be shared in a reduction in the unit price of the Product supplied under this Agreement, effective at a mutually agreed upon time. 8.4 ******. 8.5 MAINTENANCE RELEASES Sets of VOICETEK Product Documentation and software media for all maintenance updates and releases will be provided by VOICETEK throughout the warranty and maintenance periods as set forth in Exhibits E and F. 9.0 FIELD TESTING Upon mutual agreement, VOICETEK and ROCKWELL may jointly conduct a field test of the VOICETEK Product for a ROCKWELL End User. VOICETEK will provide reasonable sales, engineering, and marketing support in a close technical working relationship with ROCKWELL for the designated customer. 10.0 SALES AND PRE-SALES SUPPORT 10.1 JOINT SALES PRESENTATIONS VOICETEK and ROCKWELL mutually agree that it will be in the best interests of both parties to make joint presentations to End User/Agent prospects. VOICETEK and ROCKWELL agree that neither party will unreasonably decline to support joint sales 10 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS 11 presentations. Each party shall be responsible for its respective sales expenses. Any sales prospect for which ROCKWELL requested joint sales effort shall not be solicited by VOICETEK alone, unless mutually agreed to in writing. 10.2 PRE-SALES SUPPORT ROCKWELL shall provide primary pre-sales application, engineering and configuration support for ROCKWELL Products. ROCKWELL shall to the best of its ability pre-qualify prospective customers of VOICETEK products, and upon mutual agreement, VOICETEK shall provide pre-sales support to ROCKWELL at a place and time reasonably requested by ROCKWELL. As described herein, the term pre-sales shall mean any systems engineering, configuration design, technical application support related to customer evaluation of the VOICETEK product prior to submission of an order by a customer. VOICETEK shall provide and maintain a highly-trained and qualified pre-sales technical capability for the primary purpose of technically configuring and presenting VOICETEK solutions to ROCKWELL customers. VOICETEK shall prepare and submit quotations incorporating final configurations and installation requirements to ROCKWELL'S Sales Support personnel for their approval prior to any submission of pricing and availability to ROCKWELL'S customer. 10.3 POST SALES SUPPORT VOICETEK shall provide post-sales support and maintain a customer support center for any VOICETEK Products(s) described in Exhibit A sold by ROCKWELL. The term "post-sales" shall mean any activity related to delivery of warranty services or Product(s) support for VOICETEK Product(s). VOICETEK will continue to provide the support service detailed in Exhibits E, F and I for post-Warranty VOICETEK PRODUCT services to all ROCKWELL End User/Agents for which VOICETEK has authorized an annual maintenance Contract. VOICETEK will provide said services as may be in effect and offered to its other End User/Agents at the time of Contract. 11.0 ORDERING AND DELIVERY 11.1 FOB/RISK OF LOSS Prices for the VOICETEK Products are FOB Chelmsford, Massachusetts. Risk of loss for all VOICETEK Products sold shall pass from VOICETEK to ROCKWELL upon delivery of the VOICETEK Products to the designated freight carrier at the FOB point. 11.2 DELIVERY PERIOD VOICETEK shall use its best commercially reasonable efforts to deliver the VOICETEK Product to the customer site within thirty (30) days of the date the order is accepted providing that such products are substantially as forecasted. 11.3 VOICETEK PRODUCT CONFIGURATION & SUPPORT VOICETEK may modify the VOICETEK Product and availability as detailed in Exhibit A upon ninety (90) days prior written 11 12 notice to ROCKWELL. VOICETEK shall provide support for any VOICETEK Product sold and installed under this Contract for a period of not less than five (5) years from the Effective Date of the contract 11.4 ORDERS ROCKWELL may purchase VOICETEK Products listed in Exhibit A during the term of this Agreement by written purchase order. Any new product or applications developed by VOICETEK shall be outside the scope of this agreement unless they are added to Exhibit A by mutual written consent of the parties. Each written order shall include (as a minimum): the name of the Product(s) ordered; VOICETEK Product code(s); price(s) net of the then applicable discount; quantity(s); and, desired delivery date(s). All purchase orders are subject to acceptance by VOICETEK. ROCKWELL'S order shall be deemed to have been accepted unless VOICETEK provides written notice of order rejection within seven (7) business days after receipt of the ROCKWELL order by Voicetek. ROCKWELL shall have no obligation to purchase any VOICETEK Products hereunder except to the extent as may be incorporated in written orders placed subject to this Agreement. Cancellation or rescheduling of any order is subject to a restocking fee as specified in Exhibit D. 11.5 TERMS & CONDITIONS OF ORDER All VOICETEK Product(s) ordered by ROCKWELL from VOICETEK pursuant to this Agreement shall be subject solely to the provisions of this Agreement and any other provisions in addition to or not specifically covered by this Agreement shall be governed by ROCKWELL'S standard purchase order terms and conditions then in effect. 11.6 SHIPMENTS All ordered VOICETEK Product(s) shall be prepared for shipment in accordance with VOICETEK's standard practices in a manner to assure the VOICETEK Product is not damaged in transit and shipped using a ROCKWELL approved carrier listed in ROCKWELL'S routing instructions. ROCKWELL shall pay all freight costs, however, no shipments will be insured unless specific written instructions are issued by ROCKWELL prior to shipment. 11.7 INSTALLATION Upon shipment of Products from VOICETEK'S facility, VOICETEK agrees to assume full responsibility for project management, system programming, equipment integration, installation and maintenance, as specified on the ROCKWELL purchase order to VOICETEK, provided Rockwell pays for these services. 11.8 PERMITS & APPROVALS VOICETEK agrees to determine the permits and approvals necessary to import, export, buy, sell and maintain the VOICETEK Product in a country for which VOICETEK Product is not approved at the time a marketing opportunity may present itself. Upon agreement by ROCKWELL and VOICETEK that it is in the best interest of both parties to do so, VOICETEK shall, at its own expense, obtain all necessary governmental permits and approvals necessary for ROCKWELL to import, export, buy, sell and maintain the VOICETEK Product or 12 13 otherwise fully perform its obligations under this Agreement. ROCKWELL agrees to provide as much advance notice as possible to VOICETEK with regard to new countries into which ROCKWELL intends to market the VOICETEK Product and to work with VOICETEK to obtain required approvals. 12.0 WARRANTY 12.1 CONFIGURATION COMPLIANCE VOICETEK warrants the Hardware Products for a period of (1) year and Software Products for a period of (90) ninety days as specified in Exhibits A, E and F. 12.2 PRODUCT LICENSE VOICETEK warrants that ROCKWELL or its End User/Agent, as the case may be, shall acquire a license to the VOICETEK Product(s) (software) purchased free and clear of all encumbrances. 12.3 LIENS & INFRINGEMENTS VOICETEK warrants that it has and will guarantee to ROCKWELL or its End User/Agent, the right, title, and interest to convey the VOICETEK Products free of all liens and encumbrances, and that the VOICETEK Products or any part thereof, do not infringe on any intellectual property interest. If at any time VOICETEK shall incur any indebtedness that has become a lien upon such VOICETEK Products or any part thereof or which may become a claim against ROCKWELL, VOICETEK shall immediately pay such claim or indebtedness, or cause such lien to be released and discharged by giving bond or otherwise at VOICETEK'S sole expense. 12.4 LIMITATIONS Except as expressly provided in this Agreement, all WARRANTIES shall be void as to any VOICETEK Product damaged or rendered unserviceable by: improper or inadequate maintenance by anyone other than VOICETEK; unauthorized modifications or physical or electrical abuse to the VOICETEK Product by anyone other than VOICETEK; unreasonable refusal to comply with engineering change notice programs; negligence by other than VOICETEK or VOICETEK'S representative(s); theft; water or other perils; damage caused by containment and/or operation outside the environmental specifications; and, alteration or connection of the VOICETEK Product to other machines, equipment, or devices (other than VOICETEK'S approved devices) without the prior written approval of VOICETEK. 13.0 INDEMNIFICATION 13.1 NEGLIGENCE INDEMNIFICATION Each party (the "Indemnitor") hereby indemnifies and holds the other party (the "Indemnitee"), its directors, officers, agents and employees harmless against any and all claims, actions and damages, liabilities or expenses, including attorney's fees and other legal costs for injury to or death to any person, and for loss of 13 14 or damage to any and all property arising out of the negligent acts or omissions of the Indemnitor under this Agreement. 13.2 INTELLECTUAL PROPERTY INDEMNIFICATION VOICETEK shall defend, at its expense, any claim against ROCKWELL alleging that the VOICECTEK Product, or any part thereof, infringes any patent, copyright, trademark, trade name, trade secret, mask work, or other intellectual property interest in any country and shall pay all costs and damages awarded, provided that VOICETEK is promptly informed in writing and furnished with a copy of each communication, notice, or other action relating to the alleged infringement and is given authority, information, and assistance necessary to defend or settle such claim. If an injunction against ROCKWELL'S use, sale, lease, license, other distribution of the VOICETEK Product, or any part thereof, results from such a claim (or if ROCKWELL reasonably believes such an injunction is likely), VOICETEK shall, at its option, (and in addition to VOICETEK'S other obligations hereunder) (i) procure for ROCKWELL the right to continue using, selling, leasing, or licensing the VOICETEK Product or part thereof; (ii) replace such Voicetek Product or part thereof with non-infringing substitutes otherwise complying substantially with all the requirements of this Agreement; or (iii) credit the purchase price, less a charge equal to one-thirty-sixth (1/36) of the purchase price of the VOICETEK Product for each month that ROCKWELL enjoyed beneficial use, and accept the return of such equipment. Any unused and unopened stock may be returned for full credit. The provisions of this section shall not apply to any claim for infringement resulting solely from VOICETEK'S compliance with ROCKWELL'S detailed design specifications, where provided. THIS SECTION 13.2 STATES THE SOLE AND EXCLUSIVE LIABILITY OF THE PARTIES TO THIS AGREEMENT FOR PATENT, COPYRIGHT, TRADE SECRET, OR OTHER PROPRIETARY RIGHTS INFRINGEMENT AND IS IN LIEU OF ALL CONDITIONS OR WARRANTIES EXPRESS, IMPLIED, OR STATUTORY, IN REGARD THERETO. 14.0 TRAINING 14.1 TRAINING VOICETEK will provide training courses as described in Exhibit C. 14.2 TRAINING MATERIALS VOICETEK shall provide ROCKWELL, * to ROCKWELL, with VOICETEK developed training documentation and materials for the VOICETEK Products in electronic format for ROCKWELL'S internal training purposes only, during the term of this Agreement. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 14 15 15.0 TERMINATION 15.1 BANKRUPTCY Either party shall have the right to terminate this Agreement immediately upon written notice in the event either party files or has filed against it any bankruptcy or similar proceedings or enters into any form of arrangement with and/or for the benefit of its creditors. 15.2 BREACH In the event either party materially breaches this Agreement, the non-breaching party may provide written notice of such breach to the other party. Should the party asserted to be in breach fail to cure such breach within a period of sixty (60) days from the date of such notice, the non-breaching party shall have the right to terminate this Agreement immediately upon written notice to the other party. In addition, if one party commits three (3) or more material breaches of this Agreement the non-breaching party shall have the right to terminate this Agreement immediately upon written notice to the breaching party. 15.3 EFFECT OF TERMINATION Upon the termination or expiration of this Agreement: (i) each party will return to the other party all of the Confidential Information received hereunder in such party's possession or control; (ii) in the event of a Breach, all unshipped orders will automatically be canceled, and (iii) VOICETEK will have the option, in its sole discretion of electing to offer support for ROCKWELL'S End User/Agents or permitting ROCKWELL to continue to provide maintenance and support for the VOICETEK Products to the extent needed to. provide such services pursuant to a written agreement to be promptly executed by the parties allowing ROCKWELL to purchase the VOICETEK Hardware and license the VOICETEK Software only for the purpose of providing such services. 15 16 information for its own account (except in connection with this Agreement), until and unless such information: (i) is lawfully disclosed in such manner as is not a breach of this Section ; (ii) is otherwise available in the public domain; (iii) is released from the restrictions imposed in this Section by written consent of the disclosing party; (iv) shall be established to have been lawfully known to the receiving party prior to receipt of such information from the disclosing party; (v) is previously and independently developed by the receiving party, which the receiving party can prove with written evidence; (vi) is required to be released by law or such order of a governmental agency or a court of law or equity. Each party acknowledge that the Confidential Information contains trade secrets of the other party, the disclosure of which would cause substantial harm to such other party that could not be remedied by the payment of damages alone. Accordingly, each party will be entitled to preliminary and permanent injunctive relief and other equitable relief for any breach of this Section 16. 17.0 ESCROW VOICETEK agrees to place with its escrow agent all machine processed and printed materials, data, and other information constituting the source code and any documentation for the VOICETEK Software listed in Exhibit A which shall include but not be limited to all existing user manuals, control procedures, record layouts, and program listings throughout the term of this Agreement. During the term of this Agreement, VOICETEK shall deposit with the Escrow Agent the source code, listings, and related programmer-level documentation for every update, correction, or new release of the VOICETEK Software released to ROCKWELL or its End User/Agents in object code form. VOICETEK shall provide that the copy of the source code placed in the Escrow Agent's vault will be reproduced in a magnetic medium compatible with the equipment on which ROCKWELL maintains the VOICETEK Product. When a change is made to the source code by VOICETEK during the term of this Agreement, the revised source code as well as the immediately preceding version of the source code shall be deposited by VOICETEK into the Escrow Agent's vault promptly after the source code has been revised. ROCKWELL shall be permitted access to the source code solely to provide service ROCKWELL'S existing customer base, without the need for 16 17 VOICETEK'S concurrence, immediately upon VOICETEK'S failure to support such VOICETEK Software. 18.0 CUSTOM APPLICATIONS AND SCRIPTING For custom software application services developed by VOICETEK, on behalf of a ROCKWELL customer order, VOICETEK shall provide the same quality of documentation normally developed to support its own customers and a copy of the software to ROCKWELL, which will enable ROCKWELL to support its customer, if required. 18.1 ROCKWELL at its option, may provide similar custom application services to ROCKWELL's customers and will also be responsible for any documentation and support required. 19.0 LIMITED LIABILITY 19.1 DAMAGES AND LOST PROFITS REGARDLESS WHETHER ANY REMEDY SET FORTH HEREIN OR IN VOICETEK'S LIMITED WARRANTY ACCOMPANYING DELIVERY OF VOICETEK PRODUCTS FAILS OF ITS ESSENTIAL PURPOSE OR OTHERWISE, VOICETEK WILL NOT BE LIABLE FOR ANY LOST PROFITS OR FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR OTHER SPECIAL DAMAGES SUFFERED BY ROCKWELL, ITS END USER/AGENTS OR OTHERS ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE VOICETEK PRODUCTS, FOR ALL CAUSES OF ACTION OF ANY KIND (INCLUDING TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, AND BREACH OF WARRANTY) EVEN IF VOICETEK HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 19.2 CUMULATIVE LIABILITY EXCEPT FOR LIABILITY FOR PERSONAL INJURY OR PROPERTY DAMAGE ARISING FROM VOICETEK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IN NO EVENT WILL VOICETEK'S TOTAL CUMULATIVE LIABILITY IN CONNECTION WITH THIS AGREEMENT OR VOICETEK PRODUCTS, FROM ALL CAUSES OF ACTION OF ANY KIND, INCLUDING TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY AND BREACH OF WARRANTY, EXCEED THE PRECEDING 12 MONTH DOLLAR VOLUME PURCHASED BY ROCKWELL. 17 18 20.0 GENERAL TERMS 20.1 COMPLIANCE WITH LAWS & RULES In all of their respective operations related to this Agreement, the parties shall comply with all applicable federal, state, and local laws, rules, and regulations, including but not limited to export control laws. Each party also agrees to indemnify and hold harmless the other party from any and all damages and liabilities assessed against the other party as a result of party's non-compliance therewith. Any permission required to be included herein shall be deemed included as a part of this Agreement whether or not specifically referenced. 20.2 GOVERNING LAW This Agreement and any Purchase Order(s) issued hereunder shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts. 20.3 CONTINUED PERFORMANCE Any dispute arising under this Agreement which is not resolved by VOICETEK and ROCKWELL shall be decided by a court of law under the terms of this Section. Pending settlement of the final decision by the court, each party shall proceed diligently with the performance of the Agreement in accordance with the other party's direction. 20.4 TAXES, DUTIES, & FEES All amounts payable under this Agreement are exclusive of all sales, use, value-added, withholding, and other taxes and duties. ROCKWELL shall be responsible for the payment of, and shall indemnify and hold harmless VOICETEK from, any and all such taxes, duties, customs charges, or other costs or charges of any nature arising in any manner out of the sale, use, storage, or delivery of the VOICETEK Product(s), except taxes based upon the income of VOICETEK. VOICETEK will be promptly reimbursed by ROCKWELL for any and all taxes or duties that VOICETEK may be required to pay in connection with this Agreement or its performance. 20.5 WAIVER No waiver by either party of any default or breach by the other party of any of the previsions hereof shall constitute a waiver of any prior or subsequent default or breach hereunder. 20.6 FORCE MAJEURE Neither party shall be liable for failure to perform any of its obligations under this Agreement during any period in which such party cannot perform due to matters beyond their control, including, but not limited to, labor disputes, strike, fire, flood, or other natural disaster, war, embargo, or riot provided that the party so delayed immediately notifies the other party of such delay. If VOICETEK'S performance is delayed for these reasons for a cumulative period of thirty (30) days or more, ROCKWELL may terminate this Agreement and/or any Purchase Order hereunder by giving VOICETEK written notice, which termination shall become effective upon receipt of such notice. If ROCKWELL terminates, its sole liability under this 18 19 Agreement or any Purchase Orders issued hereunder will be to pay any balances due for conforming Product(s): (a.) delivered by VOICETEK before receipt of ROCKWELL'S termination notice; and, (b.) ordered by ROCKWELL for delivery and actually delivered within fifteen (15) days after receipt of ROCKWELL'S termination notice. 20.7 CONFLICT IN TERMS If any conflict arises with the terms and conditions in the exhibits or attachments to this document, the terms and conditions contained within the body of this Distributor Agreement will prevail. 20.8 NOTICES Any notices under this Agreement shall be sent in writing to the parties at their following addresses, by registered mail, provided either party may change such address by providing notice of same to the other party: For VOICETEK: VOICETEK COMMUNICATIONS INC. 19 Alpha Road Chelmsford, MA 01824 Telephone: 508-250-7875 Facsimile: 508-250-7926 For ROCKWELL: ROCKWELL INTERNATIONAL CORPORATION 1431 Opus Place P.O. Box 1494 Downers Grove, IL 60515 Attn: OEM Supplier Management Telephone: 708-960-8536 Facsimile: 708-769-1641 20.8 VALIDITY If any provision of this Agreement shall be rendered invalid, then such invalidity shall not affect the remainder of this Agreement which shall remain in full force and effect. 20.9 EXHIBITS The Exhibits attached hereto are incorporated into this Agreement by reference and made a part of this Agreement as though they were recited herein in their entirety. 21.0 SURVIVAL The provisions of Sections 1 (Sole and Entire Agreement), 3.2 (Nature of Agreement), 7 (Trade Names, Trademarks, and Private Labels), 12 (Warranty), 13 (Indemnification), 16 (Confidentiality), 17 (Escrow), 19 (Limited Liability), 20 (General), and this Section 21 (Survival) shall survive termination or expiration of this Agreement. 19 20 IN CONSIDERATION of the mutual covenants and conditions herein set forth, the parties have executed this Agreement as of the day and year written below. VOICETEK CORPORATION ROCKWELL INTERNATIONAL CORP. By: /s/ Scott Ganson By: /s/ Robert K. Nash ------------------------- ------------------------------ Typed Name: Scott Ganson Typed Name: Robert K. Nash -------------------- ---------------------- Title: VP Sales Title: Sr. Subcontract Mgr. -------------------- ---------------------- Date: 10/1/96 Date: 9-26-96 -------------------- ---------------------- 20 21 EXHIBIT A UNIT PRICE LIST AND DISCOUNT TERMS 1. Within thirty (30) days of the effective date of this Agreement, ROCKWELL shall make a good faith estimate (the Forecast) as to ROCKWELL'S likely sales volume of Products under this Agreement for the first twelve (12) month period. 2. ROCKWELL agrees to provide VOICETEK with a quarterly six (6) month forecast within twenty-one (21) calendar days after the start of each new quarter. SEE HARD COPY OF CONTRACT EXHIBIT "A" AND PRICE BOOK FOR PRODUCT LIST AND DISCOUNT SCHEDULE AND TERMS 21 22 EXHIBIT A OCTOBER 1, 1996 Rockwell Telecommunications / Voicetek Corporation Discount Agreement Terms and Conditions 3 YEAR AGREEMENT
Year Voicetek Sales Volume Discount 1 * from Oct. 1 - Sept 31, 1997 * * in FY97 * 2 * in FY98 * 3 * in FY99 *
For example: In year two Rockwell successfully sells * of Voicetek products and services. Rockwell will be entitled to a * discount in year three. If Rockwell sells * of Voicetek products and services in year two, the Rockwell discount for year three is *. The above discount terms are provided under the following conditions: 1. In order to qualify for the above discount terms in the second and third years, the sales volumes must be met in the prior year or the discount offered will be * for the following year. 2. * 3. The above discounts will be applied to the current price book in effect at the date of the agreement. 4. The Voicetek product and services are listed in the price book as discountable and non-discountable. The following is a sample list of Voicetek products that qualify for a discount. (This list may not be all inclusive): _ * _ * _ * _ * _ * _ * _ * The following is a sample list of Voicetek products that are not discountable. (This list may not be all inclusive): _ * _ * _ * _ * * CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 23 EXHIBIT A OCTOBER 1, 1996 _ * _ * _ * _ * _ * _ * 5. Sales of all Voicetek products and services listed in the current price book catalog apply toward the sales volume levels required for the discount. 6. Sales of Application Development & Software Consulting will be discounted to Rockwell at * or * per hour per the current price list. 7. Spares will be discounted at the rate of *. 8. Sales of Voicetek maintenance and software support agreements will be discounted to Rockwell based on Voicetek Sales volume as follows:
Year Voicetek Sales Volume Discount 1 * from Oct. 1 - Sept 31, 1997 * * in FY97 * 2 * in FY98 * Sales above * * 3 * in FY 99 * sales above * *
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 24 EXHIBIT B TERRITORY ROCKWELL will have the non-exclusive rights to market the Product worldwide under its own label or VOICETEKS' label subject to the terms and conditions set forth in this Agreement. COMPLIANCE WITH THE LAW In General. If ROCKWELL markets the Products outside the United States, ROCKWELL will be solely responsible, and agrees to comply with all laws, rules, regulations, orders, decrees, judgments and other governmental acts of the United States of America and any country or territory, and their political subdivisions and agencies, that may be applicable to the ROCKWELL and its activities hereunder. This includes without limitation any approval, registration or testing of the Products for this Agreement in which VOICETEK has not received such approvals or registration. VOICETEK expressly agrees that VOICETEK shall be solely responsible for identification of and compliance with any applicable laws, rules, regulations, orders, decrees, and regulatory requirements of any nature in any area named by ROCKWELL which is in addition to the areas covered by Exhibit J providing the parties have agreed to obtain such approvals as described in Article 11.7 of the main Agreement. VOICETEK shall be under no obligation to ship Products to ROCKWELL for marketing outside the U.S. until ROCKWELL has provided VOICETEK with satisfactory evidence that such approval, registration or testing is not required or that it has been obtained. ROCKWELL shall indemnify and hold VOICETEK harmless for any loss or damages suffered by VOICETEK as a result of ROCKWELL'S failure to comply with this section. This indemnity shall continue in force whether or not VOICETEK asks ROCKWELL to verify its compliance with any laws or regulations before shipping Products. United States Export Laws. ROCKWELL acknowledges and agrees that the Products and other technical data delivered by VOICETEK are subject to the United States Export Administration Act of 1979, as amended (the "Act") and all the regulations promulgated thereunder. Taxes. ROCKWELL shall remit 100 percent (100%) of the fees owed to VOICETEK without the deduction of withholding, customs, import or export, or other taxes. VOICETEK agrees to provide ROCKWELL with a list of all relevant approvals or certifications received by VOICETEK. 22 25 EXHIBIT C Training INITIAL TRAINING VOICETEK will provide a one day training session in the United States for ROCKWELL sales and marketing personnel at *. ROCKWELL is responsible for travel and living expenses of VOICETEK personnel assigned to perform this training. Training will be conducted at a site mutually agreed upon. ROCKWELL personnel may attend up to a total of 10 class seats in VOICETEK'S scheduled classes at *. Additional class seats will be made available at *. A limit of up to two (2) ROCKWELL personnel may attend the same class at the same time. ROCKWELL is responsible for their own travel and living expenses. If this training is held at ROCKWELL facilities, travel expenses as incurred by VOICETEK will be invoiced. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 23 26 EXHIBIT D CANCELLATIONS 1. Cancellation policy: a) Less than 31 days prior to scheduled shipment date - * b) Less than 60 days prior to scheduled shipment date - * c) Less than 90 days prior to scheduled shipment date - * 2. Return Authorization for warranty returns on stock updates shall be accomplished by following the procedures outlined in Exhibit E. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS. 24 27 EXHIBIT E HARDWARE WARRANTY 1. All Product is warranted to perform, when given normal, proper and intended usage, substantially in accordance with the published release specifications for each Product and, except for Licensed Software, against defects in materials and workmanship. 2. VOICETEK warrants that all hardware Product delivered shall be free from defects under normal use in material and workmanship for a period of one (1) year from customer acceptance. VOICETEK shall, at its option replace or repair, free of charge, any equipment covered by this warranty which shall be returned to the original shipping point, transportation charges prepaid, within one (1) year from the date of customer acceptance. If material upon examination proves to be damaged due to an accident, misuse, neglect, alteration, improper installation, repair, or improper testing, the warranty will not be applicable and voided. If VOICETEK elects to repair or replace such equipment, VOICETEK shall have reasonable time to make such repairs or replace such equipment. This warranty shall not apply to any equipment, or parts thereof, which has been repaired or altered, without VOICETEK'S written consent, by anyone other than VOICETEK'S employees or trained personnel, or has not been operated in accordance with VOICETEK'S printed instructions or has been operated under conditions more severe than, or otherwise exceeding, those set forth in the specifications for such equipment. 3. If during the stated warranty period any defect in material, or workmanship is discovered in any Product covered by the above warranty, VOICETEK shall, at the request of ROCKWELL, immediately advance replacement of any such products provided that (a) VOICETEK is promptly notified in writing immediately upon discovery of such defect, which notice shall contain a detailed explanation of any alleged deficiency, (b) such Product is returned to VOICETEK no more than fifteen (15) days after issuance of a return material authorization (RMA) by VOICETEK, freight prepaid to VOICETEK'S Customer Service Department, and (c) VOICETEK is satisfied upon examination that claimed deficiencies actually exist and were not caused by accident, misuse, neglect, alteration, improper installation, improper repair, improper testing, lightning, power surges, fire, flood, or earthquake. Unauthorized modification or unauthorized or improper alteration of Products shall invalidate this warranty. If the failed product is not returned within fifteen (15) days to VOICETEK, ROCKWELL will be invoiced at the then current discounted List Price and ROCKWELL agrees to pay such invoice. 4. EXCEPT FOR THE EXPRESS WARRANTIES STATED IN THIS AGREEMENT, VOICETEK DISCLAIMS ALL WARRANTIES ON PRODUCTS FURNISHED UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND THE EXPRESS WARRANTIES IN THIS AGREEMENT ARE IN LIEU OF ALL OBLIGATIONS OR LIABILITIES ON THE PART OF VOICETEK ARISING OUT OF OR IN CONNECTION WITH THE PERFORMANCE OF THE PRODUCT. THE FOREGOING WARRANTIES EXTEND ONLY TO ROCKWELL AND SHALL NOT BE ASSIGNABLE TO ANY OTHER PARTY. 25 28 EXHIBIT F SOFTWARE PROGRAM LICENSE AND WARRANTY 1. LICENSE 1.1 Subject to the following terms and conditions VOICETEK grants to ROCKWELL and ROCKWELL accepts a perpetual, non-exclusive license to use the object code software provided by VOICETEK (the Software Product only within VOICETEK equipment with all copyright, patent and intellectual property rights remaining the sole property of VOICETEK. 1.2 ROCKWELL shall receive software support and upgrades for the Software Product in accordance with the applicable then current VOICETEK software support policy in effect and upon payment of any applicable discounted software maintenance fees, should ROCKWELL elect to implement the upgrades. 2. PROTECTION AND SECURITY OF SOFTWARE PRODUCTS 2.1 ROCKWELL acknowledges and agrees that the Software Product contains proprietary and confidential information of VOICETEK and/or its third party supplier. ROCKWELL agrees to protect the confidential and proprietary nature of the Software Product in the same manner that it protects its own confidential information of like value, provided that ROCKWELL will in all cases use reasonable care to protect the Software Product. 2.2 ROCKWELL shall not use, print, copy, translate, adapt, create derivative works from, record, transmit, display, disclose, publish, encumber by way of security interest or otherwise pledge or transfer, modify, assign, distribute, rent, loan or make available to any third party the Software Product in whole or in part, except as expressly provided in this Agreement. 2.3 ROCKWELL shall refrain from and shall prevent others from decompiling or applying any procedure to the Software Product, including reverse engineering or any similar process, in order to derive and/or appropriate for use, the source code or source listings for the Software Product. 3. TERM 3.1 This Agreement shall become effective for each Software Product upon delivery of the Software Product to ROCKWELL. 3.2 VOICETEK may terminate this Agreement and the license upon notice to ROCKWELL if any amount payable by ROCKWELL in respect of any of the Software Products is not paid in accordance with Article 8.4 of the main Contract, or if ROCKWELL otherwise breaches any provision of this Agreement and fails to cure such breach within thirty (30) days of notice thereof, or if ROCKWELL becomes bankrupt, makes an assignment for the benefit of creditors or a trustee is appointed for ROCKWELL, or if the assets of ROCKWELL vest in or become subject to the rights of any trustee, receiver, board, tribunal, commission or any body, corporate or person, other than ROCKWELL, or if bankruptcy, reorganization or insolvency proceedings are instituted against ROCKWELL and are not dismissed within 30 days. 26 29 4. LIMITED WARRANTIES 4.1 VOICETEK warrants for a period of 90 days, from the date when the Software Product is successfully installed and accepted at a customer's site, or 180 days from date of shipment, whichever occurs first, that it substantially conforms to the functional specifications and shall be substantially free from errors, provided, however, that this warranty shall apply only to those portions of the Software Product, or its replacement, that incorporate all programs corrections and Enhancements, if any, delivered to ROCKWELL, and provided, further that its warranty shall not apply to any physical form or part thereof which has been abused or misused, or which shall have been modified by End-user/Agent except as supplied by VOICETEK. VOICETEK'S sole obligation hereunder shall be to remedy any such non-conformance of the software Product when reported to VOICETEK by End-user/Agent and this shall be completed in accordance with exhibit I, after VOICETEK has agreed that the product does not meet VOICETEK'S specifications. 4.2 THE WARRANTY SET OUT IN SECTION 4.1 SHALL CONSTITUTE THE SOLE LIABILITY OF VOICETEK AND THE SOLE REMEDY OF ROCKWELL FOR ANY FAILURE OF ANY PROGRAM TO FUNCTION AS WARRANTED. 4.3 EXCEPT AS EXPRESSLY PROVIDED HEREIN THERE ARE NO WARRANTIES, CONDITIONS OR REPRESENTATIONS EXPRESS OR IMPLIED BY STATUTE, USAGE, CUSTOM OF THE TRADE OR OTHERWISE WITH RESPECT TO THE SOFTWARE PRODUCTS PROVIDED BY VOICETEK HEREUNDER, INCLUDING BUT NOT LIMITED TO, WARRANTIES OR REPRESENTATIONS OF WORKMANSHIP, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR DURABILITY, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, VOICETEK DOES NOT WARRANT THAT THE SOFTWARE PRODUCT WILL MEET ALL OF ROCKWELL'S NEEDS OR THAT OPERATION OF THE SOFTWARE PRODUCT WILL BE ERROR FREE. 5. LIMITATION OF LIABILITY 5.1 IN NO EVENT WHATSOEVER, REGARDLESS OF THE FORM OR CAUSE OF ACTION WHETHER IN CONTRACT OR TORT (INCLUDING NEGLIGENCE) OR THE NUMBER OF CLAIMS ASSERTED, SHALL VOICETEK, ITS EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS TOTAL COLLECTIVE LIABILITY TO ROCKWELL FOR ALL CLAIMS EXCEED THE AMOUNT PAID UNDER THIS AGREEMENT FOR THE SOFTWARE PRODUCT THAT IS THE SUBJECT MATTER OF OR THAT IS DIRECTLY RELATED TO CAUSE OF ACTION, PROVIDED THAT IN NO EVENT SHALL THE TOTAL COLLECTIVE LIABILITY OF VOICETEK, ITS EMPLOYEES, OFFICERS, AGENTS AND DIRECTORS EXCEED THE AMOUNT PAID TO VOICETEK PURSUANT TO THIS AGREEMENT. 5.2 VOICETEK, ITS EMPLOYEES, AGENTS, OFFICERS AND DIRECTORS SHALL NOT BE LIABLE IN ANY WAY WHATSOEVER, WHETHER AS A RESULT OF A CLAIM OR 27 30 ACTION IN CONTRACT OR TORT, INCLUDING NEGLIGENCE OR OTHERWISE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOST PROFITS OR LOST BUSINESS REVENUE, LOST BUSINESS, FAILURE TO REALIZE EXPECTED SAVINGS, OR OTHER COMMERCIAL OR ECONOMIC LOSS OF ANY KIND WHATSOEVER, OR FOR ANY DAMAGES, DIRECT OR INDIRECT, SPECIAL OR CONSEQUENTIAL ARISING OUT OF ANY CLAIM AGAINST ROCKWELL BY ANY PERSON WHETHER OR NOT SUCH DAMAGES ARE FORESEEABLE AND WHETHER OR NOT VOICETEK, ITS EMPLOYEES, AGENTS, OFFICERS OR DIRECTORS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES WHICH ARE IN ANY WAY RELATED TO THIS AGREEMENT OR THE SOFTWARE PRODUCT. 5.3 THE FOREGOING PROVISIONS LIMITING THE LIABILITY OF VOICETEK EMPLOYEES, AGENTS, OFFICERS AND DIRECTORS SHALL BE DEEMED TO BE TRUST PROVISIONS FOR THE BENEFIT OF SUCH EMPLOYEES, OFFICERS, DIRECTORS AND AGENTS AND SHALL BE ENFORCEABLE BY SUCH AS TRUST BENEFICIARIES. 6. PATENT, COPYRIGHT, TRADE NAME AND TRADE SECRET INFRINGEMENT 6.1 VOICETEK shall defend any suit alleging the infringement of any patent, copyright or trade secret which is brought against ROCKWELL on account of its use of the Software Product and shall pay all reasonable legal costs and expenses incurred by ROCKWELL in conjunction therewith and satisfy all monetary judgments and decrees against ROCKWELL, provided that ROCKWELL notifies VOICETEK within ten (10) business days of the date any such claim becomes known to ROCKWELL, that VOICETEK shall have sole control of the defense or settlement of such actions, and that ROCKWELL provides such assistance and cooperation to VOICETEK as is reasonably requested. 6.2 In the event ROCKWELL is enjoined from its use of VOICETEK'S Software Product due to proceeding based upon any infringement of any patent, copyright or trade secret, VOICETEK shall either: (i) promptly render the Software Product non-infringing and capable of providing services as intended, or (ii) procure for ROCKWELL the right to continue using the Software Product, or (iii) replace the Software Product with a non-infringing version, or (iv) remove the Software Product and refund the purchase price, less a monthly usage fee equal to one sixtieth of the license for each month that ROCKWELL has had use of the Software Product. 6.3 The foregoing constitutes the entire liability of VOICETEK to ROCKWELL with respect to infringement of patents, copyrights, and trade secrets for Products purchased pursuant to this Agreement and VOICETEK hereby disclaims any implied warranty of non-infringement. 28 31 7. MISCELLANEOUS 7.1 Notwithstanding anything else in this Exhibit, VOICETEK shall not, in any way whatsoever, be held liable or responsible for any failure by it to meet its obligations or responsibilities under this Exhibit where such failure results from causes beyond VOICETEK'S reasonable control. 7.2 This Exhibit constitutes the entire understanding between VOICETEK and ROCKWELL with respect to the licensing of the Software Products to ROCKWELL by VOICETEK and supersedes all prior oral and written communications with respect to the Software Products licensed under this Exhibit. This Exhibit may be amended or modified only by means of a written Agreement signed by both VOICETEK and ROCKWELL. 7.3 If any provision of this Exhibit shall be held to be invalid, illegal or unenforceable, such provision shall be served therefrom and the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 7.4 ROCKWELL shall comply with all export regulations pertaining to the Software Product in effect from time to time. In particular, without limiting the generality of the foregoing, ROCKWELL hereby warrants that it will not directly or indirectly export, re-export or transship the Software Product or such other information, media or products in violation of or otherwise in contravention of the export laws, rules and regulations. 29 EX-10.5 9 LEASE DATED AS OF MAY 25. 1993 1 EXHIBIT 10.5 LEASE LANDLORD: Teachers Realty Corporation TENANT: Voicetek Corporation PREMISES: 19 Alpha Road Chelmsford, Massachusetts DATED: As of May 25, 1993 2 TABLE OF CONTENTS
ARTICLE CAPTION PAGE I. BASIC LEASE PROVISIONS 1 1.1 Introduction 1 1.2 Basic Data 1 1.3 Additional Definitions 2 II. PREMISES AND APPURTENANT RIGHTS 3 2.1 Lease of Premises 3 2.2 Appurtenant Rights and Reservations 3 III. BASIC RENT 4 3.1 Payment 4 IV. COMMENCEMENT AND CONDITION 5 4.1 Commencement Date 5 4.2 Condition of the Premises 5 V. USE OF PREMISES 5 5.1 Permitted Use 5 5.2 Installation and Alterations by Tenant 6 VI. ASSIGNMENT AND SUBLETTING 9 6.1 Prohibition 9 VII. RESPONSIBILITY FOR REPAIRS AND CONDITIONS 10 OF PREMISES; SERVICES TO BE FURNISHED BY LANDLORD 7.1 Landlord Repairs 10 7.2 Tenant's Agreement 11 7.3 Floor Load - Heavy Machinery 12 7.4 Building Services 12 7.5 Electricity 13 VIII. REAL ESTATE TAXES 17 8.1 Payments on Account of Real 17 Estate Taxes 8.2 Abatement 18 8.3 Alternate Taxes 18
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ARTICLE CAPTION PAGE IX. OPERATING EXPENSES 18 9.1 Definitions 18 9.2 Tenant's Payments 19 X. INDEMNITY AND PUBLIC LIABIITY INSURANCE 20 10.1 Tenant's Indemnity 20 10.2 Public Liability Insurance 21 10.3 Tenant's Risk 21 10.4 Injury Caused by Third Parties 22 XI. LANDLORD'S ACCESS TO PREMISES 22 11.1 Landlord's Rights 22 XII. FIRE, EMINENT DOMAIN, ETC. 22 12.1 Abatement of Rent 22 12.2 Landlord's Right of Termination 23 12.3 Restoration 23 12.4 Award 23 XIII. DEFAULT 24 13.1 Tenant's Default 24 13.2 Landlord's Default 27 XIV. MISCELLANEOUS PROVISIONS 27 14.1 Extra Hazardous Use 27 14.2 Waiver 28 14.3 Covenant of Quiet Enjoyment 28 14.4 Landlord's Liability 28 14.5 Notice to Mortgagee or Ground Lessor 29 14.6 Assignment of Rents and Transfer 30 of Title 14.7 Rules and Regulations 30 14.8 Additional Charges 31 14.9 Invalidity of Particular Provisions 31 14.10 Provisions Binding, Etc. 31 14.11 Recording 31 14.12 Notices 31 14.13 When Lease Becomes Binding 32 14.14 Paragraph Headings 32 14.15 Rights of Mortgagee or 32 Ground Lessor 14.16 Status Report 33 14.17 Security Deposit 33
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ARTICLE CAPTION PAGE 14.18 Remedying Defaults 34 14.19 Holding Over 34 14.20 Waiver of Subrogation 34 14.21 Surrender of Premises 35 14.22 Substitute Space 35 14.23 Brokerage 35 14.24 Special Taxation Provisions 35 14.25 Hazardous Materials 36 14.26 Governing Law 37
-iii- 5 L E A S E Preamble THIS INSTRUMENT IS A LEASE, dated as of May 25, 1993 in which the Landlord and the Tenant are the parties hereinafter named, and which relates to space in the building (the "Building") known and numbered as 19 Alpha Road, Chelmsford, Massachusetts. The parties to this instrument hereby agree with each other as follows: ARTICLE I BASIC LEASE PROVISIONS 1.1 INTRODUCTION. The following terms and provisions set forth basic data and, where appropriate, constitute definitions of the terms hereinafter listed: 1.2 BASIC DATA. Landlord: Teachers Realty Corporation Landlord's Original Address: c/o Finard & Company, Inc. Three Burlington Woods Drive Burlington, MA 01803 Tenant: Voicetek Corporation, a Massachusetts corporation Tenant's Original Address: 19 Alpha Road, Chelmsford, MA 01824 Guarantor: N/A Basic Rent: The sum of $89,464.50 ($4.50 per square foot of Premises Rentable Area) per annum. Premises Rentable Area: Approximately 19,881 square feet. Permitted Uses: Office and light manufacturing, but specifically excluding any use which would cause any portion of the Premises to be deemed a "place of public accommodation" as defined in the Americans with Disabilities Act of 1990, as amended. Escalation Factor: 32.57%, as computed in accordance with the Escalation Factor Computation. Initial Term: Three (3) years commencing on the Commencement Date and expiring at the close of the day immediately preceding the third anniversary of the 6 Commencement Date, except that if the Commencement Date shall be other than the first day of a calendar month the expiration of the Initial Term shall be at the close of the day on the last day of the calendar month on which such anniversary date shall fall. Security Deposit: $22,366.12. 1.3 ADDITIONAL DEFINITIONS. Manager: Finard & Company, Inc. Building Rentable Area: 64,250 rentable square feet. Business Days: All days except Saturday, Sunday, New Year's Day, Washington's Birthday, Patriot's Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day (and the following day when any such day occurs on Sunday). Commencement Date: As defined in Section 4. 1. Default of Tenant: As defined in Section 13.1. Escalation Charges: The amounts prescribed in Sections 8.1 and 9.2. Escalation Factor Computation: Premises Rentable Area divided by 95% of the Building Rentable Area. Force Majeure: Collectively and individually, strike or other labor trouble, fire or other casualty, governmental preemption of priorities or other controls in connection with a national or other public emergency or shortages of, or inability to obtain, fuel, supplies or labor resulting therefrom, or any other cause, whether similar or dissimilar, beyond Landlord's reasonable control. Initial Public Liability Insurance: $1,000,000 per person; $3,000,000 per occurrence (combined single limit) for property damage, bodily injury or death. Operating Expenses: As set forth in Section 9.1. Operating Year: As defined in Section 9.1. Premises: A portion of the Building as shown on Exhibit A annexed hereto. Property: The Building and the land parcels on which it is located (including adjacent sidewalks). Tax Year: As defined in Section 8.1. -2- 7 Taxes: As determined in accordance with Section 8. 1. Tenants Removable Property: As defined in Section 5.2. Term of this Lease: The Initial Term and any extension thereof in accordance with the provisions hereof. Utility Expenses: As defined in Section 9.1. Exhibits: The following Exhibits are annexed to this Lease and incorporated herein by this reference: Exhibit A - Plan showing Premises Exhibit B - Plan Showing location of "new loading dock area" Exhibit C - Rules and Regulations Exhibit D - Intentionally Omitted Exhibit E - Operating Expenses Exhibit F - Tenant's Janitorial Specifications ARTICLE II PREMISES AND APPURTENANT RIGHTS. 2.1 LEASE OF PREMISES. Landlord hereby demises and leases to Tenant for the Term of this Lease and upon the terms and conditions hereinafter set forth, and Tenant hereby accepts from Landlord, the Premises. 2.2 APPURTENANT RIGHTS AND RESERVATIONS. (a) Tenant shall have, as appurtenant to the Premises, the non-exclusive right to use, and permit its invitees to use in common with others, public or common lobbies, hallways, and common walkways necessary for access to the Building, and if the portion of the Premises on any floor includes less than the entire floor, the common toilets, corridors and elevator lobby of such floor; but Tenant shall have no other appurtenant rights and all such rights shall always be subject to reasonable rules and regulations from time to time established by Landlord pursuant to Section 14.7 and to the right of Landlord to designate and change from time to time areas and facilities so to be used. (b) Excepted and excluded from the Premises are the ceiling, floor, perimeter walls and exterior windows, except the inner surfaces thereof, but the entry doors (and related glass and finish work) to the Premises are a part thereof; and Tenant agrees that Landlord shall have the right to place in the Premises (but in such manner as to reduce to a minimum interference with Tenant's use of the Premises) interior storm windows, subcontrol devices (by way of illustration, an electric sub panel, etc.), utility lines, pipes, equipment and the like, in, over -3- 8 and upon the Premises. Tenant shall install and maintain, as Landlord may require, proper access panels in any hung ceilings or walls as may be installed by Tenant in the Premises to afford access to any facilities above the ceiling or within or behind the walls. ARTICLE III BASIC RENT 3.1 PAYMENT. (a) Tenant agrees to pay to Landlord, or as directed by Landlord, commencing on the Commencement Date without offset, abatement, deduction or demand, the Basic Rent and the monthly installment of the Reimbursement Rent. Such Basic Rent shall be payable in equal monthly installments, in advance, on the first day of each and every calendar month during the Term of this Lease, at Landlord's Original Address, or at such other place as Landlord shall from time to time designate by notice to Tenant, in lawful money of the United States. In the event that any installment of Basic Rent is not paid when due, Tenant shall pay, in addition to any Escalation Charges or other additional charges due under this Lease, an administrative fee equal to 5% of the overdue payment. (b) Basic Rent for any partial month shall be pro-rated on a daily basis, and if the first day on which Tenant must pay Basic Rent shall be other than the first day of a calendar month, the first payment which Tenant shall make to Landlord shall be equal to a proportionate part of the monthly installment of Basic Rent for the partial month from the first day on which Tenant must pay Basic Rent to the last day of the month in which such day occurs, plus the installment of Basic Rent for the succeeding calendar month. (c) As an Additional Charge hereunder, Tenant hereby covenants and agrees to pay the Landlord the amount of $25,000.00 over the three year Initial Term of this Lease (the "Reimbursement Rent"). The Reimbursement Rent represents payment of back due rents payable to Landlord as the result of use and occupancy of the Premises by Tenant, which amounts have been earned and are presently due and owing to Landlord notwithstanding any expiration or earlier termination of this Lease. The Reimbursement Rent shall be payable to Landlord as and when payments of Basic Rent are due and payable hereunder without offset, deduction, abatement or demand. The Reimbursement Rent shall be paid to Landlord in equal monthly installments of $694.44. Landlord shall have the same rights and remedies against Tenant for failure to pay any monthly installment of Reimbursement Rent as Landlord has against -4- 9 Tenant for failure to pay Basic Rent when due, including, without limitation, all sums and charges prescribed in Section 14.18 of the Lease, the 5% administrative fee payable pursuant to the last sentence of Section 3.1(a) hereof and all rights and remedies reserved unto Landlord pursuant to Article XIII of this Lease. ARTICLE IV COMMENCEMENT AND CONDITION 4.1 COMMENCEMENT DATE. The Commencement Date shall be the Date of execution of this Lease by the last party executing this Lease as evidenced on the signature page hereof. 4.2 CONDITION OF THE PREMISES. Tenant hereby acknowledges and agrees to accept the Premises on the Commencement Date in its then "as is" condition without representation or warranty of Landlord of any kind, either express or implied. Tenant is currently occupying the Premises under certain other arrangements with Landlord and therefore it is agreed and understood that Landlord shall not be required to make or pay for any improvements to the Premises at or prior to the Commencement Date. Notwithstanding the foregoing to the contrary, Landlord hereby agrees to demise the Premises from the immediately adjacent and currently vacant space and to cut an opening in the exterior wall of the building and install one 8'x8' overhead roll-up door in that portion, of the Premises identified as the "new loading dock area" on Exhibit B to this Lease. It is agreed and understood that the work required to be performed by Landlord hereunder may be performed after the Commencement Date and Tenant agrees to allow Landlord's contractor to enter the Premises for completing such work. ARTICLE V USE OF PREMISES 5.1 PERMITTED USE. (a) Tenant agrees that the Premises shall be used and occupied by Tenant only for Permitted Uses. (b) Tenant agrees to conform to the following provisions during the Term of this Lease: (i) Tenant shall cause all freight to be delivered to or removed from the Building and the Premises in -5- 10 accordance with reasonable rules and regulations established by Landlord therefor; (ii) Tenant will not place on the exterior of the Premises (including both interior and exterior surfaces of doors and interior surfaces of windows) or on any part of the Building outside the Premises, any signs, symbol, advertisements or the like visible to public VIEW outside of the Premises. Landlord will not unreasonably withhold consent for signs or lettering on the entry doors to the Premises provided such signs conform to building standards adopted by Landlord and Tenant has submitted a sketch of the sign to be placed on such entry doors. (iii) Tenant shall not perform any act or carry on any practice which may injure the Premises, or any other part of the Building, or cause offensive odors or loud noise or constitute a nuisance or menace to any other tenant or tenants or other persons in the Building; (iv) Tenant shall, in its use of the Premises., comply with the requirements of all applicable governmental laws, rules and regulations including, without limitation, the Americans with Disabilities Act of 1990, as amended; and (v) Tenant shall continuously throughout the Term of this Lease occupy the Premises for the Permitted Uses and for no other purposes. 5.2 INSTALLATION AND ALTERATIONS BY TENANT. (a) Tenant shall make no alterations, additions (including, for the purposes hereof, wall-to-wall carpeting), or improvements in or to the Premises without Landlord's prior written consent. Any such alterations, additions or improvements shall (i) be in accordance with complete plans and specifications prepared by Tenant and approved in advance by Landlord; (ii) be performed in a good and workmanlike manner and in compliance with all applicable laws; (iii) be performed and completed in the manner required in Section 5.2(d) hereof; (iv) be made at Tenant's sole expense and at such times as Landlord may from time to time designate; and (v) become a part of the Premises and the property of Landlord. It is agreed and understood that Landlord shall have the right to review and approve all changes to any plans which Landlord shall have approved pursuant to this Section 5.2(a). It is also agreed and understood that Landlord shall not be deemed to be unreasonable in denying its consent to alterations, additions and improvements to the Premises which affect "Base Building Systems" (as said term is hereafter defined). - 6 - 11 As used herein, the term "Base Building Systems" shall mean (i) any mechanical, electrical or plumbing system or component of the Building (including the Premises) (ii) the exterior of the Building (iii) the Building HVAC distribution system (iii) any fire safety prevention/suppression system and (iv) any structural element or component of the Building. (b) All articles of personal property and all business fixtures, machinery and equipment and furniture owned or installed by Tenant solely at its expense in the Premises ("Tenant's Removable Property") shall remain the property of Tenant and may be removed by Tenant at any time prior to the expiration of this Lease, provided that Tenant, at its expense, shall repair any damage to the Building caused by such removal. (c) Notice is hereby given that Landlord shall not be liable for any labor or materials furnished or to be furnished to Tenant upon credit, and that no mechanic's or other lien for any such labor or materials shall attach to or affect the reversion or other estate or interest of Landlord in and to the Premises. Whenever and as often as any mechanic's lien shall have been filed against the Premises based upon any act or interest of Tenant or of anyone claiming through Tenant, Tenant shall forthwith take such actions by bonding, deposit or payment as will remove or satisfy the lien. (d) All of the Tenant's alterations, additions and installation of furnishings shall be coordinated with any work being performed by Landlord and in such manner as to maintain harmonious labor relations and not damage the Property or interfere with Building construction or operation and, except for installation of furnishings, shall be performed by Landlord's general contractor or, at Landlord's election, by contractors or workmen first approved by Landlord. Installation and moving of furnishings, equipment and the like shall be performed only with labor compatible with that being employed by Landlord for work in or to the Building and not to employ or permit the use of any labor or otherwise take any action which might result in a labor dispute involving personnel providing services in the Building. 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 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 and property damage insurance with such limits as -7- 12 Landlord may reasonably require but in no event less than a combined single limit of Two Million and No/100ths ($2,000,000.00) Dollars (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 the entire cost of any work done on the 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 or the Property and immediately to discharge any such liens which may so attach and, at the request of Landlord to deliver to Landlord security satisfactory to Landlord against liens arising out of the furnishing of such labor and material. Upon completion of any work done on the Premises by Tenant, its agents, employees, or independent contractors, Tenant shall promptly deliver to Landlord original lien releases and waivers executed by each contractor, subcontractor, supplier, materialmen, architect, engineer or other party which furnished labor, materials or other services in connection with such work and pursuant to which all liens, claims and other rights of such party with respect to labor, material or services furnished in connection with such work are unconditionally released and waived. Tenant shall pay within fourteen (14) days after being billed therefor by Landlord, as an additional charge hereunder, one hundred percent (100%) of any increase in real estate taxes on the Property not otherwise billed to Tenant which shall, at any time after commencement of the Term, result from any alteration, addition or improvement to the Premises made by or on behalf of Tenant (including Tenant's original installation and Tenant's subsequent alterations, additions, substitutions and improvements), whether done prior to or after the commencement of the Term of this Lease. (e) In connection with the performance of any alterations,. improvements, changes or additions to the Premises as contemplated by Article IV or Section 5.2 of this Lease, in the event that any such improvement, alteration, change or addition to the Premises to be performed by Tenant ("Work') affects so-called "Base Building Building Systems" and to the extent that such Work is not performed by Landlord or a general contractor employed directly by Landlord, Tenant hereby agrees to use the services of a construction management firm designated by Landlord to oversee, coordinate and review all aspects of any such Work. The cost and expense of the services of such construction manager shall be borne by Tenant but only to the extent that such costs and expenses are comparable to and competitive with the costs and expenses charged by other firms engaged in - 8 - 13 construction management and oversight services in the general geographic location of the Building for services of a similar scope and type. ARTICLE VI ASSIGNMENT AND SUBLETTING 6.1 PROHIBITION. (a) Tenant covenants and agrees that whether voluntarily, involuntarily, by operation of law or otherwise, neither this Lease nor the term and estate hereby granted, nor any interest herein or therein, will be assigned, mortgaged, pledged, encumbered or otherwise transferred and that neither the Premises nor any part thereof will be encumbered in any manner by reason of any act or omission on the part of Tenant, or used or occupied, by anyone other than Tenant, or for any use or purpose other than a Permitted Use, or be sublet (which term, without limitation, shall include granting of concessions, licenses and the like) in whole or in part, or be offered or advertised for assignment or subletting. (b) The provisions of paragraph (a) of this Section shall apply to a transfer (by one or more transfers) of a majority of the stock or partnership interests, or other evidences of ownership of Tenant as if such transfer were an assignment of this Lease; but such provisions shall not apply to transactions with an entity into or with which Tenant is merged or consolidated or to which substantially all of Tenant's assets are transferred or to any entity which controls or is controlled by Tenant or is under common control with Tenant, provided that in any of such events (i) the successor to Tenant has a net worth computed in accordance with generally accepted accounting principles at least equal to the net worth of Tenant immediately prior to such merger, consolidation or transfer, (ii) proof satisfactory to Landlord of such net worth shall have been delivered to Landlord at least 10 days prior TO the effective date of any such transaction, and (iii) the assignee agrees directly with Landlord, by written instrument in form satisfactory to Landlord, to be bound by all the obligations of Tenant hereunder including, without limitation, the covenant against further assignment or subletting. (c) If this Lease be assigned, or if the Premises or any part thereof be sublet or occupied by anyone other than Tenant, Landlord may, at any time and from time to time, collect rent and other charges from the assignee, subtenant or occupant, and apply the net amount collected to the rent and other charges herein reserved, but no -9- 14 such assignment, subletting, occupancy, collection or modification of any provisions of this Lease shall be deemed a waiver of this covenant, or the acceptance of the assignee, subtenant or occupant as a tenant or a release of the original named Tenant from the further performance by the original named Tenant hereunder. No assignment or subletting hereunder shall relieve Tenant obligations hereunder and Tenant shall remain from its fully and primarily liable therefor. No assignment or subletting, or occupancy shall affect Permitted Uses. ARTICLE VII RESPONSIBILITY FOR REPAIRS AND CONDITIONS OF PREMISES; SERVICES TO BE FURNISHED BY LANDLORD 7.1 LANDLORD REPAIRS. (a) Except as otherwise provided in this Lease, Landlord agrees to keep in good order, condition and repair the roof, public areas, exterior walls (including exterior glass) and structure of the Building (including plumbing, mechanical and electrical systems installed by Landlord but excluding any systems installed specifically for Tenant's benefit or used exclusively by Tenant) and the HVAC system serving the Premises, all insofar as they affect the Premises, except that Landlord shall in no event be responsible to Tenant for the condition of glass in the Premises or for the doors (or related glass and finish work) leading to, the Premises, or for any condition in the Premises or the Building caused by any act or neglect of Tenant, its agents, employees, invitees or contractors. Landlord shall not be responsible to make any improvements or repairs to the Building other than as expressly in this Section 7.1 provided, unless expressly provided otherwise in this Lease. All costs and expenses incurred by Landlord in performing its obligations under this Section 7.1 shall be included in Operating Expenses (as said term is hereafter defined) except that Tenant shall, as an additional charge hereunder and within 15 days of being invoiced by Landlord, reimburse Landlord directly for all costs and expenses incurred by Landlord in repairing or maintaining the roof top HVAC units servicing the Premises. (b) Landlord shall never be liable for any failure to make repairs which Landlord has undertaken to make under the provisions of this Section 7.1 or elsewhere in this Lease, unless Tenant has given notice to Landlord of the need to make such repairs, and Landlord has failed to commence to make such repairs within a reasonable time -10- 15 after receipt of such notice, or fails to proceed with reasonable diligence to complete such repairs. (c) Any services which Landlord is required to furnish pursuant to the provisions of this Lease may, at Landlord's option be furnished from time to time, in whole or in part, by employees of Landlord or by the Manager of the Property or by one or more third persons and Landlord further reserves the right to require Tenant to enter into agreements with such persons in form and content approved by Landlord for the furnishing of such services. Landlord shall cause the paved portions of the Property to be kept reasonably free and clear of snow, ice and refuse and shall cause the landscaped areas of the Property to be maintained in a reasonably attractive appearance. 7.2 TENANT'S AGREEMENT. (a) Tenant will keep neat and clean and maintain in good order, condition and repair the Premises and every part thereof, excepting only those repairs for which Landlord is responsible under the terms of this Lease, reasonable wear and tear of the Premises, and damage by fire or other casualty and as a consequence of the exercise of the power of eminent domain; and shall surrender the Premises, at the end of the Term, in such condition. Without limitation, Tenant shall continually during the Term of this Lease maintain the Premises in accordance with all laws, codes and ordinances from time to time in effect and all directions, rules and regulations of the proper officers of governmental agencies having jurisdiction, and of the Boston Board of Fire Underwriters, and shall, at Tenant's own expense, obtain all permits, licenses and the like required by applicable law. Notwithstanding the foregoing or the provisions of Article XII, Tenant shall be responsible for the cost of repairs which may be necessary by reason of damage to the Building caused by any act or neglect of Tenant or its agents, employees, contractors or invitees (including any damage by fire or any other casualty arising therefrom). Tenant shall be responsible for the payment of all charges for gas or other utilities used or consumed in the Premises. Tenant shall be responsible for the removal and disposal of all refuse and waste generated from the Premises and shall maintain a dumpster service contract with a reputable dumpster service company throughout the Term of this Lease. The location of such dumpster shall be subject to the reasonable approval of Landlord. In no event shall such dumpster be visable from the street or interfere with the use of the parking or loading areas on the Property and shall be in compliance with all applicable codes, by-laws and ordinances. - 11 - 16 (b) If repairs are required to be made by Tenant pursuant to the terms hereof, Landlord may demand that Tenant make the same forthwith, and if Tenant refuses or neglects to commence such repairs and complete the same with reasonable dispatch after such demand, Landlord may (but shall not be required to do so) make or cause such repairs to be made (the provisions of Section 14.18 being applicable to the costs thereof) and shall not be responsible to Tenant for any loss or damage that may accrue to Tenant's stock or business by reason thereof. Notwithstanding the foregoing, Landlord may elect to take action hereunder immediately and without notice to Tenant if Landlord reasonably believes an emergency to exist. 7.3 FLOOR LOAD - HEAVY MACHINERY. (a) Tenant shall not place a load upon any floor in the Premises exceeding the floor load per square foot of area which such floor was designed to carry and which is allowed by law. Landlord reserves the right to prescribe the weight and position of all business machines and mechanical equipment, including safes, which shall be placed so as to distribute the weight. Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant's expense in settings sufficient, in Landlord's judgment, to absorb and prevent vibration, noise and annoyance. Tenant shall not move any safe, heavy machinery, heavy equipment, freight, bulky matter or fixtures into or out of the Building without Landlord's prior consent, which consent may include a requirement to provide insurance, naming Landlord as an insured, in such amounts as Landlord may deem reasonable. (b) If such safe, machinery, equipment, freight, bulky matter or fixtures requires special handling, Tenant agrees to employ only persons holding a Master Rigger's License to do such work, and that all work in connection therewith shall comply with applicable laws and regulations. Any such moving shall be at the sole risk and hazard of Tenant, and Tenant will exonerate, indemnity and save Landlord harmless against and from any liability, loss, injury, claim or suit resulting directly or indirectly from such moving. 7.4 BUILDING SERVICES. (a) Landlord shall also provide: (i) Cold water (at temperatures supplied by the Town of Chelmsford) for drinking, lavatory and toilet purposes. If Tenant uses water for any purpose other than for ordinary lavatory and drinking purposes, Landlord may assess a reasonable charge for the additional water so used, or install a water meter and thereby measure Tenant's water consumption for all purposes. In the latter event, Tenant shall pay the cost of the meter and the cost of installation thereof and - 12 - 17 shall keep such meter and installation equipment in good working order and repair. Tenant agrees to pay for water consumed, as shown on such meter, together with the sewer charge based on such meter charges, as and when bills are rendered, and in default in making such payment Landlord may pay such charges and collect the same from Tenant as an additional charge. (ii) Access to the Premises twenty-four hours per day, subject to reasonable security restrictions and restrictions based on emergency conditions and all other applicable provisions of this Lease. (b) Landlord reserves the right to curtail, suspend, interrupt and/or stop the supply of water, sewage, electrical current, cleaning, and other services, and to curtail, suspend, interrupt and/or stop use of entrances and/or lobbies serving access to the Building, without thereby incurring any liability to Tenant, when necessary by reason of accident or emergency, or for repairs, alterations, replacements or improvements in the judgment of Landlord desirable or necessary, or when prevented from supplying such services or use by strikes, lockouts, difficulty in obtaining materials, accidents or any other cause beyond Landlord's control, or by laws, orders or inability, by exercise of reasonable diligence, to obtain electricity, water, gas, steam, coal, oil or other suitable fuel or power. No diminution or abatement of rent or other compensation, nor any direct, indirect or consequential damages shall or will be claimed by Tenant as a result of, nor shall this Lease or any of the obligations of Tenant be affected or reduced by reason of, any such interruption, curtailment, suspension or stoppage in the furnishing of the foregoing services or use, irrespective of the cause thereof. Failure or omission on the part of Landlord to furnish any of the foregoing services or use shall not be construed as an eviction of Tenant, actual or constructive, nor entitle Tenant to an abatement of rent, nor to render the Landlord liable in damages, nor release Tenant from prompt fulfillment of any of its covenants under this Lease. 7.5 ELECTRICITY. (a) Landlord shall permit Landlord's existing wires, pipes, risers, conduits and other electrical equipment of Landlord to be used for the purpose of providing electrical service to the Premises. Tenant covenants and agrees that its electrical usage and consumption will not disproportionately "siphon off" electrical service necessary for other tenants of the Building and that its total connected load will not exceed the maximum load from time to time permitted by applicable governmental regulations nor the design criteria of the existing Building electrical capacity. -13- 18 Landlord shall not in any way be liable or responsible to Tenant for any loss or damage or expense which Tenant may sustain or incur if, during the Term of this Lease, either the quantity or character of electric current is changed or electric current is no longer available or suitable for Tenant's requirements due to a factor or cause beyond Landlord's control. Tenant shall purchase and install all lamps, tubes, bulbs, starters and ballasts. Tenant shall pay all charges for electricity, gas and other utilities used or consumed in the Premises. Tenant shall bear the cost of repair and maintenance of any electric or gas meter used or to be installed in (or serving) the Premises. (b) In order to insure that the foregoing requirements are not exceeded and to avert possible adverse affect on the Building's electrical system, Tenant shall not, without Landlord's prior consent, connect any fixtures, appliances or equipment to the Building's electrical distribution system, which operates on a voltage in excess of 120 volts nominal. If Landlord shall consent to the connection of any such fixtures, appliances or equipment, all additional risers or other electrical facilities or equipment required therefor shall be provided by Landlord and the cost thereof shall be paid by tenant upon Landlord's demand as Additional Rent. From time to time during the Term of this Lease, Landlord shall have the right to have an electrical consultant selected by Landlord make a survey of Tenant's electric usage, the result of which shall be conclusive and binding upon Landlord and Tenant. In the event that such survey shows that Tenant has exceeded the requirements set forth in paragraph (a), in addition to any other rights Landlord may have hereunder, Tenant shall, upon demand, reimburse Landlord for the costs of such survey. (c) Electricity and Gas Consumption. (i) Electricity and Natural Gas used and consummed in the Premises is measured by a single gas meter (the "Existing Gas Meter") and a single Electric Meter (the "Existing Electric Meter"). In addition to measuring consumption of Natural Gas and Electricity in the Premises, the Existing Gas Meter and Existing Electric Meter measure consumption of those utilities used and consumed in a portion of the Building which is immediately adjacent to the Premises and comprised of 13,619 rentable square feet (the "Adjacent Space"). The Adjacent Space is presently vacant and unoccupied and is not a portion of the Premises demised to Tenant under this Lease. The provisions of this paragraph 7.5(c) are intended to allocate certain responsibilities as to the payment of electricity and natural gas costs and expenses between Landlord (with respect to the Adjacent Space) and -14- 19 Tenant (with respect to the Premises) as measured by the Existing Gas Meter and the Existing Electric Meter. (ii) Tenant hereby acknowledges that the Tenant is the current named billing party with respect to the Existing Gas Meter and the Existing Electricity Meter. Tenant hereby acknowleges and agrees that subject to the terms and provisions hereafter set forth and until receipt of written notice from the Landlord to the contrary, all electricity and natural gas used and consumed in the Adjacent Space shall be provided through the Existing Gas Meter and the Existing Electric Meter with the allocation of expenses resulting from such meters between Landlord and Tenant as hereafter provided. Landlord and Tenant hereby acknowledge and agree that the aggregate per square foot cost of providing natural gas and electric service to the Adjacent Space is $0.20 per rentable square foot contained in the Adjacent Space per annum. (hereafter the "Per Square Foot Utility Cost"). The Per Square Foot Utility Cost is based upon the assumption that the Adjacent Space is vacant and unoccupied and is comprised of $0.12 per rentable square foot per annum with respect to electricity and $0.08 per rentable square foot per annum with respect to natural gas. Until further written notice from Landlord as hereafter set forth, Tenant shall be responsible for payment of all costs and expenses for gas and electricity billed to the Existing Electric Meter and the Existing Gas Meter for such time as the Existing Electric Meter and/or the Existing Gas Meter shall remain in Tenant's name. In order to reimburse Tenant for the cost of electricity and gas used and consumed in the Adjacent Space, Landlord shall pay Tenant an amount (the "Landlord's Utility Cost") equal to the number of rentable square feet contained in the Adjacent Space which shall from time to time be vacant (as designated by Landlord in a "Landlord's Utility Statement" as hereafter defined) multiplied by the Per Square Foot Utility Cost. Tenant shall from time to time, but not more often than once every three full calendar months while all or any portion of the Adjacent Space shall remain unoccupied (or until further notice from Landlord) invoice Landlord for the Landlord's Utility Cost attributable to the three full calendar month period setting forth the number of of such invoice (provided that the LST, such invoice shall be applicable only to the three full calendar month period immediately following the Commencement Date hereunder). Upon the written request of Tenant, or at any time at the Landlord's election, Landlord shall provide Tenant with a written calculation of the Landlord's Utility Costs applicable to any such three full-calendar month period setting forth the number of rentable square feet of the Adjacent Space which was -15- 20 unoccupied during such three month period and the actual number of days of vacancy ("Landlord's Utility Statement"). Landlord's Utility Statement shall be conclusive and binding upon Landlord and Tenant. At Landlord's option, Landlord shall be entitled to offset Landlord's Utility Costs against and apply amounts owing to Tenant hereunder against obligations of Tenant to Landlord under this Lease. Any failure by Tenant to pay amounts due and owing to the applicable utilities for gas and electricity billed to the Existing Gas Meter and/or the Existing Electric Meter shall entitle Landlord to the same rights and remedies against Tenant as Landlord has for a failure by Tenant to pay Basic Rent when due under this Lease. (iii) Notwithstanding the terms and provisions contained in paragraphs (i) and (ii) of this paragraph (c) to the contrary, at such time as Landlord shall procure a tenant to occupy all or any portion of the Adjacent Space, Landlord's obligation to pay Landlord's Utility Costs with respect to the portion of the Adjacent Space occupied by such third party shall cease and come to an end. At Landlord's option, Landlord shall be entitled to continue paying Landlord's Utility Cost with respect to any portion of the Adjacent Space which would then remain unoccupied based upon the number of rentable square feet contained in the Adjacent Space as shall then be unoccupied and the provisions of paragraphs (i) and (ii) of this paragraph (c) shall remain in force and effect and shall be applicable to such portions of the Adjacent Space as remain vacant. (iv) Tenant hereby acknowledges and agrees, and Landlord hereby reserves unto Landlord the right, exercisable by Landlord at any time and from time to time during the Term of this Lease to cause the Existing Electric Meter and the Existing Gas Meter (or either of them) to be placed in Landlord's name for billing purposes. In the event Landlord shall elect to implement the procedure described in the first sentence of this paragraph (iv), Landlord shall provide Tenant with written notice of such election and Tenant hereby agrees to execute such documents and instruments as may be required in order to effect a change of the named billing party on the Existing Electric Meter and the Existing Gas Meter (or either of them) to Landlord's name. The change of named party provided herein shall be deemed effective as of the date such change is made effective by the applicable utility (the "Change Date"). Tenant shall be responsible for all bills for the applicable utility being changed to Landlord's name prior to the Change Date. From and after the Change Date, Landlord shall have the right to cause electricity and natural gas used and consummed in the Premises to be check-metered off of -16- 21 the Existing Gas Meter and/or the Existing Electric Meter, as applicable. As an additional charge hereunder, Tenant shall reimburse Landlord for the cost of electricty and/or gas used and consummed in the Premises as measured by the applicable check meter within 15 days after being billed therefor by Landlord. Landlord shall have the right to collect from Tenant monthly estimated payments of the amounts Landlord reasonably estimates will be sufficient to pay Tenant's electricity and/or gas bills resulting from the Existing Gas Meter and the Existing Electric Meter pursuant to this paragraph (iv). ARTICLE VIII REAL ESTATE TAXES 8.1 PAYMENTS ON ACCOUNT OF REAL ESTATE TAXES. (a) For the purposes of this Article, the term "Tax Year" shall mean the twelve-month period commencing on the July 1 immediately preceding the Commencement Date and each twelve-month period thereafter commencing during the Term of this Lease; and the term "Taxes" shall mean all real estate taxes, special assessments and betterment assessments assessed with respect to the Property for any Tax Year. (b) Tenant shall pay to Landlord, as an Escalation Charge, an amount equal to (i) Taxes for each Tax Year (or partial Tax Year) falling within the Term of this Lease, multiplied by (ii) the Escalation Factor, such amount to be apportioned for any fraction of a Tax Year in which the Commencement Date falls or the Term of this Lease ends. (c) Estimated payments by Tenant on account of Taxes shall be made monthly and at the time and in the fashion herein provided for the payment of Basic Rent. The monthly amount so to be paid to Landlord shall be sufficient to provide Landlord by the time real estate tax payments are due a sum equal to Tenant's required payments, as estimated by Landlord from time to time, on account of Taxes for the then current Tax Year. Promptly after receipt by Landlord of bills for such Taxes, Landlord shall advise Tenant of the amount thereof and the computation of Tenant's payment on account thereof. If estimated payments theretofore made by Tenant for the Tax Year covered by such bills exceed the required payments on account thereof for such Year, Landlord shall credit the amount of overpayment against subsequent obligations of Tenant on account of Taxes (or refund such overpayment if the Term of this Lease has ended and Tenant has no further obligation to Landlord); but if the -17- 22 required payments on account thereof for such Year are greater than estimated payments theretofore made on account thereof for such Year, Tenant shall make payment to Landlord within 30 days after being so advised by Landlord. Landlord shall have the same rights and remedies for the non-payment by Tenant of any payments due on account of Taxes as Landlord has hereunder for the failure of Tenant to pay Basic Rent. 8.2 ABATEMENT. If Landlord shall receive any tax refund or reimbursement of Taxes or sum in lieu thereof with respect to any Tax Year which is not due to vacancies in the Building, then out of any balance remaining thereof after deducting Landlord's expenses reasonably incurred in obtaining such refund, Landlord shall, provided there does not then exist a Default of Tenant, credit an amount equal to such refund or reimbursement or sum in lieu thereof (exclusive of any interest) multiplied by the Escalation Factor against the obligations of Tenant next falling due under this Article VIII; provided, that in no event shall Tenant be entitled to receive a credit equal to more than the payments made by Tenant on account of real estate tax increases for such Year pursuant to paragraph (b) of Section 8.1 or to receive any payments or abatement of Basic Rent if Taxes for any Year are less than Base Taxes or Base Taxes are abated. 8.3 ALTERNATE TAXES. (a) If some method or type of taxation shall replace the current method of assessment of real estate taxes in whole or in part, or the type thereof, or if additional types of taxes are imposed upon the Property or Landlord relating to the Property, Tenant agrees that Tenant shall pay a proportionate share of the same as an additional charge computed in a fashion consistent with the method of computation herein provided, to the end that Tenant's share thereof shall be, to the maximum extent practicable, comparable to that which Tenant would bear under the foregoing provisions. (b) If a tax (other than Federal or State net income tax) is assessed on account of the rents or other charges payable by Tenant to Landlord under this Lease, Tenant agrees to pay the same as an additional charge within ten (10) days after billing therefor, unless applicable law prohibits the payment of such tax by Tenant. ARTICLE IX OPERATING EXPENSES 9.1 DEFINITIONS. For the purposes of this Article, the following terms shall have the following respective meanings: - 18 - 23 (i) Operating Year: Each calendar year in which any part of the Term of this Lease shall fall. (ii) Operating Expenses: The aggregate costs or expenses reasonably incurred by Landlord with respect to the operation, administration, cleaning, repair, maintenance and management of the Property (but specifically excluding Utility Expenses) all as set forth in Exhibit E annexed hereto, provided that, if during any portion of the Operating Year for which Operating Expenses are being computed, less than all of Building Rentable Area was occupied by tenants or if Landlord is not supplying all tenants with the services being supplied hereunder, actual Operating Expenses incurred shall be reasonably extrapolated by Landlord on an item by item basis to the estimated Operating Expenses that would have been incurred if the Building were fully occupied for such Year and such services were being supplied to all tenants, and such extrapolated amount shall, for the purposes hereof, be deemed to be the Operating Expenses for such Year. (iii) Utility Expenses: The aggregate costs or expenses reasonably incurred by Landlord with respect to supplying electricity (other than electricity supplied to those portions of the Building leased to tenants), oil, steam, gas, water and sewer and other utilities supplied to the Property and not paid for directly by tenants, provided that, if during any portion of the Operating Year for which Utility Expenses are being computed, less than all Building Rentable Area was occupied by tenants or if Landlord is not supplying all tenants with the utilities being supplied hereunder, actual utility expenses incurred shall be reasonably extrapolated by Landlord on an item-by-item basis to the estimated Utility Expenses that would have been incurred if the Building were fully occupied for such Year and such utilities were being supplied to all tenants, and such extrapolated amount shall, for the purposes hereof, be deemed to be the Utility Expenses for such Year. 9.2 TENANT'S PAYMENTS. (a) Tenant shall pay to Landlord, as an Escalation Charge, an amount equal to (i) Operating Expenses for each Operating Year (or partial Operating Year) falling within in the Term of this Lease multiplied by (ii) the Escalation Factor, such amount to be apportioned for any partial Operating Year in which the Commencement Date falls or the Term of this Lease ends. (b) Tenant shall pay to Landlord, as an Escalation Charge, an amount equal to (i) Utility Expenses for each Operating Year (or partial Operating Year) falling within the Term of this Lease multiplied by (ii) the Escalation Factor, such amount to be apportioned for any partial -19- 24 Operating Year in which the Commencement Date falls or the Term of this Lease ends. (c) Estimated payments by Tenant on account of Operating Expenses shall be made monthly and at the time and in the fashion herein provided for the payment of Basic Rent. The monthly amount so to be paid to Landlord shall be sufficient to provide Landlord by the end of each Operating Year a sum equal to Tenant's required payments, as estimated by Landlord from time to time during each Operating Year, on account of Operating Expenses and Utility Expenses for such Operating Year. After the end of each Operating Year, Landlord shall submit to Tenant a reasonably detailed accounting of Operating Expenses and Utility Expenses for such Year, and Landlord shall certify to the accuracy thereof. If estimated payments theretofore made for such Year by Tenant exceed Tenant's required payment on account thereof for such Year, according to such statement, Landlord shall credit the amount of overpayment against subsequent obligations of Tenant with respect to Operating Expenses and Utility Expenses (or refund such overpayment if the Term of this Lease has ended and Tenant has no further obligation to Landlord), but, if the required payments on account thereof for such Year are greater than the estimated payments (if any) theretofore made on account thereof for such Year, Tenant shall make payment to Landlord within thirty (30) days after being so advised by Landlord. Landlord shall have the same rights and remedies for the nonpayment by Tenant of any payments due on account of Operating Expenses and Utility Expenses as Landlord has hereunder for the failure of Tenant to pay Basic Rent. ARTICLE X INDEMNITY AND PUBLIC LIABILITY INSURANCE 10.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made effective according to law, Tenant agrees to defend, indemnify and save harmless Landlord from and against all claims, loss, liability, costs and damages of whatever nature arising from any default by Tenant under this Lease and the following: (i) from any accident, injury, death or damage whatsoever to any person, or to the property of any person, occurring in or about the Premises; (ii) from any accident, injury, death or damage occurring outside of the Premises but on the Property, where such accident, damage or injury results or is claimed to have resulted from an act or omission on the part of Tenant or Tenant's agents, employees, invitees or independent contractors; or (iii) in connection with the conduct or management of the Premises or of any business -20- 25 therein, or any thing or work whatsoever done, or any condition created (other than by Landlord) in or about the Premises; and, in any case, occurring after the date of this Lease, until the end of the Term of this Lease, and thereafter so long as Tenant is in occupancy of the Premises. 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, including, without limitation, reasonable attorneys' fees and costs at both the trial and appellate levels. The provisions of this Section 10.1 shall survive the expiration or any earlier termination of this Lease. 10.2 PUBLIC LIABILITY INSURANCE. Tenant agrees to maintain in full force from the date upon which Tenant first enters the Premises for any reason, throughout the Term of this Lease, and thereafter so long as Tenant is in occupancy of any part of the Premises, a policy of general liability and property damage insurance (including broad form contractual liability, independent contractor's hazard and completed operations coverage) under which Landlord, Manager (and such other persons as are in privity of estate with Landlord as may be set out in notice from time to time) and Tenant are named as insureds, and under which the insurer agrees to defend, indemnify and hold Landlord, Manager, and those in privity of estate with Landlord, harmless from and against all cost, expense and/or liability arising out of or based upon any and all claims, accidents, injuries and damages set forth in Section 10.1. Each such policy shall be non-cancellable and non-amendable with respect to Landlord, Manager and Landlord's said designees without thirty (30) days' prior notice to Landlord and shall be in at least the amounts of the Initial Public Liability Insurance specified in Section 1.3 or such greater amounts as Landlord shall from time to time request, and a duplicate original or certificate thereof shall be delivered to Landlord. 10.3 TENANT'S RISK. To the maximum extent this agreement may be made effective according to law, Tenant agrees to use and occupy the Premises and to use such other portions of the Property as Tenant is herein given the right to use at Tenant's own risk; and Landlord shall have no responsibility or liability for any loss of or damage to Tenant's Removable Property or for any inconvenience, annoyance, interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is permitted by this Lease or required by law to make in or to any portion of the Premises or other sections of the Property, or in or to the fixtures, equipment or appurtenances thereof. Tenant shall carry - 21 - 26 "all-risk" property insurance on a "replacement cost" basis (including so-called improvements and betterments), and provide a waiver of subrogation as required in Section 14.20. The provisions of this Section 10.3 shall be applicable from and after the execution of this Lease and until the end of the Term of this Lease, and during such further period as Tenant may use or be in occupancy of any part of the Premises or of the Building. 10.4 INJURY CAUSED BY THIRD PARTIES. To the maximum extent this agreement may be made effective according to law, Tenant agrees that Landlord shall not be responsible or liable to Tenant, or to those claiming by, through or under Tenant, for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises adjacent to or connecting with the Premises or any part of the Property or otherwise. The provisions of this Section 10.4 shall survive the expiration or any earlier termination of this Lease. ARTICLE XI LANDLORD'S ACCESS TO PREMISES 11.1 LANDLORD'S RIGHTS. Landlord shall have the right to enter the Premises at all reasonable hours for the purpose of inspecting or making repairs to the same, and Landlord shall also have the right to make access available at all reasonable hours to prospective or existing mortgagees, purchasers or tenants of any part of the Property. ARTICLE XII FIRE, EMINENT DOMAIN, ETC. 12.1 ABATEMENT OF RENT. If the Premises shall be damaged by fire or casualty, Basic Rent and Escalation Charges payable by Tenant shall abate proportionately for the period in which, by reason of such damage, there is substantial interference with Tenant's use of the Premises, having regard to the extent to which Tenant may be required to discontinue Tenant's use of all or a portion of the Premises, but such abatement or reduction shall end if and when Landlord shall have substantially restored the Premises (excluding any alterations, additions or improvements made by Tenant pursuant to Section 5.2) to the condition in which they were prior to such damage. If the Premises shall be affected by any -22- 27 exercise of the power of eminent domain, Basic Rent and Escalation Charges payable by Tenant shall be justly and equitably abated and reduced according to the nature and extent of the loss of use thereof suffered by Tenant. In no event shall Landlord have any liability for damages to Tenant for inconvenience., annoyance, or interruption of business arising from such fire, casualty or eminent domain. 12.2 LANDLORD'S RIGHT OF TERMINATION. If the Premises or the Building are substantially damaged by fire or casualty (the term "substantially damaged" meaning 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 the repair work would commence), or if any part of the Building is taken by any exercise of the right of eminent domain, then Landlord shall have the right to terminate this Lease (even if Landlord's entire interest in the Premises may have been divested) by giving notice of Landlord's election so to do within 90 days after the occurrence of such casualty or the effective date of such taking, whereupon this Lease shall terminate thirty (30) days after 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. 12.3 RESTORATION, If this Lease shall not be terminated pursuant to Section 12.2, Landlord shall thereafter use due diligence to restore the Premises (excluding any alterations, additions or improvements made by Tenant) to proper condition for Tenant's use and occupation, provided that Landlord's obligation shall be limited to the amount of insurance proceeds available therefor. If, for any reason, such restoration shall not be substantially completed within six months after the expiration of the 90-day period referred to in Section 12.2 (which six-month period may be extended for such periods of time as Landlord is prevented from proceeding with or completing such restoration for any cause beyond Landlord's reasonable control, but in no event for more than an additional three months), Tenant shall have the right to terminate this Lease by giving notice to Landlord thereof within thirty (30) days after the expiration of such period (as so extended). Upon the giving of such notice, this Lease shall cease and come to an end without further liability or obligation on the part of either party unless, within such 30-day period, Landlord substantially completes such restoration. Such right of termination shall be Tenant's sole and exclusive remedy at law or in equity for Landlord's failure so to complete such restoration. 12.4 AWARD. Landlord shall have and hereby reserves and excepts, and Tenant hereby grants and assigns to -23- 28 Landlord, all rights to recover for damages to the Property and the leasehold interest hereby created, and to compensation accrued or hereafter to accrue by reason of such taking, damage or destruction, 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, at its sole cost and expense, prosecuting a separate condemnation proceeding with respect to a claim for the value of any of Tenant's Removable Property 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. ARTICLE XIII DEFAULT 13.1 TENANT'S DEFAULT. (a) If at any time subsequent to the date of this Lease any one or more of the following events (herein referred to as a "Default of Tenant") shall happen: (i) Tenant shall fail to pay the Basic Rent, Reimbursement Rent, Escalation Charges or other sums payable as additional charges hereunder when due; or (ii) Tenant shall neglect or fail to perform or observe any other covenant herein contained on Tenant's part to be performed or observed, or Tenant shall desert or abandon the Premises or the Premises shall become, or appear to have become vacant (regardless whether the keys shall have been surrendered or the rent and all other sums due shall have been paid), and Tenant shall fail to remedy the same within thirty (30) days after notice to Tenant specifying such neglect or failure, or if such failure is of such a nature that Tenant cannot reasonably remedy the same within such thirty (30) day period, Tenant shall fail to commence promptly to remedy the same and to prosecute such remedy to completion with diligence and continuity; or (iii) Tenant's leasehold interest in the Premises shall be taken on execution or by other process of law directed against Tenant; or (iv) Tenant shall make an assignment for the benefit of creditors or shall file a voluntary petition in bankruptcy or shall be adjudicated bankrupt or insolvent, or shall file any petition or answer seeking -24- 29 any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future Federal, State or other statute, law or regulation for the relief of debtors, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any substantial part of its properties, or shall admit in writing its inability to pay its debts generally as they become due; or (v) A petition shall be filed against Tenant in bankruptcy or under any other law seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future Federal, State or other statute, law or regulation and shall remain undismissed or unstayed for an aggregate of sixty (60) days (whether or not consecutive), or if any debtor in possession (whether or not Tenant) trustee, receiver or liquidator of Tenant or of all or any substantial part of its properties or of the Premises shall be appointed without the consent or acquiescence of Tenant and such appointment shall remain unvacated or unstayed for an aggregate of sixty (60) days (whether or not consecutive); or (vi) If a Default of Tenant of the kind set forth in clauses (i) or (ii) above shall occur and if either (a) Tenant shall cure such Default within the applicable grace period or (b) Landlord shall, in its sole discretion , permit Tenant to cure such Default after the applicable grace period has expired, and an event which would constitute a similar Default if not cured within the applicable grace period shall occur more than once within the next 365 days, whether or not such event is cured within the applicable grace period; then in any such case (1) if such Default of Tenant shall occur prior to the Commencement Date, this Lease shall ipso facto, and without further act on the part of Landlord, terminate, and (2) if such Default of Tenant shall occur after the Commencement Date, Landlord may terminate this Lease by notice to Tenant, and thereupon this Lease shall come to an end as fully and completely as if such date were the date herein originally fixed for the expiration of the Term of this Lease, and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter provided. (b) If this Lease shall be terminated as provided in this Article, or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the Premises shall be taken or occupied by someone other than Tenant, then Landlord may, without notice, re-enter the Premises, either by force, summary -25- 30 proceedings, ejectment or otherwise, and remove and dispossess Tenant and all other persons and any and all property from the same, as if this Lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. (c) in the event of any termination, Tenant shall pay the Basic Rent, Escalation Charges and other sums payable hereunder up to the time of such termination, and thereafter Tenant, until the end of what would have been the Term of this Lease in the absence of such termination, and whether or not the Premises shall have been relet, shall be liable to Landlord for, and shall pay to Landlord, as liquidated current damages, the Basic Rent, Escalation Charges and other sums which would be payable hereunder if such termination had not occurred, less the net proceeds, if any, of any reletting of the Premises, after deducting all expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, advertising, expenses of employees, alteration costs and expenses of preparation for such reletting. Tenant shall pay such current damages to Landlord monthly on the days which the Basic Rent would have been payable hereunder if this Lease had not been terminated. (d) At any time after such termination, whether or not Landlord shall have collected any such current damages, as liquidated final damages and in lieu of all such current damages beyond the date of such demand, at Landlord's election Tenant shall pay to Landlord and amount equal to the excess, if any, of the Basic Rent, Escalation Charges and other sums as hereinbefore provided which would be payable hereunder from the date of such demand (assuming that, for the purposes of this paragraph, annual payments by Tenant on account of Taxes, Utility Expenses and Operating Expenses would be the same as the payments required for the immediately preceding Operating or Tax Year) for what would be the then unexpired Term of this Lease if the same had remained in effect, over the then fair net rental value of the Premises for the same period. (e) In the case of any Default by Tenant, re-entry, expiration and dispossession by summary proceeding or otherwise, Landlord may (i) re-let the Premises or any part or parts thereof, either in the name of Landlord or otherwise, 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 of this Lease and may grant concessions or free rent to the extent that Landlord considers advisable and -26- 31 necessary to re-let the same and (ii) may make such reasonable alterations, repairs and decorations in the Premises as Landlord in its sole judgment considers advisable and necessary for the purpose of reletting the Premises; and the making of such alterations, repairs and decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord shall in no event be liable in any way whatsoever for failure to re-let the Premises, or, in the event that the Premises are re-let, for failure to collect the rent under such re-letting. Tenant hereby expressly waives any and, all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants and conditions of this Lease. (f) If a Guarantor of this Lease is named in Section 1.2, the happening of any of the events described in paragraphs (a)(iv) or (a)(v) of this Section 13.1 with respect to the Guarantor shall constitute a Default of Tenant hereunder. (g) The specified remedies to which Landlord may resort hereunder are not intended to be exclusive of any remedies or means of redress to which Landlord may at any time be entitled to lawfully, and Landlord may invoke any remedy (including the remedy of specific performance) allowed at law or in equity as if specific remedies were not herein provided for. (h) All costs and expenses incurred by or on behalf of Landlord (including, without limitation, attorneys' fees and expenses) in enforcing its rights hereunder or occasioned by any Default of Tenant shall be paid by Tenant. 13.2 LANDLORD'S DEFAULT. Landlord shall in no event be in default of the performance of any of Landlord's obligations hereunder unless and until Landlord shall have unreasonably failed to perform such obligation within a period of time reasonably required to correct any such default, after notice by Tenant to Landlord specifying wherein Landlord has failed TO perform any such obligations. ARTICLE XIV MISCELLANEOUS PROVISIONS 14.1 EXTRA HAZARDOUS USE. Tenant covenants and agrees that Tenant will not do or permit anything to be done in or -27- 32 upon the Premises, or bring in anything or keep anything therein, which shall increase the rate of property or liability insurance on the Premises or of the Building above the standard rate applicable to premises being occupied for Permitted Uses; and Tenant further agrees that, in the event that Tenant shall do any of the foregoing, Tenant will promptly pay to Landlord, on demand, any such increase resulting therefrom, which shall be due and payable as an additional charge hereunder. 14.2 WAIVER. (a) Failure on the part of Landlord or Tenant to complain of any action or non-action on the part of the other, no matter how long the same may continue, shall never be a waiver by Tenant or Landlord, respectively, of any of the other's rights hereunder. Further, no waiver at any time of any of the provisions hereof by Landlord or Tenant shall be construed as a waiver of any of the other provisions hereof, and a waiver at any time of any of the provisions hereof shall not be construed as a waiver at any subsequent time of the same provisions. The consent or approval of Landlord or Tenant to or of any action by the other requiring such consent or approval shall not be construed to waive or render unnecessary Landlord's or Tenant's consent or approval to or of any subsequent similar act by the other. (b) No payment by Tenant, or acceptance by Landlord, of a lesser amount than shall be due from Tenant to Landlord shall be treated otherwise than as a payment on account of the earliest installment of any payment due from Tenant under the provisions hereof. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full, shall be given no effect, and Landlord may, accept such check without prejudice to any other rights or remedies which Landlord may have against Tenant. 14.3 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and provisions of this Lease, on payment of the Basic Rent and Escalation Charges and observing, keeping and performing all of the other terms and provisions of this Lease on Tenant's part to be observed, kept and performed, shall lawfully, peaceably and quietly have, hold, occupy and enjoy the Premises during the term hereof, without hindrance or ejection by any persons lawfully claiming under Landlord to have title to the Premises superior to Tenant; the foregoing covenant of quiet enjoyment is in lieu of any other covenant, express or implied. 14.4 LANDLORD'S LIABILITY. (a) Tenant specifically agrees to look solely to Landlord's then equity interest in the -28- 33 Property at the time owned, for recovery of any judgment from Landlord; it being specifically agreed that Landlord (original or successor) shall never be personally liable for any such judgment, or for the payment of any monetary obligation to Tenant. The provision contained in the foregoing sentence is not intended to, and shall not, limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord or Landlord's successors in interest, or to take any action not involving the personal liability of Landlord (original or successor) to respond in monetary damages from Landlord's assets other than Landlord's equity interest in the Property. (b) With respect to any services or utilities to be furnished by Landlord to Tenant, Landlord shall in no event be liable for failure to furnish the same when prevented from doing so by Force Majeure, strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish such services, or because of war or other emergency, or for any cause beyond Landlord's reasonable control, or for any cause due to any act or neglect of Tenant or Tenant's servants, agents, employees, licensees or any person claiming by, through or under Tenant; nor shall any such failure give rise to any claim in Tenant's favor that Tenant has been evicted, either constructively or actually, partially or wholly. (c) In no event shall Landlord ever be liable to Tenant for any loss of business or any other indirect or consequential damages suffered by Tenant from whatever cause. (d) With respect to any repairs or restoration which are required or permitted to be made by Landlord, the same may be made during normal business hours and Landlord shall have no liability for damages to Tenant for inconvenience, annoyance or interruption of business arising therefrom. 14.5 NOTICE TO MORTGAGEE OR GROUND LESSOR. After receiving notice from any person, firm or other entity that it holds a mortgage or a ground lease which includes the Premises, no notice from Tenant to Landlord alleging any default by Landlord shall be effective unless and until a copy of the same is given to such holder or ground lessor (provided Tenant shall have been furnished with the name and address of such holder or ground lessor), and the curing of any of Landlord's defaults by such holder or ground lessor shall be treated as performance by Landlord. -29- 34 14.6 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. (a) With reference to any assignment by Landlord of Landlord's interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage on property which includes the Premises, Tenant agrees that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage, shall never be treated as an assumption by such holder of any of the obligations of Landlord hereunder unless such holder shall, by notice sent to Tenant, specifically otherwise elect and that, except as aforesaid, such holder shall be treated as having assumed Landlord's obligations hereunder only upon foreclosure of such holder's mortgage and the taking of possession of the Premises. (b) In no event shall the acquisition of Landlord's interest in the Property by a purchaser which, simultaneously therewith, leases Landlord's entire interest in the Property back to the seller thereof be treated as an assumption by operation of law or otherwise, of Landlord's obligations hereunder, but Tenant shall look solely to such seller-lessee, and its successors from time to time in title, for performance of Landlord's obligations hereunder. In any such event, this Lease shall be subject and subordinate to the lease to such purchaser. For all purposes, such seller-lessee, and its successors in title, shall be the Landlord hereunder unless and until Landlord's position shall have been assumed by such purchaser-lessor. (c) Except as provided in paragraph (b) of this Section, in the event of any transfer of title to the Property by Landlord, Landlord shall thereafter be entirely freed and relieved from the performance and observance of all covenants and obligations hereunder. 14.7 RULES AND REGULATIONS. Tenant shall abide by rules and regulations set forth in Exhibit C attached hereto and those rules and regulations from time to time established by Landlord, it being agreed that such rules and regulations will established and applied by Landlord in a non- discriminatory fashion, such that all rules and regulations shall be generally applicable to other tenants of the Building of similar nature to the Tenant named herein. Landlord agrees to use reasonable efforts to insure that any such rules and regulations are uniformly enforced, but Landlord shall not be liable to Tenant for violation of the same by any other tenant or occupant of the Building, or persons having business with them. In the event that there shall be any conflict between such rules and regulations and the provisions of this Lease, the provisions of this Lease shall control. -30- 35 14.8 ADDITIONAL CHARGES. If Tenant shall fail to pay when due any sums under this Lease designated or payable as an additional charge, Landlord shall have the same rights and remedies as Landlord has hereunder for failure to pay Basic Rent. 14.9 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by Law. 14.10 PROVISIONS BINDING, ETC. Except as herein otherwise provided, the terms hereof shall be binding upon and shall inure to the benefit of the successors and assigns, respectively, of Landlord and Tenant and, if Tenant shall be an individual, upon and to his heirs, executors, administrators, successors and assigns. Each term and each provision of this Lease to be performed by Tenant shall be construed to be both a covenant and a condition. The reference contained to successors and assigns of Tenant is not intended to constitute a consent to assignment by Tenant, but has reference only to those instances in which Landlord may later give consent to a particular assignment as required by those provisions of Article VI hereof. 14.11 RECORDING. Tenant agrees not to record this Lease, but each party hereto agrees, on the request of the other, to execute a so-called notice of lease in form recordable and complying with applicable law and reasonably satisfactory to Landlord's attorneys. In no event shall such document set forth the rent or other charges payable by Tenant under this Lease; and any such document shall expressly state that it is executed pursuant to the provisions contained in this Lease, and is not intended to vary the terms and conditions of this Lease. 14.12 NOTICES. Whenever, by the terms of this Lease, notices, consents or approvals shall or may by given either to Landlord or to Tenant, such notices, consents or approvals shall be in writing and shall be sent by registered or certified mail, return receipt requested, postage prepaid: If intended for Landlord, addressed to Landlord at Landlord's Original Address with a copy Addressed to Landlord at 730 Third Avenue, New York, New York 10017 Attention: Douglas Lawrence (or to such other address as -31- 36 may from time to time hereafter by designated by Landlord by like notice). If intended for Tenant, addressed to Tenant at Tenant's original Address until the Commencement Date and thereafter to the Premises (or to such other address or addresses as may from time to time hereafter be designated by Tenant by like notice.) All such notices shall be effective when deposited in the United States Mail within the Continental United States, provided that the same are received in ordinary course at the address to which the same were sent. 14.13 WHEN LEASE BECOMES BINDING. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both Landlord and Tenant. All negotiations, considerations, representations and understandings between Landlord and Tenant are incorporated herein and this Lease expressly supersedes any proposals or other written documents relating hereto. this Lease may be modified or altered only by written agreement between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change or modify any of the provisions hereof. 14.14 PARAGRAPH HEADINGS. The paragraph headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction, or meaning of the provisions of this Lease. 14.15 RIGHTS OF MORTGAGEE OR GROUND LESSOR. This Lease shall be subordinate to any mortgage or ground lease from time to time encumbering the Premises, whether executed and delivered prior to or subsequent to the date of this Lease, if the holder of such mortgage or ground lease shall so elect. If this Lease is subordinate to any mortgage or ground lease and the holder thereof (or successor) shall succeed to the interest of Landlord, at the election of such holder (or successor) Tenant shall attorn to such holder and this Lease shall continue in full force and effect between such holder (or successor) and Tenant. Tenant agrees to execute such instruments of subordination or attornment in confirmation of the foregoing agreement as such holder may request, and Tenant hereby appoints such holder as Tenant's attorney-in-fact to execute such subordination or attornment agreement upon default of Tenant in complying with such holder's request. -32- 37 14.16 STATUS REPORT. Recognizing that both parties may find it necessary to establish to third parties, such as accountants, banks, mortgagees, ground lessors, or the like, the then current status of performance hereunder, either party, on the request of the other made from time to time, will promptly furnish to Landlord, or the holder of any mortgage or ground lease encumbering the Premises, or to Tenant, as the case may be, a statement of the status of any matter pertaining to this Lease, including, without limitation, acknowledgement that (or the extent to which) each party is in compliance with its obligations under the terms of this Lease. 14.17 SECURITY DEPOSIT. Concurrently with the execution and delivery of this Lease, Tenant shall deposit the Security Deposit specified in Section 1.2 hereof and that Landlord shall hold the same throughout the Term of this Lease as security for the performance by Tenant of all obligations on the part of Tenant hereunder. Landlord shall have the right from time to time without prejudice to any other remedy Landlord may have on account thereof, to apply such deposit, or any part thereof, to Landlord's damages arising from, or to cure, any Default of Tenant. If Landlord shall so apply any or all of such deposit, Tenant shall immediately deposit with Landlord the amount so applied to be held as security hereunder. There then existing no Default of Tenant, Landlord shall return the deposit, or so much thereof as shall theretofore not been applied in accordance with the terms of this Section 14.17, to Tenant on the expiration or earlier termination of the Term of this Lease and surrender of possession of the Premises by Tenant to Landlord at such time. While Landlord holds such deposit, Landlord shall have no obligation to pay interest on the same and shall have the right to commingle the same with Landlord's other funds. If Landlord conveys Landlord's interest under this Lease, the deposit, or any part thereof not previously applied, may be turned over by Landlord to Landlord's grantee, and, if so turned over, Tenant agrees to look solely to such grantee for proper application of the deposit in accordance with the terms of this Section 14.17, and the return thereof in accordance therewith. The holder of a mortgage shall not be responsible to Tenant for the return or application of any such deposit, whether or not it succeeds to the position of Landlord hereunder, unless such deposit shall have been received in hand by such holder. Provided that Tenant is not otherwise in default in the performance or observance of any term, covenant, condition or agreement to be performed or observed by Tenant hereunder, Tenant shall be permitted to apply a portion (namely $7,455.37) of the Security Deposit held by Landlord hereunder against the Basic Rent obligation -33- 38 for and with respect to the last month of the Initial Term. 14.18 REMEDYING DEFAULTS. Landlord shall have the right, but shall not be required, to pay such sums or to do any act which requires the expenditure of monies which may be necessary or appropriate by reason of the failure or neglect of Tenant to perform any of the provisions of this Lease, and in the event of the exercise of such right by Landlord, Tenant agrees to pay to Landlord forthwith upon demand all such sums, together with interest thereon at a rate equal to 3% over the prime rate in effect from time to time at the Bank of Boston (but in no event less than 18% per annum), as an additional charge. Any payment of Fixed Rent, Escalation Charges or other sums payable hereunder not paid when due shall, at the option of Landlord, bear interest at a rate equal to 3% over the prime rate in effect from time to time at the Bank of Boston (but in no event less than 18% per annum) from the due date thereof and shall be payable forthwith on demand by Landlord, as an additional charge. 14.19 HOLDING OVER. Any holding over by Tenant after the expiration of the Term of this Lease shall be treated as a daily tenancy at sufferance at a rate equal to the then fair rental value of the Premises but in no event less twice the sum of (i) Fixed Rent and (ii) Escalation Charges in effect on the expiration date. Tenant shall also pay to Landlord all damages, direct and/or indirect (including any loss of a tenant or rental income), sustained by reason of any such holding over. Otherwise, such holding over shall be on the terms and conditions set forth in this Lease as far as applicable. The Landlord may, but shall not be required to, and only on written notice to Tenant after the expiration of the Term hereof, elect to treat such holding over as an extension of the Term of this Lease for a period of up to one (1) year, as designated by Landlord, such extension to be on the terms and conditions set forth in this Section 14.19. 14.20 WAIVER OF SUBROGATION. Insofar as, and to the extent that, the following provision shall not make it impossible to secure insurance coverage obtainable from responsible insurance companies doing business in the locality in which the Property is located (even though extra premium may result therefrom) Landlord and Tenant mutually agree that any property damage insurance carried by either shall provide for the waiver by the insurance carrier of any right of subrogation against the other, and they further mutually agree that, with respect to any damage to property, the loss from which is covered by insurance then being carried by them, respectively, the one carrying such insurance and suffering such loss releases the other of and from any and all claims with -34- 39 respect to such loss to the extent of the insurance proceeds paid with respect thereto. 4.21 SURRENDER OF PREMISES. Upon the expiration or earlier termination of the Term of this Lease, Tenant shall peaceably quit and surrender to Landlord the Premises in neat and clean condition and in good order, condition and repair, together with all alterations, additions and improvements which may have been made or installed in, on or to the Premises prior to or during the Term of this Lease, excepting only ordinary wear and use and damage by fire or other casualty for which, under other provisions of this Lease, Tenant has no responsibility of repair and restoration. Tenant shall remove all of Tenant's Removable Property and, to the extent specified by Landlord, all alterations and additions made by Tenant and all partitions wholly within the Premises; and shall repair any damage to the Premises or the Building caused by such removal. Any Tenant's Removable Property which shall remain in the Building or on the Premises after the expiration or termination of the Term of this Lease shall be deemed conclusively to have been abandoned, and either may be retained by Landlord as its property or may be disposed of in such manner as Landlord may see fit, at Tenant's sole cost and expense. 14.22 SUBSTITUTE SPACE. If Landlord so requests, Tenant shall vacate the Premises and relinquish its rights with respect to the same provided that Landlord shall provide to Tenant substitute space in the Building, such space to be reasonably comparable in size, layout, finish and utility to the Premises, and further provided that Landlord shall, at its sole cost and expense, move Tenant and its Removable Property from the Premises to such new space in such manner as will minimize, to the greatest extent practicable, undue interference with the business or operation of Tenant. Any such substitute space shall, from and after such relocation, be treated as the Premises demised under this Lease, and shall be occupied by Tenant under the same terms, provisions and conditions as are set forth in this Lease. 14.23 BROKERAGE. Tenant warrants and represents that Tenant has dealt with no broker in connection with the consummation of this Lease and, in the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim (except any claim by the Broker). 14.24 SPECIAL TAXATION PROVISIONS. Landlord shall have the right at any time and from time to time, to unilaterally amend the provisions of this Lease if Landlord is advised by its Counsel that all or any portion of the monies paid -35- 40 by Tenant to Landlord hereunder are, or may be deemed to be, unrelated business income within the meaning of the United States Internal Revenue Code, or regulation issued thereunder, and Tenant agrees that it will execute all documents or instruments necessary to effect such amendment or amendments, provided that no such amendment shall result in Tenant having to pay in the aggregate more money on account of its occupancy of the demised premises under the provisions of this Lease as so amended and provided further, that no such amendment or amendments shall result in Tenant receiving under the provisions of this Lease less services than it is entitled to receive nor services of a lesser quality. Anything contained in the foregoing provisions of this Lease (including, without limitation, Article VI hereof) to the contrary notwithstanding, neither Tenant nor any other person having an interest in the possession, use, occupancy or utilization of the Premises, shall enter into any lease, sublease, license, concession or other agreement for use, occupancy, utilization of space in the Premises which provides for rental or other payment for such use, occupancy or utilization of space, in whole or in part, on the net income or profits derived by any person from the Premises leased, used, occupied or utilized (other than an amount based on a fixed percentage or percentage of receipts for sales) and any such recorded lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the Premises. 14.25 HAZARDOUS MATERIALS. Tenant shall not (either with or without negligence) cause or permit the escape, disposal, release or threat of release of any biologically or chemically active or other Hazardous Materials (as said term is hereafter defined) on, in, upon or under the Property or the Premises. Tenant shall not allow the generation, storage, use or disposal of such Hazardous Materials in any manner not sanctioned by law or by the highest standards prevailing in the industry for the generation, storage, use and disposal of such Hazardous Materials, nor allow to be brought into the Property any such Hazardous Materials except for use in the ordinary course of Tenant's business, and then only after written notice is given to Landlord of the identity of such Hazardous Materials. Hazardous Materials shall include, without limitation, any material or substance which is (i) petroleum, (ii) asbestos, (iii) designated as a "hazardous substance" pursuant to Section 311 of the Federal Water Pollution Control Act, 33 U.S.C. SS 1251 et seq. (33 U.S.C. SS 1321) or listed pursuant to SS 307 of the Federal Water Pollution Control Act (33 U.S.C. SS 1317), (iv) defined as a "hazardous waste" pursuant to -36- 41 Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. SS 6901 et seq. (42 U.S.C. SS 6903), (v) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. SS 9601 et seq. (42 U.S.C. SS 9601), as amended, or (vi) defined as "oil" or a "hazardous waste", a "hazardous substance", a "hazardous material" or a "toxic material" under any other law, rule or regulation applicable to the Property, including, without limitation, Chapter 21E of the Massachusetts General Laws, as amended. If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of Hazardous Materials, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional charges but only if such requirement applies to the Premises or may be the result of the acts or omissions of Tenant. In addition, Tenant shall execute affidavits, representations and the like, from time to time, at Landlord's request concerning Tenant's best knowledge and belief regarding the presence of Hazardous Materials on the Premises. In all events, Tenant shall indemnify and save Landlord harmless from any release on threat of release on the presence or existence of Hazardous Materials on the Premises occurring while Tenant is in possession, or elsewhere on the Property if caused by Tenant or persons acting under Tenant. The within covenants and indemnity shall survive the expiration or earlier termination of the Term of this Lease. Landlord expressly reserves the right to enter the Premises to perform regular inspections. 14.26 GOVERNING LAW. This Lease shall be governed exclusively by the provisions hereof and by the laws of the Commonwealth of Massachusetts, as the same may from time to time exist. IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly executed, under seal, by persons hereunto duly -37- 42 authorized, in multiple copies, each to be considered an original hereof, as of the date first set forth above. TENANT: VOICETEK CORPORATION Dated: May 25, 1993 By: /s/ Stephen A. Gorgal --------------- ----------------------------- Its: Treasurer ----------------------------- LANDLORD: TEACHERS REALTY CORPORATION Dated: May 25, 1993 By: /s/ Richard J. Usas --------------- ----------------------------- Its: Director ---------------------------- 43 EXHIBIT A [VOICETEK FLOOR PLAN] 44 EXHIBIT B [VOICETEK PARTIAL FLOOR PLAN] 45 EXHIBIT C RULES AND REGULATIONS 1. The sidewalks, paved and/or landscaped areas shall not be obstructed or encumbered by Tenant or used for any purpose other than ingress and egress to and from the demised premises. 2. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by Tenant on any part of the demised premises or Building so as to be visible from outside the demised premises without the prior written consent of Landlord, which will not be unreasonably withheld or delayed In the event of the violation of this paragraph, Landlord may remove same without any liability, and may charge the expense incurred in such removal to Tenant, as additional rent. 3. No awnings, curtains, blinds, shades, screens or other projections shall be attached to or hung in, or used in connection with, any window of the demised premises or any outside wall of the Building without the prior written consent of Landlord, which will not be unreasonably withheld or delayed so long as said awning or other item conforms to similar items installed in or upon other portions of the Building. Such awnings, curtains, blinds, shades, screens or other projections must be of a quality, type, design and color, and attached in the manner, approved by Landlord. If any portion of the demised premises which is not used for office purposes shall have windows, such windows shall be equipped with curtains, blinds or shades approved by Landlord, and curtains, blinds or shades shall be kept closed said at all times. 4. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were designed and constructed, and no sweepings, rubbish, rags, acids, chemicals, process water, cooling water or like substances shall be deposited therein. Said plumbing fixtures and the plumbing system of the Building shall be used only for the discharge of so-called sanitary waste. All damage resulting from any misuse of said fixtures and/or plumbing system by Tenant or anyone claiming under Tenant shall be borne by Tenant. 5. Tenant must, upon the termination of its tenancy, return to Landlord all locks, cylinders and keys to the demised premises and any offices therein. 6. Tenant shall keep any sidewalks and planters in front of the demised premises reasonably free and clear of litter and refuse, regardless of the source thereof. 7. Tenant shall, at Tenant's expense, provide artificial light and electric current for the employees of Landlord and/or Landlord's contractors while making repairs or alterations in the demised premises. 46 8. Tenant shall not make, or permit to be made, any unseemly or disturbing odors or noises or disturb or interfere with occupants of the Building or those having business with them, whether by use, of any musical instrument, radio, machine, or in any other way. 9. Canvassing, soliciting, and peddling in the Building are prohibited and Tenant shall cooperate to prevent the same. 10. Tenant shall keep the demised premises free at all time of pests, rodents and other vermin, and Tenant shall keep all trash and rubbish stored in containers of a type approved by Landlord, such containers to be kept at locations designated by Landlord. Tenant shall cause such containers to be emptied whenever necessary to prevent them from overflowing or from producing any objectionable odors. 11. Landlord reserves the right to rescind, alter, waive and/or establish any reasonable rules and regulations of uniform application to all tenants which, in its judgment, are necessary, desirable or proper for its best interests and the best interests of the occupants of the Building. 12. The access roads, driveways, entrances and exits shall not be obstructed or encumbered by Tenant or used for any purpose other than ingress and egress. 47 EXHIBIT E (ITEMS INCLUDED IN BUILDING/ UTILITY COSTS AND OPERATING EXPENSES) A. Without limitation, Building Energy/Utility Costs shall include: Costs for electricity, fuel, oil, gas, steam, water and sewer use charges and other utilities supplied to the Property and not paid for directly by tenants. B. Without limitation, Operating Expenses shall include: 1. All expenses incurred by Landlord or Landlord's agents which shall be directly related to employment of personnel, including amounts incurred for wages, salaries and other compensation for services, payroll, social security, unemployment and similar taxes, workmen's compensation insurance, disability benefits, pensions, hospitalization, retirement plans and group insurance, uniforms and working clothes and the cleaning thereof, and expenses imposed on Landlord or Landlord's agents in connection with the operation, repair, maintenance, cleaning, and protection of the Property, and its mechanical systems including, without limitation, day and night supervisors, janitors, carpenters, engineers, mechanics, electricians and plumbers and personnel engaged in supervision of any of the persons mentioned above: provided that, if any such employee is also employed on other property of Landlord, such compensation shall be suitably allocated by Landlord among the Property and such other properties. 2. The cost of services, materials and supplies furnished or used in the operation, repair, maintenance, cleaning, and protection of the Property including, without limitation, fees and assessments, if any, imposed upon Landlord, or charged to the Property, by any governmental agency or authority or other duly authorized private or public entity on account of public safety services, transit, housing, police, fire, sanitation or other services or purported benefits. 3. The cost of replacements for tools and other similar equipment used in the repair, maintenance, cleaning and protection of the Property, provided that, in the case of any such equipment used jointly on other property of Landlord, such costs shall be allocated by Landlord among the Property and such other properties. 4. Premiums for insurance against damage or loss to the Building from such hazards as shall from time to time be generally required by institutional mortgagees in the Boston area for similar properties, including, but not by way of limitation, insurance covering loss of rent attributable to any such hazards, and public liability insurance. 48 EXHIBIT F TENANT'S JANITORIAL SPECIFICATIONS EACH VISIT 1. Empty all trash. 2. Replace liners as needed. 3. Empty and wash all ashtrays. 4. Dust all flat surfaces and cleared desks. 5. Clean glass doors. 6. Clean kitchen and coffee areas. 7. Thoroughly clean restrooms; and restock with soap and paper supplies. 8. Vacuum all carpeting. 9. Dust mop tile floors. 10. Damp mop tile floors. 11. Spray buff tile floors: as needed. 12. Turn off all lights, lock doors and leave premises in orderly condition. The above services are done on Tuesday, Thursday and Saturday of each week. 49 5. Intentionally Omitted. 6. If, during the Term of this Lease, Landlord shall make a capital expenditure, the total cost of which is not properly includable in Operating Expenses for the Operating Year in which it was made, there shall nevertheless be included in such Operating Expenses for the Operating Year in which it was made and in Operating Expenses for each succeeding Operating Year, an annual charge-off of such capital expenditure. The annual charge-off shall be determined by dividing the original capital expenditure plus an interest factor, reasonably determined by Landlord, as being the interest rate then being charged for long-term mortgages, by institutional lenders on like properties within the locality in which the Building is located, by the number of years of useful life of the capital expenditure, and the useful life shall be determined reasonably by Landlord in accordance with generally accepted accounting principles and practices in effect at the time of making such expenditure. 7. Betterment or special assessments provided the same are apportioned equally over the longest period permitted by law. 8. Amounts paid to independent contractors for services, materials and supplies furnished for the operation, repair, maintenance, cleaning and protection of the Property. 9. Management Fees payable to contractors or managers for operation and management of the Building. EX-10.6 10 FIRST AMENDEMENT TO LEASE- 8/8/94 1 EXHIBIT 10.6 FIRST AMENDMENT TO LEASE AGREEMENT This First Amendment to Lease Agreement ("First Amendment") is made as of this 8 day of August 1994 by and between Teachers Realty Corporation ("Landlord") and Voicetek Corporation ("Tenant"). WHEREAS, Landlord and Tenant have heretofore executed a certain Lease Agreement dated May 25,1993 ("Lease") pursuant to which Tenant has leased 19,881 rentable square feet of area (the "Original Premises") in a building (the "Building") known as 19 Alpha Road, Chelmsford, MA; and WHEREAS, Landlord and Tenant have agreed that Tenant shall be permitted to expand the Original Premises and to lease an additional 13,619 rentable square feet of area in the Building, as more particularly shown on Exhibit A to this First Amendment (the "New Premises") subject to the terms, covenants and provisions of the Lease as amended hereby; and WHEREAS, the three (3) year Initial Term of the Lease is scheduled to expire on May 31,1996; and WHEREAS, Landlord and Tenant are now desirous of extending the Term of the Lease a period of five (5) years beginning on the New Premises Commencement Date (as hereafter defined); and WHEREAS, Landlord and Tenant have agreed to enter into this First Amendment to memorialize their agreements and to otherwise modify and amend the Lease to (i) reflect the increase in the size of the Premises demised under the Lease as a result of the addition of the New Premises (ii) to extend the Term of the Lease for the period of five (5) years beginning on the New Premises Commencement Date and (iii) to otherwise modify and amend the Lease as hereinafter set forth. NOW, THEREFORE, in consideration of Ten ($10.00) Dollars and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Tenant and Landlord hereby agree as follows: 1. Changes in Basic Lease Provisions. Effective as of the New Premises Commencement Date (as hereinafter defined), the information provided in Article I of the Lease captioned "Basic Lease Provisions" will be changed and amended in the following respects: (a) The definition of the term "Premises Rentable Area" shall be amended by deleting the reference to "19,881 square feet" and inserting in its place and stead the number "33,500 square feet". 2 (b) The definition of the term "Basic Rent" shall be amended by deleting the entire schedule of Basic Rent set forth on the cover page of the Lease and replacing it with the following:
Period Basic Rent Monthly Payment - ------ (per period) --------------- ------------ "A. The period beginning on the $89,464.50 $ 7,455.38 Commencement Date (as defined in Section 4.1 of the Lease) through the date immediately preceding the New Premises Commencement Date (pro-rated on a daily basis for any partial calendar month in which the New Premises Commencement Date shall fall) B. The approximately two year period $144,050.00 $12,004.17 beginning on the New Premises Commencement Date through and including the last day of the calendar month in which the Second Anniversary of the New Premises Commencement Date shall fall (pro-rated on. a daily basis for any partial calendar month in which the New Premises Commencement Date shall fall) $150,750.00 $12,562.50" C. The three year period beginning on the day immediately following expiration of the period described in "B" above through and including the last day of the Term of this Lease as it is extended pursuant to paragraph 1(d) of this First Amendment
Tenant shall continue to make the monthly payments of the Reimbursement Rent as defined under Article III, Section 3.1(c) of the Lease and these payments shall remain unchanged by this First Amendment. -2- 3 (c) The definition of the term "Security Deposit" shall be amended and increased by deleting the reference to "$22,366.12" and inserting in its place and stead the number "$32,366.12". Simultaneously with the execution and delivery of the First Amendment, Tenant shall deposit the additional amount of $10,000.00 with Landlord to be held (together with the amounts previously deposited) as security for Tenant's obligations under the Lease pursuant to Section 14.17 of the Lease. Provided that Tenant is not in default under the Lease, the Landlord shall apply $10,788.00 (rather than $7,455.37 as stated in the last sentence of Section 14.17) of the Security Deposit toward the Tenant's Basic Rent obligation for the last month of the Initial Term. (d) The definition of the term "Initial Term" shall be amended and extended for a period of five (5) years beginning upon the New Premises Commencement Date; provided, however, that if the New Premises Commencement Date shall fall on other than the first day of a calendar month, the Initial Term shall expire on the last day of the calendar month in which the fifth (5th) anniversary of the New Premises Commencement Date shall fall. (e) The definition of the term "Escalation Factor" shall be amended by deleting "32.57%" and inserting the number "54.88%" in its place and stead. 2. Utilities. The Tenant shall be responsible for the payment of all utilities servicing the Premises. Notwithstanding anything contained in Section 7.5(c) of the Lease to the contrary, effective as of the New Premises Commencement Date, Landlord shall no longer be obligated to pay Landlord's Utility Cost applicable to gas and electricity used and consumed in the Adjacent Space. Tenant shall be responsible for all electricity and gas used and consumed in the Premises as amended as measured in the existing meters 3. Expansion; Generally. Effective as of the New Premises Commencement Date, the 13,619 rentable square feet of area shown on Exhibit A to this First Amendment shall be added to and included in the Premises demised under the Lease for the balance of the Term of this Lease and the term "Premises" wherever used in the Lease shall be deemed to mean and include the New Premises together with the Original Premises and the terms "Premises Rentable Area" and "Basic Rent" shall have the meanings ascribed to them in paragraph 1 of this First Amendment. Accordingly, monthly and annual payments of the Operating Expenses and Escalation Charges shall be increased to reflect the increase in the size of the Premises by the addition of the New Premises. 4. Landlord's Expansion Work; New Premises Commencement Date. 4.1 Commencement Date. The provisions of Article IV of the Lease shall not be applicable to the New Premises and Landlord shall have no obligation whatsoever to perform the work described in Section 4.2 on page 5 of the Lease. All construction to be performed by Landlord in the New Premises and the Original Premises shall be governed by the provisions of this paragraph 4 of this First Amendment. The New Premises Commencement Date shall be the day following the date on which the New Premises are "ready for occupancy" as provided in Section 4.2 of this First Amendment Notwithstanding the foregoing, if Tenant's personnel shall occupy all or any part of the - 3 - 4 New Premises for the conduct of its business prior to the New Premises Commencement Date, such date shall for all purposes of this Lease be the New Premises Commencement Date. The Tenant shall, upon demand of the Landlord, execute a certificate confirming the New Premises Commencement Date as it is determined in accordance with the provisions of Section 4.2. 4.2 Preparation of the Premises. (a) Landlord shall exercise all reasonable efforts to complete the work necessary to prepare the New Premises for Tenant's occupancy and to otherwise alter the Original Premises pursuant to the Plans and Specifications attached hereto as Exhibit B ("Landlord's Expansion Work"), and in accordance with Landlord's building standards, but Tenant shall have no claim against Landlord for failure to complete such Work. Tenant hereby approves all matters set forth in Exhibit B. The New Premises shall be deemed "ready for occupancy" on the date upon which Landlord has substantially completed the Landlord's Expansion Work as certified to Tenant by Landlord by written notice. To the extent that the requirements of Landlord's Expansion Work, including, without limitation, the cost of all permits, architectural and engineering fees, and construction supervision fees, shall exceed a cost of $47,000.00, Tenant shall pay the cost of such excess requirements (the "OBS Costs") to Landlord as an additional charge hereunder. Tenant shall pay 1/2 of the OBS Costs prior to Landlord commencing Landlord's Expansion Work and the other 1/2 of OBS Costs shall be paid upon completion of Landlord's Expansion Work. Tenant shall, if requested by Landlord, execute a work letter confirming such excess costs prior to the time Landlord shall be required to commence work. Failure of Tenant to timely pay Landlord the amounts required to be paid pursuant to this Section 4.2 shall entitle Landlord to the same rights and remedies as Landlord has against Tenant for failure to pay Basic Rent when due. 4.3 Conclusiveness of Landlord's Performance. Unless Tenant shall have given Landlord written notice by the end of the first full calendar month after the New Premises Commencement Date of specific respects in which Landlord has not performed Landlord's Expansion Work in compliance with the matters set forth in Exhibit B, Tenant shall have no claim that Landlord has failed to perform any of the Landlord's Expansion Work. Except for Landlord's Expansion Work, the Premises are being leased in their condition, "as is" without warranty or representation by Landlord. Tenant acknowledges that it has inspected the New Premises and common areas of the Building and, except for Landlord's Expansion Work, has found the same to be satisfactory. 5. No Brokers. Tenant warrants and represents that Tenant has dealt with no broker in connection with the consummation of this Lease and, in the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim. 6. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Lease. - 4 - 5 7. Except as herein modified, all terms, covenants and provisions of the Lease are hereby ratified and affirmed. WITNESS our hands and seals on the day and year first above written. LANDLORD: TEACHERS REALTY CORPORATION By: /s/ S. Marc Flannery ------------------------- S. Marc Flannery Its: Assistant Secretary ------------------------ TENANT: VOICETEK CORPORATION By: /s/ Stephen A. Gorgal ------------------------ Its: Controller ----------------------- -5- 6 EXHIBIT A [VOICETEK FLOOR PLAN] 7 EXHIBIT B VOICETEK CORPORATION 19 ALPHA ROAD CHELMSFORD, MASSACHUSETTS "SCOPE OF WORK" The following work will be performed by Landlord as specified hereunder and in accordance with the floor plan dated May 25, 1994 ("Plan"). DEMOLITION Existing improvements shall be demolished as necessary to accommodate the proposed layout shown on the Plan. The demolition of the closets adjacent to the lobby area (as shown on the Plan) has been deleted from the Scope of Work. Tenant shall be responsible for dismantling and relocating the existing cage area located at the rear of the Original Premises. All debris shall be removed from the property and those areas of the Premises affected by construction shall be cleaned as required during construction and upon completion of construction. PARTITION New drywall partitions and soffit will be installed as per the Plan and shall consist of 2 1/2" metal studs, With 1/2" sheet rock each side, insulated with fiber glass blanket, taped and ready for finish. All new partitions, unless otherwise specified on the Plan, will extend to the underside of the existing ceilings. Demising wall separating the Premises from the adjoining premises shall be made to comply with building code requirements. Minor patching and repairs shall be made to existing walls prior to painting. CEILING Existing suspended acoustic ceiling will be patched and repaired as required to accommodate the layout and renovations indicated on the Plan. Any new ceiling tiles or grid shall match existing style. DOORS To the extent feasible, existing doors, which are to be eliminated, shall be relocated to those areas where new doors have been specified on the Plan. A total of three (3) new doors together with hardware will be furnished of a quality and finish equivalent to existing doors within the space. 8 FLOORING New carpet will be provided to those areas indicated on the Plan. Allowance will be $13.50 per square yard installed. Existing flooring, including vinyl composition tile (V.C.T.), shall be patched as specified on the Plan. Vinyl base will be installed to those areas which will receive new carpet and as necessary in those areas where walls are newly constructed or demolished. WALL FINISHES All walls and doors to be finished as specified on the Plan. Tenant shall be responsible for promptly removing all wall hangings in the Original Premises prior to painting. Additionally Tenant shall disconnect and move any computer equipment as required to facilitate painting. Tenant shall provide contractor access to the Premises during non-business hours to complete the painting. HVAC New ductwork distribution and diffusers will be furnished and installed as required in accordance with new layout. Existing diffusers shall be reused to the greatest extent possible. No special air conditioning (i.e. computer room) is included in the Scope of Work. SPRINKLERS New sprinkler heads Will be provided to satisfy landlord's underwriter and in accordance with tenant's new layout. ELECTRICAL Lighting: Existing 2'x4' fluorescent light fixtures will be relocated consistent with Tenant's layout. A total of ten new 2'x4' fluorescent fixtures will be provided to match existing fixtures. Each newly constructed office shall have a single pole light switch. 9 Power Thirty standard and five dedicated duplex outlets will be provided to areas of new construction in locations to be specified by Tenant Exit signs and emergency lighting will be provided and/or modified as required by code. /s/ Stephen A. Gorgal EX-10.7 11 SECOND AMENDMENT TO LEASE- 4/25/96 1 EXHIBIT 10.7 C SECOND AMENDMENT TO LEASE AGREEMENT This Second Amendment to Lease Agreement ("Second Amendment") is made as of this 25th day of March, 1996 by and between Teachers Realty Corporation ("Landlord") and Voicetek Corporation ("Tenant"). WHEREAS, Landlord and Tenant have heretofore executed a certain Lease Agreement dated May 25, 1993, which Lease Agreement has been amended by that certain First Amendment to Lease Agreement (the "First Amendment") dated August 8, 1994 (said Lease Agreement as amended by the First Amendment is hereafter the "Lease") pursuant to which Tenant has leased 33,500 rentable square feet of area (comprised of the 19,881 square foot "Original Premises" originally leased to Tenant under the Lease Agreement and the 13,619 square foot "New Premises" demised to Tenant under the First Amendment) in a building (the "Building") known as 19 Alpha Road, Chelmsford, MA; and WHEREAS, Landlord and Tenant have agreed to further expand the Premises on two occasions so that Tenant shall lease (i) an additional 3,520 rentable square feet of area (the "Second Expansion Space") and (ii) an additional 13,700 rentable square feet of area (the "Third Expansion Space"), all as more particularly shown on Exhibit A to this Second Amendment subject to the terms, covenants and provisions of the Lease as amended hereby; and WHEREAS, the Initial Term of the Lease (as extended by the First Amendment) is scheduled to expire on October 31, 1999; and WHEREAS, Landlord and Tenant have agreed to enter into this Second Amendment in order to memorialize their agreements and to otherwise modify and amend the Lease to (i) reflect the increases in the size of the Premises demised under the Lease from time to time as a result of the addition of the Second Expansion Space and the Third Expansion Space and (ii) to otherwise modify and amend the Lease as hereinafter set forth. NOW, THEREFORE, in consideration of Ten ($10.00) Dollars and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Tenant and Landlord hereby agree as follows: 1. Second Expansion Space; Changes in Basic Lease Provisions. Effective as of March 25,1996 (the "Second Expansion Commencement Date"), the information provided in Article I of the Lease captioned "Basic Lease Provisions" (as previously amended) will be changed and the Lease shall be deemed amended in the following respects: (a) The definition of the term "Premises Rentable Area" shall be amended by deleting the reference to "33,500 rentable square feet" and inserting in its place and stead the number "37,020 rentable square feet". 2 (b) The definition of the term "Basic Rent" shall be amended by inserting the phrase "plus the Second Expansion Rent" after the numbers set forth in the "Basic Rent" and "Monthly Payment" columns of paragraph 1(b) B. and 1(b) C. of the First Amendment. As used herein, the term "Second Expansion Rent" shall mean (a) for the period beginning on the Second Expansion Commencement Date and ending on October 31, 1996, $15,136.00 per annum ($4.30 per square foot contained in the Second Expansion Space) payable in equal monthly installments of $1,261.33 (pro rated for any partial month in which the Second Expansion Commencement Date shall fall) and (b) for the period beginning on November 1, 1996 through the last day of Initial Term (October 31, 1999) the amount of $15,840.00 per annum ($4.50 per square foot contained in the Second Expansion Space) payable in equal monthly installments of $1,320.00. All such Second Expansion Rent shall be payable on the first day of each calendar month (pro rated as of the Second Expansion Commencement Date as aforementioned) without deduction, offset, abatement or demand. In addition to the increases in the Basic Rent as it is amended by the provisions of paragraphs 1(b) and 4(b) of this Second Amendment, Tenant shall continue to make the monthly payments of the Reimbursement Rent as defined under Article III, Section 3.1(c) of the Lease as and when required by the terms of said Section 3.1(c) of the Lease and these payments of Reimbursement Rent shall remain unchanged by this Second Amendment. (c) The definition of the term "Security Deposit" shall be amended and increased in the amounts described in paragraph 7 of this Second Amendment. (d) The definition of the term "Building Rentable Area" shall be deemed amended by deleting "64,250 rentable square feet" and inserting in its place and stead "63,220 rentable square feet". (e) The definition of the term "Escalation Factor" shall be amended by deleting "54.88%" and inserting the number "61.64%" in its place and stead. 2. Second Expansion Space Expansion; Generally. Effective as of the Second Expansion Commencement Date, the Second Expansion Space shall be deemed added to and included in the Premises demised under the Lease for the balance of the Term of this Lease and, until the Third Expansion Commencement Date, the term "Premises" wherever used in the Lease shall be deemed to mean and include the Second Expansion Space together with the Original Premises and the New Premises. Accordingly, monthly and annual payments on account of Escalation Charges shall be increased to reflect the increase in the size of the Premises resulting from the addition of the Second Expansion Space. 3. Landlord's Second Expansion Work Deemed Completed. It is agreed and understood that the provisions of Article IV of the Lease and paragraph 4 of the First -2- 3 Amendment shall not be applicable to the Second Expansion Space and Landlord shall have no obligation whatsoever to perform the work described therein. Tenant hereby acknowledges and agrees that Landlord has, as of the date of this Second Amendment, completed the work described in Exhibit B to this Second Amendment ("Landlord's Second Expansion Work"). Tenant hereby approves all work performed by Landlord in the Second Expansion Space. Accordingly, the Second Expansion Space is being leased in its condition as of the date of this Second Amendment, "as is" without warranty or representation by Landlord. Tenant acknowledges that it has inspected the Second Expansion Space and Landlord's Second Expansion Work and has found the same to be satisfactory and complete. 4. Third Expansion Space; Changes in Basic Lease Provisions. Effective as of the Third Expansion Commencement Date (as hereinafter defined), the information provided in Article I of the Lease captioned "Basic Lease Provisions" (as previously amended) will be changed and the Lease shall be deemed amended in the following respects: (a) The definition of the term "Premises Rentable Area" (as amended by paragraph 1 of this Second Amendment) shall be amended by deleting the reference to "37,020 rentable square feet" and inserting in its place and stead the number "50,720 rentable square feet". (b) The definition of the term "Basic Rent" shall be amended by inserting the phrase "and the Third Expansion Rent" (in addition to the phrase "plus the Second Expansion Rent" after the numbers set forth in the Basic Rent and Monthly Payment columns of paragraph 1(b) B. and 1(b) C. of the First Amendment (as they have been amended by paragraph 1(b) of this Second Amendment). As used herein, the term "Third Expansion Rent" shall mean (a) for the period beginning on the Third Expansion Commencement Date and ending on the last day of the calendar month in which the first (1st) anniversary of the Third Expansion Commencement Date shall fall, $95,900.00 ($7.00 per rentable square foot contained in the Third Expansion Space) payable in equal monthly installments of $7,991.67 (pro rated for any partial calendar month in which the Third Expansion Commencement Date should fall), (b) for the twelve (12) calendar month period immediately following the period described in (a) above, $99,325.00 per annum ($7.25 per rentable square foot contained in the Third Expansion Space) payable in equal monthly installments of $8,277.08, and (c) for the period commencing immediately following the period described in (b) above and thereafter for the remainder of the Initial Term (October 31, 1999), $102,750.00 per annum ($7.50 per rentable square foot contained in the Third Expansion Space) payable in equal monthly installments of $8,562.50. All such Third Expansion Rent shall be payable on the first day of each calendar month (pro rated as of the Third Expansion Commencement Date as aforementioned) without deduction, offset, abatement or demand. -3- 4 (c) The definition of the term "Escalation Factor" shall be amended by deleting "61.64%" (as increased and adjusted by the provisions of paragraph 1(e) of this Second Amendment") and inserting the number "84.45%" in its place and stead. 5. Third Expansion Space Expansion; Generally. Effective as of the Third Expansion Commencement Date, the Third Expansion Space shall be added to and included in the Premises demised under the Lease for the balance of the Term of this Lease and the term "Premises" wherever used in the Lease shall be deemed to mean and include the Third Expansion Space together with the Original Premises, the New Premises and the Second Expansion Space. Accordingly, monthly and annual payments on account of Escalation Charges shall be increased to reflect the increase in the size of the Premises resulting from the addition of the Third Expansion Space. 6. Landlord's Third Expansion Work; Third Expansion Commencement Date. 6.1 Commencement Date. (a) The Third Expansion Commencement Date shall be the earlier of (i) that date (the "Target Date") which is sixty (60) days after the Delivery Date (as said term is hereafter defined) irrespective of whether Tenant has completed Tenant's Work or obtained a Certificate of Occupancy, or (ii) that date on which Tenant commences occupancy of the Third Expansion Space for the Permitted Uses, whichever first occurs. Each of the parties hereto agrees, upon demand of the other, to execute a declaration expressing the Third Expansion Commencement Date as soon as the Third Expansion Commencement Date has been determined. As used herein, the term "Delivery Date" shall mean that date upon which Landlord shall deliver possession of the Third Expansion Space to Tenant as set forth in a written notice from Landlord to Tenant (a "Delivery Notice"). The Delivery Date shall not occur until Landlord and Tenant have each executed and delivered this Second Amendment and all existing tenants of any portion of the Third Expansion Space (if any there may be) have vacated the Third Expansion Space. 6.2 Tenant's Third Expansion Plans. (a) Tenant hereby agrees to accept the Third Expansion Spaces in its "as is" condition on the Delivery Date, with all faults and without representation or warranty by Landlord of any kind. All work, construction and improvements to be performed in the Third Expansion Space for use and occupancy by Tenant shall be provided and installed by Tenant at Tenant's sole cost and expense (subject to Landlord's obligation to fund the Allowance in accordance with the provisions of this Paragraph 6). Prior to commencement of any work by Tenant, Tenant shall deliver to Landlord a detailed floor plan layout together with detailed construction drawings, detailed specifications and written instructions (herein called "Tenant's Third Expansion Plans") reflecting the partitions, improvements, mechanical, electrical and other work and alterations desired by Tenant in the Third Expansion Space. Landlord shall not unreasonably withhold or delay its approval of Tenant's Third Expansion Plans. -4- 5 6.3 Tenant's Work. (a) Landlord's approval of Tenant's Third Expansion Plans and specifications shall, in no event, unless expressly set forth in such approval, be deemed to create any obligation on the part of Landlord to do any work or make any installations in or about the Third Expansion Space nor to authorize Tenant to make any further additions, improvements or alterations to the Third Expansion Space. Tenant shall be responsible for the construction of all work and improvements necessary for Tenant to occupy the Third Expansion Space. Without limitation of the foregoing, Tenant shall be responsible for completing (at Tenant's sole cost and expense) all work necessary to separately meter utilities used and consumed in the Third Expansion Space (to the extent not already separately metered) and shall arrange for such services directly with the applicable utilities. All utilities used or consumed in the Premises during performance of Tenant's Third Expansion Work shall also be the responsibility of Tenant. (b) Tenant shall perform, at its sole cost and expense, all of the work (the "Tenant's Third Expansion Work") shown on Tenant's Third Expansion Plans strictly in accordance with Tenant's Third Expansion Plans. Any changes to Tenant's Third Expansion Plans shall be subject to the approval of Landlord which approval will not be unreasonably withheld or delayed. Tenant's Third Expansion Work shall be performed by Tenant strictly in compliance with and subject to the provisions of Section 5.2 of the Lease. Without limitation of Landlord's rights to approve all aspects of Tenant's Third Expansion Work and Tenant's Third Expansion Plans, Landlord hereby approves the location of the windows shown on that certain Space Plan by King Design Associates, Inc. dated June 5, 1996. Notwithstanding the foregoing to the contrary, Landlord hereby expressly reserves the right to review and approve any structural changes to the Building necessary to effect installation of such windows, the actual materials and windows used and the appearance and aesthetic impact on the Building resulting from the installation of such windows. In addition to and without limitation of any other provision of this Lease, Landlord hereby reserves the right to require that Tenant, at its sole cost and expense, remove such windows from the Building upon expiration or earlier termination of this Lease. If Landlord shall elect to require that Tenant remove such windows as aforesaid, Tenant hereby agrees to remove same and restore the Building to its condition prior to installation of such windows. The provisions of this paragraph (b) shall survive expiration or earlier termination of the Term of this Lease. (c) Prior to commencing occupancy of all or any portion of the Third Expansion Space, Tenant shall, at its sole expense, procure a Certificate of Occupancy and any other permit or approval required by the Town of Chelmsford or the Commonwealth of Massachusetts for its use and occupancy of the Third Expansion Space and Tenant shall deliver copies thereof to Landlord. Subject to all applicable provisions of this Lease, entry of the Third Expansion Space by Tenant or its agents or contractors prior to the Third Expansion Commencement Date for the limited purpose of performing Tenant's Third Expansion Work shall be permitted. In no event shall the Third Expansion Commencement Date be delayed by reason of Tenant's failure to complete the Tenant's -5- 6 Third Expansion Work prior to the Target Date. Tenant shall not damage or deface the Building or any part thereof in connection with the Tenant's Third Expansion Work and Tenant shall promptly reimburse Landlord for the cost of repairing any damage to the Building caused by Tenant, its employees, workmen, contractors, subcontractors, materialmen and all other parties who are involved in performing all or any part of Tenant's Third Expansion Work. Tenant shall, at its sole cost and expense, cause Tenant's Third Expansion Work to be guaranteed and bonded for completion. Tenant hereby agrees that Tenant's Third Expansion Work shall be completed in accordance with Tenant's Third Expansion Plans first approved by Finard & Company, Inc. ("Landlord's Construction Representative"). To the maximum extent this Agreement may be made effective according to law, Tenant agrees to indemnify, defend and save Landlord harmless from and against any and all loss, cost, penalties, liabilities, damages and claims arising from any act, omission or negligence of Tenant or Tenant's General Contractor or any contractors or workman employed by either of them ("Tenant's Subs") or their respective contractors, licensees, agents, servants or employees arising from the performance of Tenant's Third Expansion Work caused to any person or to the property of any person, the Building, or the Property. This indemnity shall, to the maximum extent this agreement may be made effective according to law, also extend to all loss, cost, penalties, liability, damage, claims or whatever nature asserted against the Landlord arising out of the use or occupancy or passage or travel over or upon, the Property by Tenant or by any person claiming by, through or under Tenant including, without limitation, Tenant's General Contractor and Tenant's Subs and their respective agents, employees and contractors and customers or arising out of any delivery to or service applied to the Third Expansion Space or the Building or on account of or based on anything whatsoever done on the Property. The indemnities contained in this paragraph shall (i) include indemnity against all cost, expenses and liabilities incurred in or in connection with any such claim or proceeding brought thereon and the defense thereof with counsel approved by the Landlord and (ii) survive expiration or earlier termination of this Lease. 6.4 Landlord's Allowance; Payment. (a) Landlord shall make a dollar contribution (hereafter the "Allowance") toward the cost of completing Tenant's Work (including, without limitation, labor, materials, construction supervision, permitting, architectural fees and engineering fees) in an amount not to exceed Eighty Two Thousand Two Hundred and No/100ths ($82,200.00) Dollars. The total cost of the Tenant's Work in excess of the amount of the Allowance (such excess costs being hereafter the "Excess Costs") shall be borne by Tenant. The Allowance shall not be applied to payment for office furniture or equipment or related expenses. (b) Payment. Provided that no Default of Tenant shall exist and be continuing, periodically, but not more than once per calendar month and within thirty (30) days after (i) Tenant's General Contractor or Tenant has submitted to Landlord's Construction Representative approved applications or invoices for Tenant's Third Expansion Work -6- 7 performed and completed and materials in place during such period on Standard AIA Requisition Forms with appropriate line item break-downs (a "Requisition") and (ii) delivery to Landlord of appropriate partial lien waivers from Tenant's General Contractors which includes subcontractors' invoices for Tenant's Third Expansion Work performed to date and appropriate partial lien waivers from Tenant's Subs on Lien Waiver forms acceptable to Landlord's Construction Representative and (iii) in each case, a certification from Tenant's Architect certifying as to the state of completion of such work and installation of such materials, Landlord shall pay to Tenant's General Contractor out of the Allowance, the cost of the Tenant's Third Expansion Work performed to date as shown on the Requisition (subject to the usual 10% retainage). No sooner than thirty (30) days after the Commencement Date and after Tenant has submitted to Landlord (i) the final Requisition, (ii) appropriate final lien waivers from Tenant's General Contractor which includes final subcontractors' invoices and appropriate final lien waivers from Tenant's Subs, (iii) a Certificate from Tenant and Tenant's Architect that the Tenant's Third Expansion Work has been completed in compliance with Tenant's Third Expansion Plans and (iv) upon acceptance of Tenant's Third Expansion Work by Landlord, Landlord shall pay the amount of the final Requisition from the Allowance, if any amounts are so available. It is agreed and understood that Landlord's contribution toward the total cost of Tenant's Third Expansion Work shall not exceed the Allowance. All costs and expenses incurred in connection with Tenant's Third Expansion Work in excess of the Allowance shall be borne by Tenant. Landlord shall be entitled to retain any portion of the Allowance not needed to complete Tenant's Third Expansion Work. Tenant shall not permit any mechanics' lien, materialmen's lien, or any other lien to be filed against the Premises, the Building, the Property or Landlord by reason of Tenant's Third Expansion Work or by reason of any other work performed by Tenant, Tenant's General Contractor or Tenant's Subs or suppliers. Tenant shall indemnify and hold Landlord wholly harmless from and against all loss, cost, expense, liability and damage resulting from any failure of Tenant to pay for the Tenant's Third Expansion Work including, without limitation, legal fees incurred in connection with such failure to pay. 6.5 Demolition Allowance. In addition to the Allowance, subject to the provisions hereof, Landlord will bear the cost and expense of performing Demolition Work in the Third Expansion Space in conjunction with the Third Expansion Work ("Demolition Costs") up to the amount of the "Demolition Allowance" (as hereafter defined). In no event shall Landlord be obligated to pay for any Demolition Costs in excess of the Demolition Allowance (as said term is hereinafter defined). As used herein, the term "Demolition Allowance" shall mean $18,500.00 ($1.35 per rentable square foot) contained in the Third Expansion Space. Tenant shall pay for all Demolition Costs in excess of the Demolition Allowance as and when billed therefor. Landlord shall be entitled to retain any portion of the Demolition Allowance not needed for Demolition Work necessary to prepare the Third Expansion Space for Tenant's Third Expansion Work. The Demolition Allowance will be disbursed -7- 8 in the same manner as applies to disbursements of the Allowance pursuant to Section 6.4 hereof. 7. Security Deposit Increase. Effective as of the date of this Second Amendment, the Security Deposit held by Landlord pursuant to the Lease shall be increased by the additional amount of $23,240.00 representing increases in the Security Deposit in the amount of (i) $2,640.00 with respect to the Second Expansion Space and (ii) $20,600.00 with respect to the Third Expansion Space. Accordingly, Tenant shall deposit the necessary additional amounts to be added to the Security Deposit so that from and after the date of this Second Amendment, the amount of the Security Deposit deposited with Landlord under the Lease shall be in the aggregate amount of $55,606.12 and the definition of the term "Security Deposit" shall be increased and adjusted to be $55,606.12 for all purposes under the Lease. Such additional amounts as may be necessary to be deposited with Landlord hereunder shall be paid to Landlord simultaneously with the execution and delivery of this Lease. 8. No Brokers. Tenant warrants and represents that Tenant has dealt with no broker in connection with the consummation of this Second Amendment and, in the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim. 9. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Lease. Except as herein modified, all terms, covenants and provisions of the Lease are hereby ratified and affirmed. WITNESS our hands and seals on the day and year first above written. LANDLORD: TEACHERS REALTY CORPORATION By: /s/ Richard J. Usas ------------------------ Its: Director ----------------------- TENANT: VOICETEK CORPORATION By: /s/ Roger Tuttle ------------------------ Its: ----------------------- -8- 9 EXHIBIT A [VOICETEK FLOOR PLAN] EX-10.8 12 THIRD AMENDMENT TO LEASE- 11/8/96 1 EXHIBIT 10.8 THIRD AMENDMENT TO LEASE AGREEMENT (Adding Fourth and Fifth Expansion Spaces) This Third Amendment to Lease Agreement ("Third Amendment") is made as of this 8th day of November, 1996 by and between Teachers Realty Corporation ("Landlord") and Voicetek Corporation ("Tenant"). WHEREAS, Landlord and Tenant have heretofore executed a certain Lease Agreement dated May 25,1993, which Lease Agreement has been amended by that certain First Amendment to Lease Agreement (the "First Amendment") dated August 8, 1994 and that certain Second Amendment to Lease Agreement (the "Second Amendment") dated as of March 25,1996 (said Lease Agreement as amended by the First Amendment and the Second Amendment is hereafter the "Lease") pursuant to which Tenant has leased or committed to Lease the aggregate amount of 50,720 rentable square feet of area (comprised of (a) the 19,881 square foot "Original Premises" originally leased to Tenant under the Lease Agreement, (b) the 13,619 square foot "New Premises" demised to Tenant under the First Amendment, (c) the 3,520 square foot Second Expansion Space and 13,700 square foot Third Expansion Space demised to Tenant pursuant to the Second Amendment; provided, however, that Landlord and Tenant hereby acknowledge that as of the date of this Third Amendment, the Third Expansion Space is not yet a portion of the Premises and will become a portion of the Premises on December 1, 1996 which the parties hereby acknowledge and agree will be the Third Expansion Commencement Date for purposes of the Second Amendment) in a building (the "Building") known as 19 Alpha Road, Chelmsford, MA; and WHEREAS, Landlord and Tenant have agreed that Tenant shall further expand the Premises on two occasions so that Tenant shall lease (i) an additional 5,500 rentable square feet of area (the "Fourth Expansion Space") beginning on the Fourth Expansion Commencement Date (as herein defined) and (ii) an additional 7,000 rentable square feet of area (the "Fifth Expansion Space") beginning on the Fifth Expansion Commencement Date (as hereafter defined), all such space being more particularly shown on Exhibit A to this Third Amendment subject to the terms, covenants and provisions of the Lease as amended hereby; and WHEREAS, the Initial Term of the Lease (as extended by the First Amendment) is scheduled to expire on October 31, 1999 and the parties desire to extend the Term of this Lease for an additional four (4) year period beginning on November 1, 1999 and expiring on October 31, 2003; and WHEREAS Landlord and Tenant have agreed to enter into this Third Amendment in order to memorialize their agreements and to otherwise modify and amend the Lease to (i) reflect the increases in the size of the Premises demised under the Lease from time to time as a result of the addition of the Fourth Expansion Space and the Fifth Expansion Space, (ii) to extend the "Term of this Lease" through October 31, 2003 and (iii) to otherwise modify and amend the Lease as hereinafter set forth. 2 NOW, THEREFORE, in consideration of Ten ($10.00) Dollars and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Tenant and Landlord hereby agree as follows: 1. Fourth Expansion Space; Changes in Basic Lease Provisions. Effective as of the date which is the first to occur of (i) February 1, 1997 or (ii) the date Tenant occupies the Fourth Expansion Space for the Permitted Uses (rather than for the "Construction Purposes" as defined in paragraph 3 of this Third Amendment) (the "Fourth Expansion Commencement Date"), the information provided in Article I of the Lease captioned "Basic Lease Provisions" (as previously amended) will be changed and the Lease shall be deemed amended in the following respects: (a) The definition of the term "Premises Rentable Area" shall be amended by deleting the reference to "50,720 rentable square feet" and inserting in its place and stead the number "56,220 rentable square feet" reflecting an increase in the size of the Premises Rentable Area by the number of rentable square feet contained in the Fourth Expansion Space (namely 5,500 rentable square feet). (b) The definition of the term "Basic Rent" shall be amended by inserting the following chart in its place and stead:
Period Basic Rent Payment ------ (rate per annum) ------- ---------------- Commencement Date of the As set forth in the Lease As set forth in the Lease through the day amended by the First Lease as amended by immediately preceding the Amendment and the Second the First Amendment Fourth Expansion Amendment (the parties and the Second Commencement Date hereby acknowledging and Amendment agreeing that the Basic Rent shall increase during this period due to the occurrence of the Third Expansion Commencement Date on December 1, 1996) Fourth Expansion $289,990.00 $24,165.83 per month Commencement Date 37,020 rsf @ $4.50 through October 31, 1997 13,700 rsf @ $7.00 5,500 rsf @ $5.00 November 1, 1997 through $294,790.00 $24,565.83 per month October 31, 1998 37,020 rsf @ $4.50 13,700 rsf @ $7.25 5,500 rsf @ $5.25
-2- 3 November 1, 1998 through $299,590.00 $24,965.83 per month October 31, 1999 37,020 rsf @ $4.50 13,700 rsf @ $7.50 5,500 rsf @ $5.50 November 1, 1998 through $365,430.00 $30,452.50 per month October 31, 2000 56,220 rsf @ $6.50 November 1, 2000 through $379,485.00 $31,623.75 per month October 31, 2001 56,220 rsf @ $6.75 November 1, 2001 through $393,540.00 $32,795.00 per month October 31, 2002 56,220 rsf @ $7.00 November 1, 2002 through $407,595.00 $33,966.25 per month October 31, 2003 56,220 rsf @ $7.25
All such Basic Rent shall be payable on the first day of each calendar month without deduction, offset, abatement or demand. In addition to the increases in the Basic Rent as it is amended by the provisions of paragraphs 1(b) and 4(b) of this Third Amendment, Tenant shall continue to make the monthly payments of the Reimbursement Rent as defined under Article III, Section 3.1(c) of the Lease as and when required by the terms of said Section 3.1(c) of the Lease and these payments of Reimbursement Rent shall remain unchanged by this Third Amendment. (c) The definition of the term "Security Deposit" shall be amended and increased in the amounts described in paragraph 7 of this Third Amendment. (d) The definition of the term "Escalation Factor" shall be amended by deleting "84.45%" and inserting the number "93.61%" in its place and stead. 2. Fourth Expansion Space Expansion; Generally. Effective as of the Fourth Expansion Commencement Date, the Fourth Expansion Space shall be deemed added to and included in the Premises demised under the Lease for the balance of the Term of this Lease until the Fifth Expansion Commencement Date, the term "Premises" wherever used in the Lease shall be deemed to mean and include the Fourth Expansion Space together with the Original Premises, the New Premises, the Second Expansion Space and the Third Expansion Space. Accordingly, monthly and annual payments on account of Escalation Charges shall be increased to reflect the increase in the size of the Premises resulting from the addition of the Fourth Expansion Space. -3- 4 3. Landlord's Fourth Expansion Work. It is agreed and understood that the provisions of Article IV of the Lease, paragraph 4 of the First Amendment and the provisions of the Second Amendment regarding initial improvements to the Second Expansion Space and the Third Expansion Space shall not be applicable to the Fourth Expansion Space and Landlord shall have no obligation whatsoever to perform the work described therein. The Fourth Expansion Space is being leased in its condition as of the date of this Third Amendment, "as is" without warranty or representation by Landlord. Tenant acknowledges that it has inspected the Fourth Expansion Space and except for Landlord's Fourth Expansion Work (as hereafter defined) has found the same to be satisfactory and complete. As used herein, the term "Landlord's Fourth Expansion Work" shall mean that Landlord shall, at its sole cost and expense, demolish and pave the outdoor playground area formerly used by the day care facility tenant as and when weather conditions reasonably permit. Notwithstanding anything contained in this Third Amendment to the contrary, Landlord shall deliver possession of the Fourth Expansion Space to Tenant on December 1, 1996 for purposes of allowing Tenant to prepare same for its use and occupancy ("Construction Purposes"). Upon such delivery, all of the terms and provisions contained in the Lease including, without limitation, Article V and Article X shall be applicable to and shall govern Tenant's entry of the Premises for the limited purposes set forth herein except that Tenant shall not be required to pay Basic Rent nor Escalation Charges with respect to the Fourth Expansion Space until the Fourth Expansion Commencement Date, all as provided in paragraph 1 of this Third Amendment. 4. Fifth Expansion Space; Changes in Basic Lease Provisions. Effective as of the Fifth Expansion Commencement Date (as hereinafter defined), the information provided in Article I of the Lease captioned "Basic Lease Provisions" (as previously amended by paragraph 1 of this Third Amendment) will be changed and the Lease shall be deemed amended in the following respects: (a) The definition of the term "Premises Rentable Area" (as amended by paragraph 1(a) of this Third Amendment) shall be amended by deleting the reference to "56,220 rentable square feet" and inserting in its place and stead the number "63,220 rentable square feet". (b) The definition of the term "Basic Rent" (as amended by paragraph 1(b) of this Third Amendment shall be amended by inserting the following chart in its place and stead: -4- 5
Period Basic Rent Payment (rate per annum) Commencement Date of the as set forth in the Lease as As set forth in the Lease through the day amended by the First Lease as amended by immediately preceding the Amendment, the Second the First Amendment, Fifth Expansion Amendment and paragraph the Second Amend- Commencement Date 1 of this Third Amendment ment and paragraph 1 of this Third Amendment Fifth Expansion $324,990.00 $27,082.50 per month Commencement Date 37,020 rsf @ $450 pro rated for any through October 31, 1997 13,700 @$7.00 partial calendar 12,500 @ $5.00 month in which the Fifth Expansion Commencement Date shall fall) November 1, 1997 through $331,540.00 $27,628.33 per month October 31, 1998 37,020 rsf @ $4.50 13,700 rsf @ $7.25 12,500 rsf @ $5.25 November 1, 1998 through $338,090.00 $28,174.17 per month October 31, 1999 37,020 rsf @ $4.50 13,700 rsf @ $7.50 12,500 rsf @ $5.50 November 1, 1999 through $410,930.00 $34,244.17 per month October 31, 2000 63,220 rsf @ $6.50 November 1, 2000 through $426,735.00 $35,561.25 per month October 31, 2001 63,220 rsf @ $6.75 November 1, 2001 through $442,540.00 $36,878.33 per month October 31, 2002 63,220 rsf @ $7.00 November 1, 2002 through $458,345.00 $38,195.42 per month October 31, 2003 63,220 rsf @ $7.25
All such Basic Rent shall be payable on the first day of each calendar month (pro rated as of the Fifth Expansion Commencement Date as aforementioned) without deduction, offset, abatement or demand. -5- 6 (c) The definition of the term "Escalation Factor" shall be deemed amended by deleting "93.61%" and inserting the number "100%" in its place and stead. (d) The definition and amount of the term "Security Deposit" shall be amended and increased in accordance with the provisions of Section 7 of this Third Amendment"). 5. Fifth Expansion Space Expansion, Generally. Effective as of the Fifth Expansion Commencement Date, the Fifth Expansion Space shall be added to and included in the Premises demised under the Lease for the balance of the Term of this Lease and the term "Premises" wherever used in the Lease shall be deemed to mean and include the Fifth Expansion Space together with the Original Premises, the New Premises, the Second Expansion Space, the Third Expansion Space, the Fourth Expansion Space and the Fifth Expansion Space. Accordingly, monthly and annual payments on account of Escalation Charges shall be increased to reflect the increase in the size of the Premises resulting from the addition of the Fifth Expansion Space. 6. Fifth Expansion Commencement Date. 6.1 Fifth Expansion Commenceme nt Date. (a) The Fifth Expansion Commencement Date shall be that date upon which Landlord shall deliver possession of the Fifth Expansion Space to Tenant. Landlord shall provide Tenant with written notice of the Fifth Expansion Commencement Date. Each of the parties hereto agrees, upon demand of the other, to execute a declaration expressing the Fifth Expansion Commencement Date as soon as the Fifth Expansion Cormmencement Date has been determined. It is agreed and understood that the Fifth Expansion Commencement Date shall not occur until the existing tenants of the Fifth Expansion Space (if any there may be) have vacated the Fifth Expansion Space. 6.2 Condition of Fifth Expansion Space. (a) Tenant hereby agrees to accept the Fifth Expansion Spaces in its "as is" condition, with all faults and without representation or warranty by Landlord of any kind. Landlord shall not be required to perform any work, construction or improvements in the Fifth Expansion Space in order to prepare same for use and occupancy by Tenant. 7. Security Deposit Increase. Effective as of the date of this Third Amendment, Tenant shall deposit an additional $6,875.00 representing an increase in the Security Deposit held by Landlord pursuant to the Lease with respect to the Fourth Expansion Space. Effective as of the Fifth Expansion Commencement Date, Tenant shall deposit an additional $8,750.00 with Landlord thus further increasing the amount of the Security Deposit due to the addition of the Fifth Expansion Space to the Premises. Accordingly, effective as of the Fifth Expansion Commencement Date, the definition of the term "Security Deposit" shall be increased and adjusted to be $71,231.12 for all purposes under the Lease. Such additional amounts as may be necessary to be deposited with -6- 7 Landlord hereunder shall be paid to Landlord as a condition of Tenant's right to use and occupy respectively the Fourth Expansion Space and the Fifth Expansion Space, which condition may be waived by Landlord in its sole and absolute discretion. 8. Extension of Term of this Lease; Confirmation of Third Expansion Commencement Date. Effective as of the date of this Third Amendment, the term "Term of this Lease" shall be deemed amended to include the additional Period November 1, 1999 through and including October 31, 2003. AU of the terms, covenants and agreements contained in the Lease as amended by this Third Amendment shall be applicable during the extension period. Landlord and Tenant each hereby acknowledge and agree that the Third Expansion Commencement Date shall be December 1, 1996 for all purposes under the Lease. 9. No Brokers. Tenant warrants and represents that Tenant has dealt with no broker in connection with the consummation of this Third Amendment and, in the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim. 10. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Lease. Except as herein modified, all terms, covenants and provisions of the Lease are hereby ratified and affirmed. WITNESS our hands and seals on the day and year first above written. LANDLORD: TEACHERS REALTY CORPORATION By: /s/ Richard J. Usas ----------------------- Richard J. Usas Its: ----------------------- TENANT: VOICETEK CORPORATION By: /s/ Roger Tuttle ----------------------- Its: V.P. Finance ----------------------- -7- EX-10.9 13 LETTER AGREEMENT DATED 9/21/94 1 EXHIBIT 10.9 VOICETEK CORPORATION 19 Alpha Road Chelmsford, MA 01824 September 21, 1994 Fleet Bank of Massachusetts, N.A. 75 State Street Boston, MA 02109 Gentlemen: This letter agreement will set forth certain understandings between Voicetek Corporation, a Massachusetts corporation (the "Borrower") and Fleet Bank of Massachusetts, N.A. (the "Bank") with respect to Revolving Loans (hereinafter defined) to be made by the Bank to the Borrower and with respect to letters of credit which may hereafter be issued by the Bank for the account of the Borrower. In consideration of the mutual promises contained herein and in the other documents referred to below, and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as follows: I. AMOUNTS AND TERMS 1.1. Reference to Documents. Reference is made to (i) that certain $1,000,000 principal amount promissory note (the "Revolving Note") of even date herewith made by the Borrower and payable to the order of the Bank, (ii) that certain Inventory, Accounts Receivable and Intangibles Security Agreement and that certain Supplementary Security Agreement - Security Interest in Goods and Chattels, each of even date herewith, from the Borrower to the Bank (collectively, the "Security Agreement"), and (iii) assignments and notices of assignment (collectively, the "Intellectual Property Assignments") from the Borrower to the Bank relating to the Borrower's registered trademarks, patents and copyrights, if any. 1.2. The Borrowing; Revolving Note. Subject to the terms and conditions hereinafter set forth, the Bank will make loans ("Revolving Loans") to the Borrower, in such amounts as the Borrower may request, at the Principal Office of the Bank on any Business Day prior to the first to occur of (i) the Expiration Date, or (ii) the earlier termination of the within-described revolving financing arrangements pursuant to Section 5.2 or Section 6.7; provided, however, that (1) the aggregate principal amount of Revolving Loans outstanding shall at no time exceed the Maximum Revolving Amount (hereinafter defined) and (2) the Aggregate Bank Liabilities (hereinafter defined) shall at no time exceed the Borrowing Base (hereinafter defined). Within such limits, and subject to the terms and conditions hereof, the Borrower may 2 obtain Revolving Loans, repay Revolving Loans and obtain Revolving Loans again on one or more occasions. The Revolving Loans shall be evidenced by the Revolving Note and interest thereon shall be payable at the times and at the rate provided in the Revolving Note. Overdue principal of the Revolving Loans and, to the extent permitted by law, overdue interest shall bear interest at a fluctuating rate per annum which at all times shall be equal to the sum of (i) two (2%) percent per annum plus (ii) the per annum rate otherwise payable under the Revolving Note (but in no event in excess of the maximum rate from time to time permitted by then applicable law), compounded monthly and payable on demand. The Borrower hereby irrevocably authorizes the Bank to make or cause to be made, on a schedule attached to the Revolving Note or on the books of the Bank, at or following the time of making each Revolving Loan and of receiving any payment of principal, an appropriate notation reflecting such transaction and the then aggregate unpaid principal balance of the Revolving Loans. The amount so noted shall constitute presumptive evidence as to the amount owed by the Borrower with respect to principal of the Revolving Loans. Failure of the Bank to make any such notation shall not, however, affect any obligation of the Borrower or any right of the Bank hereunder or under the Revolving Note. All payments of interest, principal and any other sum payable hereunder and/or under the Revolving Note shall be made to the Bank at its Principal Office, in immediately available funds. All payments received by the Bank after 2:00 p.m. on any day shall be deemed received as of the next succeeding Business Day. All monies received by the Bank shall be applied first to fees, charges, costs and expenses payable to the Bank under this letter agreement, the Revolving Note and/or any of the other Loan Documents, next to interest then accrued on account of any Revolving Loans or letter of credit reimbursement obligations and only thereafter to principal of the Revolving Loans and letter of credit reimbursement obligations. All interest and fees payable hereunder and/or under the Revolving Note shall be calculated on the basis of a 360-day year for the actual number of days elapsed. 1.3. Repayment; Renewal. The Borrower shall repay in full all Revolving Loans and all interest thereon upon the first to occur of: (i) the Expiration Date or (ii) an acceleration under Section 5.2(a) following an Event of Default. The Borrower may repay, at any time, without penalty or premium, the whole or any portion of any Revolving Loan. In addition, if at any time the Borrowing Base is in an amount which is less than the then outstanding Aggregate Bank Liabilities, the Borrower will forthwith prepay so much of the Revolving Loans as may be required (or arrange for the termination of such letters of credit as may be required) so that the Aggregate Bank Liabilities will not exceed the Borrowing Base. The Bank may, at its sole discretion, renew the financing arrangements described in this letter agreement by extending the Expiration Date in a writing signed by the Bank and accepted by the Borrower. Neither the inclusion in this letter agreement or elsewhere of covenants relating to periods of time after the Expiration Date, nor any other provision hereof, nor any action -2- 3 (except a written extension pursuant to the immediately preceding sentence), non-action or course of dealing on the part of the Bank will be deemed an extension of, or agreement on the part of the Bank to extend, the Expiration Date. 1.4. Advances and Payments. The proceeds of all Revolving Loans shall be credited by the Bank to a general deposit account maintained by the Borrower with the Bank. The proceeds of each Revolving Loan will be used by the Borrower solely for working capital purposes and, in the ordinary course, for other general corporate purposes. The Bank may charge any general deposit account of the Borrower at the Bank with the amount of all payments of interest, principal and other sums due, from time to time, under this letter agreement and/or the Revolving Note and/or with respect to any letter of credit; and will thereafter notify the Borrower of the amount so charged. The failure of the Bank so to charge any account or to give any such notice shall not affect the obligation of the Borrower to pay interest, principal or other sums as provided herein or in the Revolving Note or with respect to any letter of credit. Whenever any payment to be made to the Bank hereunder or under the Revolving Note or with respect to any letter of credit shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and interest payable on each such date shall include the amount thereof which shall accrue during the period of such extension of time. All payments by the Borrower hereunder and/or in respect of the Revolving Note and/or with respect to any letter of credit shall be made net of any impositions or taxes and without deduction, set-off or counterclaim, notwithstanding any claim which the Borrower may now or at any time hereafter have against the Bank. 1.5. Letters of Credit. The Bank may, from time to time, in its sole discretion issue one or more letters of credit for the account of the Borrower; provided that at the time of such issuance and after giving effect thereto the Aggregate Bank Liabilities will in no event exceed the lesser of (i) $1,000,000 or (ii) the then effective Borrowing Base. Any such letter of credit will be issued for such fee and upon such terms and conditions as may be agreed to by the Bank and the Borrower at the time of issuance. The Borrower hereby authorizes the Bank, without further request from the Borrower, to cause the Borrower's liability to the Bank for reimbursement of funds drawn under any such letter of credit to be repaid from the proceeds of a Revolving Loan to be made hereunder, unless such liability has been otherwise paid from any other source made available by the Borrower to the Bank. The Borrower hereby irrevocably requests that such Revolving Loans be made. 1.6. Conditions to Advance. Prior to the making of the initial Revolving Loan or the issuance of any letter of credit -3- 4 hereunder, the Borrower shall deliver to the Bank duly executed copies of this letter agreement, the Security Agreement, the Intellectual Property Assignments, the Revolving Note and the documents and other items listed on the Closing Agenda delivered herewith by the Bank to the Borrower, all of which, as well as all legal matters incident to the transactions contemplated hereby, shall be satisfactory in form and substance to the Bank and its counsel. Without limiting the foregoing, any Revolving Loan or letter of credit issuance (including the initial Revolving Loan or letter of credit issuance) is subject to the further conditions precedent that on the date on which such Revolving Loan is made or such letter of credit is issued (and after giving effect thereto): (a) All statements, representations and warranties of the Borrower made in this letter agreement and/or the Security Agreement shall continue to be correct in all material respects as of the date of such Revolving Loan or the date of issuance of such letter of credit, as the case may be. (b) All covenants and agreements of the Borrower contained herein and/or in any of the other Loan Documents shall have been complied with in all material respects on and as of the date of such Revolving Loan or the date of issuance of such letter of credit, as the case may be. (c) No event which constitutes, or which with notice or lapse of time or both would constitute, an Event of Default shall have occurred and be continuing. (d) No material adverse change shall have occurred in the financial condition of the Borrower from that disclosed in the financial statements then most recently furnished to the Bank. Each request by the Borrower for any Revolving Loan or letter of credit issuance, and each acceptance by the Borrower of the proceeds of any Revolving Loan or delivery of a letter of credit, will be deemed a representation and warranty by the Borrower that at the date of such Revolving Loan or the date of issuance of such letter, as the case may be, and after giving effect thereto all of the conditions set forth in the foregoing clauses (a)-(d) of this Section 1.6 will be satisfied. Each request for a Revolving Loan or letter of credit issuance will be accompanied by a borrowing base certificate on a form satisfactory to the Bank, executed by the chief financial officer of the Borrower, unless such a certificate shall have been previously furnished setting forth the Borrowing Base as at a date not more than 30 days prior to the date of the requested borrowing. II. REPRESENTATIONS AND WARRANTIES 2.1. Representations and Warranties. In order to induce the Bank to enter into this letter agreement and to make Revolving -4- 5 Loans hereunder and/or issue letters of credit hereunder, the Borrower warrants and represents to the Bank as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of Massachusetts. The Borrower has full corporate power to own its property and conduct its business as now conducted and as contemplated to be conducted, to grant the security interests contemplated by the Security Agreement and the Intellectual Property Assignments and to enter into and perform this letter agreement and the other Loan Documents. The Borrower is duly qualified to do business and in good standing in each jurisdiction in which the Borrower maintains any facility, sales office, warehouse or other location and in each other jurisdiction where such qualification is required by the nature of the Borrower's business (except any such other jurisdiction in which failure so to qualify would not, singly or in the aggregate with all other such failures, have a material adverse effect on the Borrower), all such jurisdictions in which the Borrower is so qualified being listed on item 2.1(a) of the attached Disclosure Schedule. At the date hereof, the Borrower has no Subsidiaries. The Borrower is not a member of any partnership or joint venture. (b) At the date of this letter agreement, all of the outstanding capital stock of the Borrower is owned, of record and beneficially, as set forth on item 2.1(b) of the attached Disclosure Schedule. (c) The execution, delivery and performance by the Borrower of this letter agreement and each of the other Loan Documents have been duly authorized by all necessary corporate and other action and do not and will not: (i) violate any provision of, or require any filings (other than filings under the Uniform Commercial Code), registration, consent or approval under, any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Borrower; (ii) violate any provision of the charter or By-laws of the Borrower, or result in a breach of or constitute a default or require any waiver or consent under any indenture or loan or credit agreement or any other material agreement, lease or instrument to which the Borrower is a party or by which the Borrower or any of its properties may be bound or affected or require any other consent of any Person; or (iii) result in, or require, the creation or imposition of any lien, security interest or other encumbrance (other than in favor of the Bank), upon or with respect to any of the properties now owned or hereafter acquired by the Borrower. -5- 6 (d) This letter agreement and each of the other Loan Documents has been duly executed and delivered by the Borrower and each is a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its respective terms. (e) Except as described in item 2.1(e) of the attached Disclosure Schedule, there are no actions, suits, proceedings or investigations pending or, to the knowledge of the Borrower, threatened by or against the Borrower before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could hinder or prevent the consummation of the transactions contemplated hereby or call into question the validity of this letter agreement or any of the other Loan Documents or any action taken or to be taken in connection with the transactions contemplated hereby or thereby or which in any single case or in the aggregate might result in any material adverse change in the business, prospects, condition, affairs or operations of the Borrower. (f) Except as described in item 2.1(f) of the attached Disclosure Schedule, the Borrower is not in violation of any term of its charter or Bylaws as now in effect. Except as described in item 2.1(f) of the attached Disclosure Schedule, the Borrower is not in material violation of any term of any mortgage, indenture or judgment, decree or order, or any other instrument, contract or agreement to which it is a party or by which any of its property is bound. (g) The Borrower has filed all federal, state and local tax returns, reports and estimates required to be filed by the Borrower. All such filed returns, reports and estimates are proper and accurate and the Borrower has paid all taxes, assessments, impositions, fees and other governmental charges required to be paid in respect of the periods covered by such returns, reports or estimates. No deficiencies for any tax, assessment or governmental charge have been asserted or assessed, and the Borrower knows of no material tax liability or basis therefor. (h) The Borrower is in compliance with all requirements of law, federal, state and local, and all requirements of all governmental bodies or agencies having jurisdiction over it, the conduct of its business, the use of its properties and assets, and all premises occupied by it, failure to comply with any of which could (singly or in the aggregate with all other such failures) have a material adverse effect upon the assets, business, financial condition or prospects of the Borrower. Without limiting the foregoing, the Borrower has all the franchises, licenses, leases, permits, certificates and authorizations needed for the conduct of its business and the use of its properties and all premises occupied by it, as now conducted, owned and used. -6- 7 (i) The management-generated financial statements of the Borrower as at December 31, 1993 and the management-generated statements as at June 30, 1994, each heretofore delivered to the Bank, are complete and accurate in all material respects and fairly present the financial condition of the Borrower as at the respective dates thereof and for the periods covered thereby, except that management-generated statements do not have footnotes and thus do not present the information which would normally be contained in footnotes to financial statements. The Borrower has no liability, contingent or otherwise, not disclosed in the aforesaid financial statements or in any notes thereto that could materially affect the financial condition of the Borrower. Since December 31, 1993, there has been no material adverse development in the business, condition or prospects of the Borrower and the Borrower has not entered into any transaction other than in the ordinary course. (j) The principal place of business and chief executive offices of the Borrower are located at 19 Alpha Road, Chelmsford, MA 01824 (the "Premises"). All of the books and records of the Borrower are located at the Premises. Except as described in item 2.1(j) of the attached Disclosure Schedule, no assets of the Borrower are located at any other address; provided that items of inventory and equipment of the Borrower with an aggregate value not in excess of $100,000 may be located off-site, such items being in the possession of the Borrower's salesmen and/or customers and used for demonstration, evaluation and testing purposes. Said item 2.1(j) of the attached Disclosure Schedule sets forth the names and addresses of all record owners of the Premises. (k) The Borrower owns or has a valid right to use all of the patents, licenses, copyrights, trademarks, trade names and franchises ("Intellectual Property") now being used or necessary to conduct its business, all of which are described on Item 2.1(k) of the attached Disclosure Schedule. None of the Intellectual Property owned by the Borrower is represented by a registered copyright, trademark, patent or other federal or state registration, except as shown on said Item 2.1(k). To the best of the Borrower's knowledge, the conduct of the Borrower's business as now operated does not conflict with valid patents, licenses, copyrights, trademarks, trade names or franchises of others in any manner that could materially adversely affect the business, prospects, assets or condition, financial or otherwise, of the Borrower. (1) To the best of the Borrower's knowledge, none of the executive officers or key employees of the Borrower is subject to any agreement in favor of anyone other than the Borrower which limits or restricts that person's right to engage in the type of business activity conducted or proposed to be conducted by the Borrower or which grants to anyone other than the Borrower any rights in any inventions or other ideas susceptible to legal protection developed or conceived by any such officer or key employee. -7- 8 (m) The Borrower is not a party to any contract or agreement which now has or, as far as can be foreseen by the Borrower at the date hereof, may have a material adverse effect on the financial condition, business, prospects or properties of the Borrower. III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS Without limitation of any covenants and agreements contained in the Security Agreement or elsewhere, the Borrower agrees that so long as the financing arrangements contemplated hereby are in effect or any Revolving Loan or any of the other Obligations shall be outstanding or any letter of credit issued hereunder shall be outstanding: 3.1. Legal Existence; Qualification; Compliance. The Borrower will maintain (and will cause each Subsidiary of the Borrower to maintain) its corporate existence and good standing in the jurisdiction of its incorporation. The Borrower will qualify to do business and will remain qualified and in good standing (and the Borrower will cause each Subsidiary of the Borrower to qualify and remain qualified and in good standing) in each jurisdiction where the Borrower or such Subsidiary, as the case may be, maintains any facility, sales office, warehouse or other location and in each other jurisdiction in which the failure so to qualify could (singly or in the aggregate with all other such failures) have a material adverse effect on the financial condition, business or prospects of the Borrower or any such Subsidiary. The Borrower will comply (and will cause each Subsidiary of the Borrower to comply) with its charter documents and by-laws and, in all material respects, with all contractual requirements by which it or any of its properties may be bound. The Borrower will comply with (and will cause each Subsidiary of the Borrower to comply with) all applicable laws, rules and regulations (including, without limitation, ERISA and those relating to environmental protection) other than (i) laws, rules or regulations the validity or applicability of which the Borrower or such Subsidiary shall be contesting in good faith by proceedings which serve as a matter of law to stay the enforcement thereof and (ii) those laws, rules and regulations the failure to comply with any of which could not (singly or in the aggregate) have a material adverse effect on the financial condition, business or prospects of the Borrower or any such Subsidiary. 3.2. Maintenance of Property; Insurance. The Borrower will maintain and preserve (and cause each Subsidiary of the Borrower to maintain and preserve) all of its properties in good working order and condition, ordinary wear and tear excepted, making all necessary repairs thereto and replacements thereof. The Borrower will maintain all such insurance as may be required under the Security Agreement and will also maintain, with financially sound and reputable insurers, insurance with respect to its property and business against such liabilities, casualties and contingencies and of such types and in such amounts as shall be -8- 9 reasonably satisfactory to the Bank from time to time and in any event all such insurance as may from time to time be customary for companies conducting a business similar to that of the Borrower in similar locales. 3.3. Payment of Taxes and Charges. The Borrower will pay and discharge (and will cause each Subsidiary of the Borrower to pay and discharge) all taxes, assessments and governmental charges or levies imposed upon it or upon its income or property, including, without limitation, taxes, assessments, charges or levies relating to real and personal property, franchises, income, unemployment, old age benefits, withholding, or sales or use, prior to the date on which penalties would attach thereto, and all lawful claims (whether for any of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon any property of the Borrower or any such Subsidiary, except any of the foregoing which is being contested in good faith and by appropriate proceedings which serve as a matter of law to stay the enforcement thereof and for which the Borrower has established and is maintaining adequate reserves. The Borrower will pay, and will cause each of its Subsidiaries to pay, in a timely manner, all lease obligations, all trade debt, purchase money obligations, equipment lease obligations and all of its other Indebtedness. The Borrower will perform and fulfill all covenants and agreements under any leases of real estate, agreements relating to purchase money debt, equipment leases and other material contracts. The Borrower will maintain in full force and effect, and comply with the terms and conditions of, all permits, permissions and licenses necessary or desirable for its business. 3.4. Accounts. The Borrower will maintain its principal depository and operating accounts with the Bank. 3.5. Conduct of Business. The Borrower will conduct, in the ordinary course, the business in which it is presently engaged. The Borrower will not, without the prior written consent of the Bank, directly or indirectly enter into any other lines of business, businesses or ventures. 3.6. Reporting Requirements. The Borrower will furnish to the Bank: (i) Within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such fiscal year for the Borrower, including therein consolidated and consolidating balance sheets of the Borrower and Subsidiaries as at the end of such fiscal year and related consolidated and consolidating statements of income, stockholders' equity and cash flow for the fiscal year then ended. The annual consolidated financial statements shall be certified by Coopers & Lybrand or other independent public accountants selected by the Borrower and reasonably acceptable to the Bank, such certification to be in such form as is generally recognized as "unqualified" (provided, -9- 10 however, that the Borrower's financial statements as at December 31, 1993 and for the fiscal year then ended may be subject to a "going concern" qualification). (ii) Within 30 days after the end of each month, consolidated and consolidating balance sheets of the Borrower and its Subsidiaries and related consolidated and consolidating statements of income and stockholders' equity and cash flow, unaudited but prepared in accordance with generally accepted accounting principles consistently applied (except that such monthly statements need not contain footnotes) and certified as accurate (subject to normal year-end audit adjustments, which shall not be material) by the chief financial officer of the Borrower, such balance sheets to be as at the end of such month and such statements of income and stockholders' equity and cash flow to be for such month and for the year to date, in each case together with a comparison to budget. (iii) At the time of delivery of each annual and monthly statement of the Borrower, a certificate executed by the chief financial officer of the Borrower stating that he or she has reviewed this letter agreement and the other Loan Documents and has no knowledge of any default by the Borrower in the performance or observance of any of the provisions of this letter agreement or of any of the other Loan Documents or, if he or she has such knowledge, specifying each such default and the nature thereof. Each financial statement given as at the end of any fiscal quarter of the Borrower will also set forth the calculations necessary to evidence compliance with Sections 3.7-3.9. (iv) Monthly, within 15 days after the end of each month, (A) an aging report in form satisfactory to the Bank covering all Receivables of the Borrower outstanding as at the end of such month, and (B) a certificate of the chief financial officer of the Borrower setting forth the Borrowing Base as at the end of such month, all in form reasonably satisfactory to the Bank. (v) Promptly after receipt, a copy of all audits or reports submitted to the Borrower by independent public accountants in connection with any annual, special or interim audits of the books of the Borrower and any letter of comments directed by such accountants to the management of the Borrower. (vi) As soon as possible and in any event within five days after the occurrence of any Event of Default or any event which, with the giving of notice or passage of time or both, would constitute an Event of Default, the statement of the Borrower setting forth details of each such Event of Default or event and the action which the Borrower proposes to take with respect thereto. -10- 11 (vii) Promptly after the commencement thereof, notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, to which the Borrower or any Subsidiary of the Borrower is a party. (viii) Promptly upon filing any registration statement or listing application (or any supplement or amendment to any registration statement or listing application) with the Securities and Exchange Commission ("SEC") or any successor agency or with any stock exchange or with the National Association of Securities Dealers quotations system, a copy of same. (ix) If the Borrower becomes a publicly-traded company, a copy of each periodic or current report filed with the SEC or any successor agency and each annual report, proxy statement and other communication sent to shareholders or other securityholders generally, such copy to be provided to the Bank promptly upon such filing with the SEC or such communication with shareholders or securityholders, as the case may be. (x) Promptly upon applying for, or being granted, a federal or state registration for any copyright, trademark or patent or purchasing any registered copyright, trademark or patent, written notice to the Bank describing same, together with all such documents as may be required to give the Bank a fully perfected first priority security interest in each such copyright, trademark or patent. (xi) Promptly after the Borrower has knowledge thereof, written notice of any development or circumstance which may reasonably be expected to have a material adverse effect on the Borrower or its business, properties, assets, Subsidiaries or condition, financial or otherwise. (xii) Promptly upon request, such other information respecting the financial condition, operations, Receivables, inventory, machinery or equipment of the Borrower or any Subsidiary as the Bank may from time to time reasonably request. 3.7. Debt to Worth. The Borrower will maintain as at the end of each fiscal quarter (commencing with its results as at June 30, 1994) on a consolidated basis a Leverage Ratio of not more than the following: not more than 2.5 to 1 as at each of June 30, 1994 and September 30, 1994; and not more than 1.25 to 1 as at December 31, 1994 and as at the end of each fiscal quarter thereafter. As used herein, "Leverage Ratio" means, as at any date when same is to be determined, the ratio of (x) the outstanding Senior Liabilities of the Borrower and/or its Subsidiaries to (y) the Borrower's consolidated Capital Base. -11- 12 3.8. Net Worth. The Borrower will maintain as at the end of each fiscal quarter (commencing with its results as at June 30, 1994) a consolidated Capital Base of not less than the then effective Capital Base Requirement. The Capital Base Requirement is deemed to have been $900,000 as at March 31, 1994; and as at the last day of each fiscal quarter thereafter (beginning with June 30, 1994) the Capital Base Requirement will be deemed to become an amount equal to the sum of: (i) the Capital Base Requirement in effect on the last day of the immediately preceding fiscal quarter, plus (ii) 75% of the net proceeds of any equity securities sold by the Borrower during the fiscal quarter then ended and 75% of the proceeds of any Subordinated Debt issued by the Borrower and/or its Subsidiaries during such fiscal quarter (nothing contained herein being deemed to approve the issuance of any such Subordinated Debt), plus (iii) 75% of the consolidated Net Income of the Borrower and Subsidiaries during said fiscal quarter then ended (but without giving effect to any Net Income which is less than zero for any fiscal quarter). 3.9. Profitability. The Borrower will achieve quarterly Net Income of at least $100,000 for each fiscal quarter, commencing with its results for the fiscal quarter ended June 30, 1994. The Borrower will achieve annual Net Income of at least $500,000 for its fiscal year ending December 31, 1994 and for each fiscal year thereafter. 3.10. Books and Records. The Borrower will maintain (and cause each of its Subsidiaries to maintain) complete and accurate books, records and accounts which will at all times accurately and fairly reflect all of its transactions in accordance with generally accepted accounting principles consistently applied. The Borrower will, at any reasonable time and from time to time upon reasonable notice and during normal business hours (and at any time and without any necessity for notice following the occurrence of an Event of Default), permit the Bank, and any agents or representatives thereof, to examine and make copies of and take abstracts from the records and books of account of, and visit the properties of the Borrower and any of its Subsidiaries, and to discuss its affairs, finances and accounts with its managers, officers or directors and independent accountants, all of whom are hereby authorized and directed to cooperate with the Bank in carrying out the intent of this Section 3.10. Each financial statement of the Borrower hereafter delivered pursuant to this letter agreement will be complete and accurate in all material respects and will fairly present the financial condition of the Borrower as at the date thereof and for the periods covered thereby. 3.11. Subordination Agreements. Prior to the Bank making the first Revolving Loan, the Borrower will obtain, and will thereafter maintain in full force and effect, a subordination agreement from each holder of Subordinated Debt, such agreements to be in form and substance satisfactory to the Bank. -12- 13 3.12. Deleted prior to execution. IV. NEGATIVE COVENANTS. Without limitation of any covenants and agreements contained in the Security Agreement or elsewhere, the Borrower agrees that so long as the financing arrangements contemplated hereby are in effect or any Revolving Loan or any of the other Obligations shall be outstanding or any letter of credit issued hereunder shall be outstanding: 4.1. Indebtedness. The Borrower will not create, incur, assume or suffer to exist any Indebtedness (nor allow any of its Subsidiaries to create, incur, assume or suffer to exist any Indebtedness), except for: (i) Indebtedness owed to the Bank, including, without limitation, the Indebtedness represented by the Revolving Note and any Indebtedness in respect of letters of credit issued by the Bank; (ii) Indebtedness of the Borrower or any Subsidiary for taxes, assessments and governmental charges or levies not yet due and payable; (iii) unsecured current liabilities of the Borrower or any Subsidiary (other than for money borrowed or the deferred purchase price of property) incurred upon customary terms in the ordinary course of business; (iv) purchase money Indebtedness (including, without limitation, Indebtedness in respect of capitalized equipment leases) owed to equipment vendors and/or lessors for equipment purchased or leased by the Borrower for use in the Borrower's business, provided that the total of Indebtedness permitted under this clause (iv) plus presently-existing equipment financing permitted under clause (v) of this Section 4.1 will not exceed $250,000 in the aggregate outstanding at any one time; (v) other Indebtedness existing at the date hereof, but only to the extent set forth on item 4.1 of the attached Disclosure Schedule; and (vi) any guaranties or other contingent liabilities expressly permitted pursuant to Section 4.3. 4.2. Liens. The Borrower will not create, incur, assume or suffer to exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to exist) any mortgage, deed of trust, -13- 14 pledge, lien, security interest, or other charge or encumbrance (including the lien or retained security title of a conditional vendor) of any nature (collectively, "Liens"), upon or with respect to any of its property or assets, now owned or hereafter acquired, except that the foregoing restrictions shall not apply to: (i) Liens for taxes, assessments or governmental charges or levies on property of the Borrower or any of its Subsidiaries if the same shall not at the time be delinquent or thereafter can be paid without interest or penalty; (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar Liens arising in the ordinary course of business for sums not yet due or which are being contested in good faith and by appropriate proceedings which serve as a matter of law to stay the enforcement thereof and as to which adequate reserves have been made; (iii) pledges or deposits under workmen's compensation laws, unemployment insurance, social security, retirement benefits or similar legislation; (iv) Liens in favor of the Bank; (v) Liens in favor of equipment vendors and/or lessors securing purchase money Indebtedness to the extent permitted by clause (iv) of Section 4.1; provided that no such Lien will extend to any property of the Borrower other than the specific items of equipment financed; or (vi) other Liens existing at the date hereof, but only to the extent and with the relative priorities set forth on item 4.2 of the attached Disclosure Schedule. Nothing contained in this Section 4.2 will in any event be deemed to prohibit non-capitalized operating leases of equipment used in the Borrower's business. 4.3. Guaranties. The Borrower will not, without the prior written consent of the Bank, assume, guarantee, endorse or otherwise become directly or contingently liable (including, without limitation, liable by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in any debtor or otherwise to assure any creditor against loss) in connection with any indebtedness of any other Person (nor will it permit any Subsidiary to do so), except (i) guaranties by endorsement for deposit or collection in the ordinary course of business and (ii) guaranties existing at the date hereof and described on item 4.3 of the attached Disclosure Schedule. 4.4. Dividends. The Borrower will not, without the prior written consent of the Bank, make any distributions to its -14- 15 shareholders, pay any dividends (other than dividends payable solely in capital stock of the Borrower) or redeem, purchase or otherwise acquire, directly or indirectly any of its capital stock; provided, however, that during fiscal 1994 the Borrower may expend up to $250,000 to redeem shares of its capital stock in transactions incidental to the conversion of Subordinated Debt into equity. 4.5. Loans and Advances. The Borrower will not make (and will not permit any Subsidiary to make) any loans or advances to any Person, including, without limitation, the Borrower's directors, officers and employees, except advances to such directors, officers or employees with respect to expenses incurred by them in the ordinary course of their duties and advances against salary, all of which advances will not exceed, in the aggregate, $100,000 outstanding at any one time. 4.6. Investments. The Borrower will not, without the Bank's prior written consent, invest in, hold or purchase any stock or securities of any Person (nor will the Borrower permit any of its Subsidiaries to invest in, purchase or hold any such stock or securities) except (i) readily marketable direct obligations of, or obligations guarantied by, the United States of America or any agency thereof, (ii) other investment grade debt securities, (iii) mutual funds, the assets of which are primarily invested in items of the kind described in the foregoing clauses (i) and (ii) of this Section 4.6, (iv) deposits with or certificates of deposit issued by the Bank and any other obligations of the Bank or the Bank's parent, (v) deposits in any other bank organized in the United States having capital in excess of $100,000,000, and (vi) investments in Subsidiaries to the extent, if any, from time to time expressly permitted by the Bank. 4.7. Subsidiaries; Acquisitions. The Borrower will not, without the prior written consent of the Bank, form or acquire any Subsidiary or make any other acquisition of the stock of any other Person or of all or substantially all of the assets of any other Person. The Borrower will not become a partner in any partnership. 4.8. Merger. The Borrower will not, without the prior written consent of the Bank, merge or consolidate with any Person, or sell, lease, transfer or otherwise dispose of any material portion of its assets (whether in one or more transactions), other than sale of inventory in the ordinary course. 4.9. Affiliate Transactions. The Borrower will not, without prior written consent of the Bank, enter into any transaction, including, without limitation, the purchase, sale or exchange of any property or the rendering of any service, with any affiliate of the Borrower, except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's business and upon fair and reasonable terms no less favorable to the Borrower than would be obtained in a comparable arms'-length -15- 16 transaction with any Person not an affiliate; provided that nothing in this Section 4.9 shall be deemed to prohibit the payment of salary or other similar payments to any officer or director of the Borrower at a level consistent with the salary and other payments being paid at the date of this letter agreement and heretofore disclosed in writing to the Bank, nor to prevent the hiring of additional officers at a salary level consistent with industry practice, nor to prevent reasonable periodic increases in salary. For the purposes hereof, "affiliate" means any Person which, directly or indirectly, controls or is controlled by or is under common control with the Borrower; any officer or director or former officer or director of the Borrower; any Person owning of record or beneficially, directly or indirectly, 5% or more of any class of capital stock of the Borrower or 5% or more of any class of capital stock or other equity interest having voting power (under ordinary circumstances) of any of the other Persons described above; and any member of the immediate family of any of the foregoing. "Control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of any Person, whether through ownership of voting equity, by contract or otherwise. 4.10. Change of Address, etc. The Borrower will not change its name or legal structure, nor will the Borrower move its chief executive office or principal place of business from the address described in the first sentence of Section 2.1(j) above, nor will the Borrower remove any books or records from such address, nor will the Borrower keep any Collateral (other than items of inventory and equipment with an aggregate value not in excess of $100,000 which may be located off-site in the possession of salesmen and/or customers, such items being used for demonstration, evaluation and testing purposes) at any location other than the Premises without, in each instance, giving the Bank at least 30 days' prior written notice and providing all such financing statements, certificates and other documentation as the Bank may request in order to maintain the perfection and priority of the security interests granted or intended to be granted pursuant to the Security Agreement. The Borrower will not change its fiscal year or methods of financial reporting (except that as of January 1, 1994 the Borrower is no longer capitalizing certain intangibles of a type which it had previously capitalized) unless, in each instance, prior written notice of such change is given to the Bank and prior to such change the Borrower enters into amendments to this letter agreement in form and substance satisfactory to the Bank in order to preserve unimpaired the rights of the Bank and the obligations of the Borrower hereunder. 4.11. Hazardous Waste. Except as provided below, the Borrower will not dispose of or suffer or permit to exist any hazardous material or oil on any site or vessel owned, occupied or operated by the Borrower or any Subsidiary of the Borrower, nor shall the Borrower store (or permit any Subsidiary to store) on any site or vessel owned, occupied or operated by the Borrower or any such Subsidiary, or transport or arrange the transport of, any hazardous material or oil (the terms "hazardous material", "oil", "site" and "vessel", respectively, being used herein with -16- 17 the meanings given those terms in Mass. Gen. Laws, Ch. 21E or any comparable terms in any comparable statute in effect in any other relevant jurisdiction). The Borrower shall provide the Bank with written notice of (i) the intended storage or transport of any hazardous material or oil by the Borrower or any Subsidiary of the Borrower, (ii) any potential or known release or threat of release of any hazardous material or oil at or from any site or vessel owned, occupied or operated by the Borrower or any Subsidiary of the Borrower, and (iii) any incurrence of any expense or loss by any government or governmental authority in connection with the assessment, containment or removal of any hazardous material or oil for which expense or loss the Borrower or any Subsidiary of the Borrower may be liable. Notwithstanding the foregoing, the Borrower and its subsidiaries may use, store and transport, and need not notify the Bank of the use, storage or transportation of, (x) oil in reasonable quantities, as fuel for heating of their respective facilities or for vehicles or machinery used in the ordinary course of their respective businesses and (y) hazardous materials that are solvents, cleaning agents or other materials used in the ordinary course of the respective business operations of the Borrower and its Subsidiaries, in reasonable quantities, as long as in any case the Borrower or the Subsidiary concerned (as the case may be) has obtained and maintains in effect any necessary governmental permits, licenses and approvals, complies with all requirements of applicable federal, state and local law relating to such use, storage or transportation, follows the protective and safety procedures that a prudent business person conducting a business the same as or similar to that of the Borrower or such Subsidiary (as the case may be) would follow, and disposes of such materials (not consumed in the ordinary course) only through licensed providers of hazardous waste removal services. 4.12. No Margin Stock. No proceeds of any Revolving Loan shall be used directly or indirectly to purchase or carry any margin security. 4.13. Subordinated Debt. The Borrower will not directly or indirectly make any optional or voluntary prepayment or purchase of Subordinated Debt nor modify, alter or add any provisions with respect to any Subordinated Debt. Further, the Borrower will not make any payment in respect of Subordinated Debt in violation of the subordination agreement relating thereto. In any event, the Borrower will not make any payment on account of Subordinated Debt if any Event of Default then exists or would result from such payment. Notwithstanding the foregoing, nothing contained in this Section will be deemed to prevent the Borrower from converting Subordinated Debt into equity. V. DEFAULT AND REMEDIES 5.1. Events of Default. The occurrence of any one of the following events shall constitute an Event of Default hereunder: (a) The Borrower shall fail to make any payment of principal of or interest on the Revolving Note on or before the -17- 18 date when due; or the Borrower shall fail to pay when due any amount owed to the Bank in respect of any letter of credit now or hereafter issued by the Bank; or (b) Any representation or warranty of the Borrower contained herein shall at any time prove to have been incorrect in any material respect when made or any representation or warranty made by the Borrower in writing in connection with the execution and delivery of this letter agreement or in connection with any Revolving Loan or letter of credit shall at any time prove to have been incorrect in any material respect when made; or (c) The Borrower shall default in the performance or observance of any agreement or obligation under any of Sections 3.1, 3.3, 3.6, 3.7, 3.8 or 3.9 or Article IV; or (d) The Borrower shall default in the performance of any other term, covenant or agreement contained in this letter agreement and such default shall continue unremedied for 30 days after notice thereof shall have been given to the Borrower; or (e) Any default on the part of the Borrower or any Subsidiary of the Borrower shall exist, and shall remain unwaived or uncured beyond the expiration of any applicable notice and/or grace period, under any other contract or agreement now existing or hereafter entered into with or for the benefit of the Bank (or any affiliate of the Bank); or (f) Any default shall exist and remain unwaived or uncured with respect to any Indebtedness of the Borrower or any Subsidiary of the Borrower in excess of $100,000 in aggregate principal amount or with respect to any instrument evidencing, guaranteeing, securing or otherwise relating to any such Indebtedness, or any such Indebtedness shall not have been paid when due, whether by acceleration or otherwise, or shall have been declared to be due and payable prior to its stated maturity, or any event or circumstance shall occur which permits, or with the lapse of time or giving of notice or both would permit, the acceleration of the maturity of any such Indebtedness by the holder of holders thereof; or (g) The Borrower shall be dissolved, or the Borrower or any Subsidiary of the Borrower shall become insolvent or bankrupt or shall cease paying its debts as they mature or shall make an assignment for the benefit of creditors, or a trustee, receiver or liquidator shall be appointed for the Borrower or any Subsidiary of the Borrower or for a substantial part of the property of the Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement, insolvency or similar proceedings shall be instituted by or against the Borrower or any such Subsidiary under the laws of any jurisdiction (except for an involuntary proceeding filed against the Borrower or any Subsidiary of the Borrower which is dismissed within 60 days following the institution thereof); or -18- 19 (h) Any attachment, execution or similar process shall be issued or levied against any of the property of the Borrower or any Subsidiary and such attachment, execution or similar process shall not be paid, stayed, released, vacated or fully bonded within 10 days after its issue or levy; or (i) Any final uninsured judgment in excess of $50,000 shall be entered against the Borrower or any Subsidiary of the Borrower by any court of competent jurisdiction; or (j) The Borrower or any Subsidiary of the Borrower shall fail to meet its minimum funding requirements under ERISA with respect to any employee benefit plan (or other class of benefit which the PBGC has elected to insure) or any such plan shall be the subject of termination proceedings (whether voluntary or involuntary) and there shall result from such termination proceedings a liability of the Borrower or any Subsidiary of the Borrower to the PBGC which in the reasonable opinion of the Bank may have a material adverse effect upon the financial condition of the Borrower or any such Subsidiary; or (k) The Security Agreement or any other Loan Document shall for any reason (other than due to payment in full of all amounts secured or evidenced thereby or due to discharge in writing by the Bank) not remain in full force and effect; or (1) The security interests and liens of the Bank in and on any of the Collateral shall for any reason (other than due to payment in full of all amounts secured thereby or due to written release by the Bank) not be fully perfected liens and security interests, subject in priority only to the matters set forth in Section 4.2 above; or (m) At any time, 50% or more of the outstanding shares of any class of equity securities of the Borrower shall be owned by any Person or by any "group" (as defined in the Securities Exchange Act of 1934, as amended, and the regulations thereunder), other than by a Person who is a stockholder of the Borrower at the date hereof or a group consisting solely of such Persons. 5.2. Rights and Remedies on Default. Upon the occurrence of any Event of Default, in addition to any other rights and remedies available to the Bank hereunder or otherwise, the Bank may exercise any one or more of the following rights and remedies (all of which shall be cumulative): (a) Declare the entire unpaid principal amount of the Revolving Note then outstanding, all interest accrued and unpaid thereon and all other amounts payable under this letter agreement, and all other Indebtedness of the Borrower to the Bank, to be forthwith due and payable, whereupon the same shall become forthwith due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower. -19- 20 (b) Terminate the revolving financing arrangements provided for by this letter agreement. (c) Exercise all rights and remedies hereunder, under the Revolving Note, under the Security Agreement, under the Intellectual Property Assignments and under each and any other agreement with the Bank; and exercise all other rights and remedies which the Bank may have under applicable law. 5.3. Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default, the Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, all of which are hereby expressly waived, to set off and to appropriate and apply any and all deposits and any other Indebtedness at any time held or owing by the Bank or any affiliate thereof to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to the Bank under this letter agreement or otherwise, irrespective of whether or not the Bank shall have made any demand hereunder and although said obligations, liabilities or claims, or any of them, may then be contingent or unmatured and without regard for the availability or adequacy of other collateral. As further security for the obligations, the Borrower also grants to the Bank a security interest with respect to all its deposits and all securities or other property in the possession of the Bank or any affiliate of the Bank from time to time, and, upon the occurrence of any Event of Default, the Bank may exercise all rights and remedies of a secured party under the Uniform Commercial Code. 5.4. Letters of Credit. Without limitation of any other right or remedy of the Bank, (i) if an Event of Default shall have occurred and the Bank shall have accelerated the Revolving Loans or (ii) if this letter agreement and/or the revolving financing arrangements described herein shall have expired or shall have been earlier terminated by either the Bank or the Borrower for any reason, the Borrower will forthwith deposit with, the Bank in cash a sum equal to the total of all then undrawn amounts of all outstanding letters of credit issued by the Bank for the account of the Borrower. VI. MISCELLANEOUS 6.1. Costs and Expenses. The Borrower agrees to pay on demand all reasonable costs and expenses (including, without limitation, reasonable legal fees) of the Bank in connection with the preparation, execution and delivery of this letter agreement, the Security Agreement, the Revolving Note and all other instruments and documents to be delivered in connection with Any Revolving Loan or any letter of credit issued hereunder and any amendments or modifications of any of the foregoing, as well as the reasonable costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) incurred by the Bank in connection with preserving, enforcing or exercising, -20- 21 upon default, any rights or remedies under this letter agreement, the Security Agreement, the Revolving Note and all other instruments and documents delivered or to be delivered hereunder or in connection herewith, all whether or not legal action is instituted. In addition, the Borrower shall be obligated to pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this letter agreement, the Security Agreement, the Revolving Note and all other instruments and documents to be delivered in connection with any Obligation. Any fees, expenses or other charges which the Bank is entitled to receive from the Borrower under this Section shall bear interest from the date of any demand therefor until the date when paid at a rate per annum equal to the sum of (i) two (2%) percent plus (ii) the per annum rate otherwise payable under the Revolving Note (but in no event in excess of the maximum rate permitted by then applicable law). 6.2. Capital Adequacy. If the Bank shall have determined that the adoption or phase-in after the date hereof of any applicable law, rule or regulation regarding capital requirements for banks or bank holding companies, or any change therein after the date hereof, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive of such entity regarding capital adequacy (whether or not having the force of law) has or would have the effect of reducing the return on the Bank's capital with respect to the Revolving Loans, the within-described revolving loan facility and/or letters of credit issued for the account of the Borrower to a level below that which the Bank could have achieved (taking into consideration the Bank's policies with respect to capital adequacy immediately before such adoption, phase-in, change or compliance and assuming that the Bank's capital was then fully utilized) but for such adoption, phase-in, change or compliance by any amount deemed by the Bank to be material: (i) the Bank shall promptly after its determination of such occurrence give notice thereof to the Borrower; and (ii) the Borrower shall pay forthwith to the Bank as an additional fee such amount as the Bank certifies to be the amount that will compensate it for such reduction with respect to the Revolving Loans, the within-described revolving loan facility and/or such letters of credit. A certificate of the Bank claiming compensation under this Section shall be conclusive in the absence of manifest error. Such certificate shall set forth the nature of the occurrence giving rise to such compensation, the additional amount or amounts to be paid to it hereunder and the method by which such amounts were determined. In determining such amounts, the Bank may use any reasonable averaging and attribution methods. No failure on the part of the Bank to demand compensation on any one occasion shall constitute a waiver of its right to demand such compensation on any other occasion and no failure on the part of the Bank to deliver any certificate in a timely manner shall in -21- 22 any way reduce any obligation of the Borrower to the Bank under this Section. 6.3. Facility Fees. With respect to the Revolving Loans, the Borrower is paying to the Bank at the date of this letter agreement, a non-refundable facility fee of $10,000. The fee described in this Section is in addition to any balances and fees required by the Bank or any of its affiliates in connection with any other services made available to the Borrower. 6.4. Other Agreements. The provisions of this letter agreement are not in derogation or limitation of any obligations, liabilities or duties of the Borrower under any of the other Loan Documents or any other agreement with or for the benefit of the Bank. No inconsistency in default provisions between this letter agreement and any of the other Loan Documents or any such other agreement will be deemed to create any additional grace period or otherwise derogate from the express terms of each such default provision. No covenant, agreement or obligation of the Borrower contained herein, nor any right or remedy of the Bank contained herein, shall in any respect be limited by or be deemed in limitation of any inconsistent or additional provisions contained in any of the other Loan Documents or any such other agreement. 6.5. Governing Law. This letter agreement and the Revolving Note shall be governed by, and construed and enforced in accordance with, the laws of The Commonwealth of Massachusetts. 6.6. Addresses for Notices, etc. All notices, requests, demands and other communications provided for hereunder shall be in writing and shall be mailed or delivered to the applicable party at the address indicated below: If to the Borrower: Voicetek Corporation 19 Alpha Road Chelmsford, MA 01824 Attention: Sheldon Dinkes, President If to the Bank: Fleet Bank of Massachusetts, N.A. High Technology Group 75 State Street Boston, MA 02109 Attention: Catherine M. Bruton, Vice President or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests, demands and other communications shall be deemed delivered on the earlier of (i) the date received or (ii) the date of delivery, refusal or non-delivery indicated on the return receipt if deposited in the United States mails, -22- 23 sent postage prepaid, certified or registered mail, return receipt requested, addressed as aforesaid. 6.7. Binding Effect; Assignment; Termination. This letter agreement shall be binding upon the Borrower, its successors and assigns and shall inure to the benefit of the Borrower and the Bank and their respective permitted successors and assigns. The Borrower may not assign this letter agreement or any rights hereunder without the express written consent of the Bank. The Bank may, in accordance with applicable law, from time to time assign or grant participations in this letter agreement, the Revolving Loans, the Revolving Note and/or the letters of credit issued hereunder. The Borrower may terminate this letter agreement and the financing arrangements made herein by giving written notice of such termination to the Bank; provided that no such termination will release or waive any of the Bank's rights or remedies or any of the Borrower's obligations under this letter agreement or any of the other Loan Documents unless and until the Borrower has paid in full the Revolving Loans and all interest thereon and all fees and charges payable in connection therewith and all letters of credit issued hereunder have been terminated. 6.8. Consent to Jurisdiction. The Borrower irrevocably submits to the non-exclusive jurisdiction of any Massachusetts court or any federal court sitting within The Commonwealth of Massachusetts over any suit, action or proceeding arising out of or relating to this letter agreement and/or the Revolving Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. The Borrower agrees that final judgment in any such suit, action or proceeding brought in such a court shall be enforced in any court of proper jurisdiction by a suit upon such judgment, provided that service of process in such action, suit or proceeding shall have been effected upon the Borrower in one of the manners specified in the following paragraph of this Section 6.8 or as otherwise permitted by law. The Borrower hereby consents to process being served in any suit, action or proceeding of the nature referred to in the preceding paragraph of this Section 6.8 either (i) by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to it at its address set forth in Section 6.6 or (ii) by serving a copy thereof upon it at its address set forth in Section 6.6. 6.9. Severability. In the event that any provision of this letter agreement or the application thereof to any Person, property or circumstances shall be held to any extent to be invalid or unenforceable, the remainder of this letter agreement, -23- 24 and the application of such provision to Persons, properties or circumstances other than those as to which it has been held invalid and unenforceable, shall not be affected thereby, and each provision of this letter agreement shall be valid and enforced to the fullest extent permitted by law. VII. DEFINED TERMS 7.1. Definitions. In addition to terms defined elsewhere in this letter agreement, as used in this letter agreement, the following terms have the following respective meanings: "Aggregate Bank Liabilities" - At any time, the sum of (i) the principal amount of all Revolving Loans then outstanding, plus (ii) all then undrawn amounts of letters of credit issued by the Bank for the account of the Borrower, plus (iii) all amounts then drawn on any such letter of credit which at said date shall not have been reimbursed to the Bank by the Borrower. "Borrowing Base" - At any time, the sum of (1) the product of (x) the then applicable Receivables Advance Percentage times (y) the aggregate principal amount of the Qualified Receivables of the Borrower then outstanding, plus (2) 65% of the aggregate principal amount of the Other Acceptable Foreign Receivables then outstanding; provided that the amount contributed to Borrowing Base pursuant to this clause (2) shall never exceed 10% of the then total Borrowing Base. "Business Day" - Any day which is not a Saturday, nor a Sunday nor a public holiday under the laws of the United States of America or The Commonwealth of Massachusetts applicable to a national bank. "Capital Base" - At any time, the sum of (i) the consolidated Tangible Net Worth of the Borrower and Subsidiaries then existing plus (ii) the principal amount of Subordinated Debt of the Borrower then outstanding (nothing contained herein being deemed to authorize the incurrence of any additional Subordinated Debt). "Collateral" - All property now or hereafter owned by the Borrower or in which the Borrower now or hereafter has any interest which is described as "Collateral" in the Security Agreement or in Section 7.2(b) below. "ERISA" - The Employee Retirement Income Security Act of 1974, as amended. "Expiration Date" - August 1, 1995, unless extended by the Bank, which extension may be given or withheld by the Bank in its sole discretion. -24- 25 "Indebtedness" - All obligations of a Person, whether current or long-term, senior or subordinated, which in accordance with generally accepted accounting principles would be included as liabilities upon such Person's balance sheet at the date as of which Indebtedness is to be determined, and shall also include guaranties, endorsements (other than for collection in the ordinary course of business) or other arrangements whereby responsibility is assumed for the obligations of others, whether by agreement to purchase or otherwise acquire the obligations of others, including any agreement, contingent or otherwise, to furnish funds through the purchase of goods, supplies or services for the purpose of payment of the obligations of others. "Liabilities" - All Indebtedness of a Person which would be properly includable in liabilities as shown on a balance sheet of such Person prepared in accordance with generally accepted accounting principles. "Loan Documents" - Each of this letter agreement, the Revolving Note, the Security Agreement, the Intellectual Property Assignments, and each other instrument, document or agreement evidencing, securing, guaranteeing or relating in any way to any of the Revolving Loans or any of the letters of credit issued hereunder, all whether now existing or hereafter arising or entered into. "Maximum Revolving Amount" - At any date as of which same is to be determined, the amount by which (x) $1,000,000 exceeds (y) the sum of (i) all then undrawn amounts of letters of credit issued by the Bank for the account of the Borrower plus (ii) all amounts then drawn on any such letter of credit which at said date shall not have been reimbursed to the Bank by the Borrower. "Net Income" (or "Net Loss") - The book net income (or book net loss, as the case may be) of a Person for any period, after all taxes actually paid or accrued and all expenses and other charges determined in accordance with generally accepted accounting principles consistently applied. "Obligation" - As defined in the Security Agreement. "Other Acceptable Foreign Receivables" - Receivables owed to the Borrower by account debtors not located in the United States which do not constitute Qualified Receivables; provided that each such Other Acceptable Foreign Receivable meets all of the following criteria: (a) the relevant account debtor has been specifically approved for this purpose in writing by the Bank, which approval may be given, withheld or revoked by the Bank in its discretion; (b) such Receivable shall arise out of a bona fide sale in the ordinary course of the Borrower's business made to a customer of the Borrower which is not a Subsidiary of the -25- 26 Borrower or otherwise controlled by the Borrower; (c) such Receivable shall remain unpaid no more than 60 days after the date of invoice of the relevant sale; and (d) such Receivable satisfies all of the requirements to be a "Qualified Receivable" set forth in the last sentence of the definition of "Qualified Receivable" below (other than clause (ix) of such sentence). "PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto. "Person" - An individual, corporation, partnership, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Principal Office" - The principal place of business of the Bank, now located at 75 State Street, Boston, MA 02109. "Qualified Receivables" - Only those Receivables of the Borrower which arise out of bona fide sales made to customers of the Borrower (which customers are located in the United States and are not Subsidiaries of or otherwise controlled by the Borrower) in the ordinary course of the Borrower's business and which remain unpaid no more than 90 days past the respective dates of invoice of such sales, the payment of which is not in dispute. (Notwithstanding the foregoing, any Receivable owed by a customer of the Borrower which is not located in the United States will also be deemed to be a Qualified Receivable if both of the following conditions are satisfied: (i) such Receivable meets all of the requirements of this definition other than the location of such customer and (ii) payment of such Receivable is secured by a letter of credit or credit insurance with terms satisfactory to the Bank and issued by a bank or other credit enhancer satisfactory to the Bank.) Unless the Bank in its sole discretion otherwise determines with respect to any Receivable, a Receivable which would otherwise be a Qualified Receivable shall be deemed not to be a Qualified Receivable (i) if the Bank does not have a fully perfected first priority security interest in such Receivable; (ii) if such Receivable is not free and clear of all adverse interests in favor of any Person other than the Bank; (iii) if such Receivable is subject to any deduction, off-set, contra account, counterclaim or condition; (iv) if a field examination made by the Bank fails to confirm that such Receivable exists and satisfies all of the criteria set forth herein to be a Qualified Receivable; (v) if such Receivable is not invoiced within such period of time as is consistent with the Borrower's normal practices at the date hereof; (vi) if the customer or account debtor has disputed liability or made any claim with respect to the Receivable or the merchandise covered thereby or with respect to any other Receivable due from said customer to the Borrower; (vii) if the customer or account debtor has filed a petition -26- 27 for bankruptcy or any other application for relief under the Bankruptcy Code or has effected an assignment for the benefit of creditors, or if any petition or any other application for relief under the Bankruptcy Code has been filed against said customer or account debtor, or if the customer or account debtor has suspended business, become insolvent, ceased to pay its debts as they become due, or had or suffered a receiver or trustee to be appointed for any of its assets or affairs; (viii) if the customer or account debtor has failed to pay other Receivables so that an aggregate of 25% of the total Receivables owing to the Borrower by such customer or account debtor has been outstanding for more than 90 days past their respective due dates; (ix) if such Receivable is owed by the United States government or any agency or department thereof (unless assigned to the Bank under the Federal Assignment of Claims Act); or (x) if the Bank believes, in its judgment, that collection of such Receivable is insecure or that it may not be paid by reason of financial inability to pay or otherwise, or that such Receivable is not for any reason suitable for use as a basis for borrowing hereunder. "Receivables" - All of the Borrower's present and future accounts, accounts receivable and notes, drafts, acceptances and other instruments representing or evidencing a right to payment for goods sold or for services rendered. "Receivables Advance Percentage" - 65%; provided that if at any time during its fiscal year ending December 31, 1994 the Borrower achieves year-to-date cumulative Net Income of more than $500,000 (as evidenced to the Bank by monthly financial statements delivered pursuant to Section 3.6 above), the Receivables Advance Percentage will automatically be deemed increased to 75%, effective upon the receipt by the Bank of the financial statements evidencing such year-to-date cumulative Net Income. "Senior Liabilities" - All Liabilities of the Borrower and/or any Subsidiary of the Borrower which do not constitute Subordinated Debt. "Subordinated Debt" - Any Indebtedness of the Borrower which is expressly subordinated, pursuant to a subordination agreement in form and substance satisfactory to the Bank, to all Indebtedness now or hereafter owed by the Borrower to the Bank. "Subsidiary" - Any corporation or other entity of which the Borrower and/or any of its Subsidiaries, directly or indirectly, owns, or has the right to control or direct the voting of, fifty (.50%) percent or more of the outstanding capital stock or other ownership interest having general voting power (under ordinary circumstances). -27- 28 "Tangible Net Worth" - An amount equal to the total assets of any Person (excluding (i) the total intangible assets of such Person and (ii) any assets representing amounts due from any officer or employee of such Person or from any Subsidiary of such Person) minus the total liabilities of such Person. Total intangible assets shall be deemed to include, but shall not be limited to, the excess of cost over book value of acquired businesses accounted for by the purchase method, formulae, trademarks, trade names, patents, patent rights and deferred expenses (including, but not limited to, unamortized debt discount and expense, organizational expense, capitalized software costs and experimental and development expenses). Any defined term used in the plural preceded by the definite article shall be taken to encompass all members of the relevant class. Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class. 7.2. Security Agreement. (a) The Borrower acknowledges and agrees that the "Obligations" described in and secured by the Security Agreement, include, without limitation, all of the obligations of the Borrower under the Revolving Note and/or this letter agreement and/or with respect to any letter of credit which may be issued by the Bank for the account of the Borrower. (b) The Security Agreement is hereby modified to provide as follows: (i) That the "Collateral" subject thereto includes, without limitation and in addition to the collateral described therein, all of the Borrower's files, books and records (including, without limitation, all electronically recorded data) all whether owned or existing or hereafter acquired, created or arising. The Borrower hereby grants to the Bank a security interest in all such Collateral in order to secure the full and prompt payment and performance of all of the obligations. (ii) That, upon the occurrence of any Event of Default (as defined in Section 5.1 of this letter agreement), the Bank may, at any time, notify account debtors that the Collateral has been assigned to the Bank and that payments by such account debtors shall be made directly to the Bank. At any time after the occurrence of an Event of Default, the Bank may collect the Borrower's Receivables, or any of same, directly from account debtors and may charge the collection costs and expenses to the Borrower. -28- 29 This letter agreement is executed, as an instrument under seal, as of the day and year first above written. Very truly yours, VOICETEK CORPORATION By /s/ Sheldon Dinkes ------------------- Its President Accepted and agreed: FLEET BANK OF MASSACHUSETTS, N.A. By /s/ Catherine Bruton -------------------------- Its VP -29- 30 DISCLOSURE SCHEDULE Item 2.1(a) Jurisdictions in which Borrower is qualified Item 2.1(b) Stock ownership Item 2.1(e) Litigation Item 2.1(f) Existing contractual violations, etc. Item 2.1(j) Location of Collateral; record owners of Premises Item 2.1(k) Intellectual Property Item 4.1 Existing Indebtedness Item 4.2 Existing Liens Item 4.3 Existing Guaranties 31 Disclosure Schedule Item 2. l(a): Jurisdictions in which Borrower is qualified California New York Pennsylvania Item 2. 1 (b): Stock Ownership (see list attached as Exhibit 2.1(b)) Item 2. 1 (e): Litigation Pentagram Software Corporation commenced an action against the Company in Norfolk Superior Court, Massachusetts, Civil Action No. 92-00873 on April 16, 1992. The claim arose out of a Product Development Agreement effective January 29, 1990 between the Company and Pentagram under which Pentagram was to act as a subcontractor to the Company for certain work to be provided by the Company under the GTE Mobile Communications contract discussed in the next paragraph. The action sought damages for breach of contract and quantum meruit recovery for additional services allegedly provided in the total amount of $230,000, as well as multiple damages and attorneys fees under M.G.L. c. 93A. In March of 1994, the parties agreed to dismiss the action and executed a settlement agreement, pursuant to which the Company agreed to pay a total of $115,000.00 in settlement of the matter, payable in installments as follows: (i) $40,000 was paid upon the execution of the Agreement for Judgment; (ii) $25,000.00 was paid on or before April 15, 1994; and (iii) one payment of $25,000.00 was paid on or before July 15, and (iv) one additional payment will be made on or before October 15, 1994. From and after March 7, 1994, interest will accrue on the outstanding balance at a rate of 4% per annum. Item 2. 1 (j): Location of Collateral 19 Alpha Road Chelmsford, Massachusetts 01824 Record Owner: Teachers Realty Corporation 32 Item 2. 1(k): Intellectual Property (see list attached as Exhibit 2. 1 (k)) Item 4. 1: Existing Indebtedness None other than Subordinated Debt. Item 4.2: Existing Liens None. Item 4.3: Existing Guaranties None. 33 RECAPITALIZATION PROPOSAL
Pre Note Share Adjustment Conversion Common STK Common Stock Assuming Outstanding on as if Ownership % Equivalents Reallocation of Common Stk Notes, Interest converted After Based or New Existing Comm Equival. Ownership % & Stk Divdends basis Conversion Ownership % Stk Equival. ----------- ------------ --------------- ------------ ----------- ------------- ---------------- Coming 150,058 1.78% $ 96,040.53 444,977 2.006% 169,541 19,483 EG & G 4,244,280 50.23% $2,189,113.79 10,966,570 49.447% 4,178,381 -65,899 Kearsarge 748,195 8.85% $ 375,726.54 1,901,969 8.576% 724,670 -23,525 LPP Partners 131,028 1.55% 131,028 0.591% 49,923 -81,105 Geneva Partners $ 341,111.04 1,047,477 4.723% 399,100 399,100 MTDC 255,209 3.02% $ 263,742.75 1,065,105 4.802% 405,816 150,607 Nynex 257,143 3.04% 257,143 1.159% 97,974 -159,169 Pioneer 599,409 7.09% $ 178,678,28 1,148,091 5.177% 437,435 -161,974 Providence Ptrs 113,027 1.34% 113,027 0.510% 43,064 -69,963 Sherman Wolf 482,042 5.70% $ 241,217.81 1,222,769 5.513% 465,888 -16,154 Wood Investment 23,207 0.27% $ 25,000.00 99,977 0.451% 38,092 14,885 Common Stk 10,155 0.12% 10,155 0.046% 3,869 -6,286 Employee Pool 1,436,552 17.00% 3,770,000 16.999% 1,436,552 0 Total 8,450,205 99.99% $3,710,630.74 22,178,288 100.000% 8,450,305
34 Exhibit 2.1 (k) EXHIBIT A PATENTS
Patent Description Registration No. Issue Date ------------------ ---------------- ---------- Method of and Apparatus 4,573,140 3-30-83 for Voice Communication Storage and Forwarding with Simultaneous Access to Multiple Users Voice Switched Gain 4,980,908 5-30-89 Control for Voice Communication Equipment Connected to Telephone Lines Apparatus for Controlling 4,663,777 12-17-84 Digital Voice Recording and Playback Over Telephone Lines and Adapted for Use with Standard Host Computers
TRADEMARKS
Marks with Federal Registration Marks Registration No. Date Use VTK No. 1,402,968 12-9-85 10-1-84 VOICETEK No. 1,428,182 12-6-85 11-1-81
Marks with Pending Applications Marks Control/Serial No. Use None EX-10.10 14 THIRD LOAN MODIFICATION AGREEMENT 1 EXHIBIT 10.10 THIRD LOAN MODIFICATION AGREEMENT This Third Loan Modification Agreement ("this Agreement") is made as of September 26, 1996 between Voicetek Corporation, a Massachusetts corporation (the "Borrower") and Fleet National Bank (successor by merger to Fleet Bank of Massachusetts, N.A.) (the "Bank"). For good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the Borrower and the Bank act and agree as follows: I. Reference is made to: (i) that certain letter agreement dated September 21, 1994 between the Borrower and Fleet Bank of Massachusetts, N.A., as amended by Loan Extension Agreement dated as of September 1, 1995 and by Second Loan Modification Agreement dated as of September 20, 1995 and as affected by certain allonges heretofore executed by the Borrower (as so amended and affected, the "Letter Agreement"), the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (ii) that certain $3,000,000 face principal amount promissory note dated September 20, 1995 made by the Borrower and payable to the order of Fleet Bank of Massachusetts, N.A., as affected by certain allonges heretofore executed by the Borrower (as so affected, the "1995 Revolving Note"); (iii) that certain Inventory, Accounts Receivable and Intangibles Security Agreement dated September 21, 1994 (the "IAR Security Agreement") given by the Borrower to Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (iv) that certain Supplementary Security Agreement - Security Interest in Goods and Chattels dated September 21, 1994 (the "Supplementary Security Agreement") given by the Borrower to Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (v) the Subordination Agreement dated September 21, 1994 (the "Subordination Agreement") given to Fleet Bank of Massachusetts, N.A. by Massachusetts Technology Development Corp. ("MTDC"), the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (vi) that certain Assignment of Trademarks as Security (the "Trademark Assignment") from the Borrower to Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder; (vii) that certain Assignment of Patents as Security (the "Patent Assignment") from the Borrower to Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder, (viii) that certain $5,000,000 face principal amount promissory note of even date herewith (the "1996 Revolving Note") made by the Borrower and payable to the order of the Bank, and (ix) that certain $1,000,000 face principal amount promissory note of even date herewith (the "Term Note") made by the Borrower and payable to the order of the Bank. The aforesaid Second Loan Modification Agreement dated as of September 20, 1995 is hereinafter referred to as the "1995 Modification". The Letter Agreement, the IAR Security Agreement, the Supplementary Security Agreement, the Subordination Agreement, the Trademark Assignment, the Patent Assignment, the 1996 Revolving Note and the Term Note are hereinafter collectively referred to as the "Financing Documents". 2. The Letter Agreement is hereby amended, effective as of the date hereof; a. By providing that all references therein to the "Bank" will be deemed to refer to Fleet National Bank. 2 b. By deleting in its entirety clause (i) of Section 1.1 of the Letter Agreement and by substituting in its stead the following: "(i) that certain $5,000,000 face principal amount promissory note (the 'Revolving Note') dated September 26, 1996 made by the Borrower and payable to the order of the Bank," As a result, all references in the Letter Agreement to a "Revolving Note" will be deemed to refer to the 1996 Revolving Note. c. By deleting the period at the end of Section 1.1 of the Letter Agreement and by substituting in its stead the following: ", and (iv) that certain $1,000,000 face principal amount promissory note (the 'Term Note') dated September 26, 1996 made by the Borrower pursuant to Section 1.4 below and payable to the order of the Bank." d. By deleting from the first sentence of Section 1.2 of the Letter Agreement the words "Aggregate Bank Liabilities" and by substituting in their stead the following: "Aggregate Revolving Bank Liabilities" e. By deleting in their entireties the last four sentences of Section 1.2 of the Letter Agreement. f. By deleting from the second sentence of Section 1.3 of the Letter Agreement, in both places where same appear, the words "Aggregate Bank Liabilities" and by substituting in their stead (in each such place) the following: "Aggregate Revolving Bank Liabilities" g. By renumbering Section 1.4 of the Letter Agreement. at ("Advances and Payments") so that it will be known as "Section 1.6". h. By renumbering Section 1.5 of the Letter Agreement ("Letters of Credit") so that it will be known as "Section 1.7". i. By renumbering Section 1.6 of the Letter Agreement ("Conditions to Advance") so that it will be known as "Section 1.8". j. By inserting into the Letter Agreement, immediately after Section 1.3 thereof, the following: " 1.4. Term Loans; Term Note. In addition to the foregoing, the Bank may make one or more loans (the 'Term Loans') to the Borrower, in an - 2 - 3 aggregate principal amount up to $1,000,000, in order to finance Qualifying Equipment. A Term Loan shall be made, no more than once per calendar quarter (or more frequently for any Term Loan in excess of $25,000), in such amount as may be requested by the Borrower; provided that (i) no Term Loan will be made after September 26, 1997; (ii) the aggregate original principal amounts of all Term Loans will not exceed $1,000,000; (iii) no Term Loan will be in an amount in excess of 80% (70% for First Half Qualifying Equipment) of the invoiced actual costs of the tangible property constituting the items of Qualifying Equipment with respect to which such Term Loan is made (excluding taxes, duties, installation charges, software, shipping and other 'soft' costs); and (iv) the Qualifying Equipment with respect to which each Term Loan is made will be limited to those items of Qualifying Equipment acquired by the Borrower after June 30, 1996 (except for First Half Qualifying Equipment, which may have been acquired at any time during the period January 1, 1996 through and including June 30, 1996) and which were not previously financed by any other Term Loan. Prior to the making of each Term Loan, and as a precondition thereto, the Borrower will provide the Bank with: (i) invoices supporting the costs and purchase dates of the relevant items of Qualifying Equipment (including, without limitation, First Half Qualifying Equipment); (ii) such evidence as the Bank may require showing that such Qualifying Equipment (including, without limitation First Half Qualifying Equipment) has been installed at the Borrower's Chelmsford, MA, Premises, has become fully operational, has been paid for by the Borrower and is owned by the Borrower free of all liens and interests of any other Person (other than the security interest of the Bank pursuant to the Security Agreement); (iii) evidence satisfactory to the Bank that the Qualifying Equipment (including, without limitation, First Half Qualifying Equipment) is fully insured against casualty loss, with insurance naming the Bank as secured party and first loss payee, (iv) the duly executed Term Note and such clerk's certificates and opinions of counsel as the Bank may require in connection therewith, and (v) all such Uniform Commercial Code financing statements and other documentation as may be necessary or desirable in order to give the Bank a fully perfected first priority security interest in all of the Qualifying Equipment (including, without limitation, First Half Qualifying Equipment). The Term Loans will be evidenced by the Term Note, substantially in the form of Item 1.4 attached to this letter agreement. Interest on each Term Loan shall be payable at the times and at the rate provided for in the Term Note. Overdue principal of any Term Loan and, to the extent permitted by law, overdue interest shall bear interest at a fluctuating rate per annum which at all times shall be equal to the sum of (1) two percent (2%) per annum plus (ii) the per annum rate otherwise payable under the Term Note (but in no event in excess of the maximum rate from time to time permitted by then applicable law), compounded monthly and payable on demand. The Borrower hereby irrevocably authorizes the Bank to make or cause to be made, on a schedule attached to -3- 4 the Term Note or on the books of the Bank, at or following the time of making each Term Loan and of receiving any payment of principal, an appropriate notation reflecting such transaction and the then aggregate unpaid principal balance of the Term Loans. The amount so noted shall constitute presumptive evidence as to the amount owed by the Borrower with respect to principal of the Term Loans. Failure of the Bank to make any such notation shall not, however, affect any obligation of the Borrower or any right of the Bank hereunder or under the Term Note. 1.5 Principal Repayment of Term Loans. The Term Loans made at any time through and including September 30, 1996 are hereinafter referred to as the 'Tranche A Term Loans'. Principal of the Tranche A Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of the Tranche A Term Loans outstanding at the close of business on September 30, 1996), such installments to commence October 1, 1996 and to continue thereafter through and including September 1, 1999. The Term Loans made at any time during the period beginning on October 1, 1996 and continuing through and including December 31, 1996 are hereinafter referred to as the 'Tranche B Term Loans'. Principal of the Tranche B Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of the Tranche B Term Loans outstanding at the close of business on December 31, 1996), such installments to commence January 1, 1997 and to continue thereafter through and including December 1, 1999. The Term Loans made at any time during the period beginning on January 1, 1997 and continuing through and including March 31, 1997 are hereinafter referred to as the 'Tranche C Term Loans'. Principal of the Tranche C Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of the Tranche C Term Loans outstanding at the close of business on March 31, 1997), such installments to commence April 1, 1997 and to continue thereafter through and including March 1, 2000. The Term Loans made at any time during the period beginning on April 1, 1997 and continuing through and including June 30, 1997 are hereinafter referred to as the 'Tranche D Term Loans'. Principal of the Tranche D Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of the Tranche D Term Loans outstanding at the close of business on June 30, 1997), such installments to commence July 1, 1997 and to continue thereafter through and including June 1, 2000. The Term Loans made at any time on or after July 1, 1997 and are hereinafter referred to as the 'Tranche E Term Loans'. Principal of the Tranche E Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of the Tranche E Term -4- 5 Loans outstanding at the close of business on September 30, 1997), such installments to commence October 1, 1997 and to continue thereafter through and including September 1, 2000. The Borrower may prepay, at any time or from time to time, without premium or penalty, the whole or any portion of the Term Loans; provided that each such principal prepayment shall be accompanied by payment of all interest under the Term Note accrued but unpaid to the date of payment. Any partial prepayment of principal of the Term Loans will be applied to installments of principal of the Term Loans thereafter coming due, in inverse order of normal maturity. Amounts paid or prepaid on the Term Loans will not be available for reborrowing." k. By deleting from the first sentence of Section 1.6 of the Letter Agreement (formerly known as "Section 1.4") the word "Revolving". l. By adding to the first paragraph of Section 1.6 of the Letter Agreement (formerly known as "Section 1.4"), at the end of such paragraph, the following: "The proceeds of each Term Loan will be used by the Borrower solely to pay or reimburse costs of Qualifying Equipment (including, without limitation, First Half Qualifying Equipment)." m. By deleting from Section 1.6 of the Letter Agreement (formerly known as "Section 1.4"), in each of the four places in said Section where same appear, the words "the Revolving Note" and by substituting in their stead, in each such place, the following: "any Note" n. By adding to Section 1.6 of the Letter Agreement (formerly known as "Section "1.4"), at the end of such Section, the following: "All payments of interest, principal and any other sum payable hereunder and/or under any Note and/or with respect to any letter of credit shall be made to the Bank, in immediately available funds, at its offices at 75 State Street, Boston, MA 02109 or to such other address as the Bank may from time to time direct. All payments received by the Bank after 2:00 p.m. on any day shall be deemed received as of the next succeeding Business Day. All monies received by the Bank shall be applied first to fees, charges, costs and expenses payable to the Bank under this letter agreement, any Note and/or any of the other Loan Documents and/or with respect to any letter of credit, next to interest then accrued on account of any Loans or letter of credit reimbursement obligations and only thereafter to principal of the Loans and letter of credit reimbursement obligations, being applied against the Loans and/or such obligations in such order as the Borrower may designate (and, failing such designation, being applied first against the letter of credit reimbursement obligations, next against the Revolving Loans and -5- 6 thereafter against installments of the Term Loans in inverse order of normal maturity). All interest and fees payable hereunder and/or under any Note shall be calculated on the basis of a 360-day year for the actual number of days elapsed." o. By deleting from the first sentence of Section 1.7 of the Letter Agreement (formerly known as "Section 1.5") the amount "$3,000,000" (such amount having been inserted by the 1995 Modification) and by substituting in its stead the following: "$5,000,000" p. By deleting from the second grammatical paragraph of Section 1.8 of the Letter Agreement (formerly known as "Section 1.6") the words "Revolving Loan", in each of the five places in said paragraph where such words appear, and by substituting in their stead, in each such place, the following: "Loan" q. By deleting from the first sentence of the last paragraph of Section 1.8 of the Letter Agreement (formerly known as "Section 1.6"), in both places where same appear, the words "Revolving Loan" and by substituting in their stead, in each such place, the following: "Loan" r. By deleting from the first sentence of the last paragraph of Section 1.8 of the Letter Agreement (formerly known as "Section 1.6"), the number "Section 1.6" and by substituting in its stead the following: "Section 1.8" s. By inserting into the introduction to Section 2.1 of the Letter Agreement, immediately after the words "Revolving Loans" the following: "and Term Loans" t. By inserting into the introduction to Article III of the Letter Agreement, immediately after the words "any Revolving Loan", the following: "or any Term Loan" u. By adding to clause (ii) of Section 3.6 of the Letter Agreement, at the end of such clause, the following: "Notwithstanding the foregoing, from and after the date on which the Borrower consummates an initial public offering generating not less than $15,000,000 in net cash proceeds to the Borrower, in lieu -6- 7 of the above-described monthly financial statements the Borrower shall provide quarterly financial statements. Such quarterly financial statements shall be delivered to the Bank within 45 days after the end of each fiscal quarter of the Borrower and shall include consolidated and consolidating balance sheets of the Borrower and its Subsidiaries and related consolidated and consolidating statements of income and stockholders' equity and cash flow, unaudited but prepared in accordance with generally accepted accounting principles consistently applied (except that such quarterly statements need not contain footnotes) and certified as accurate (subject to normal year-end audit adjustments, which shall not be material) by the chief financial officer of the Borrower, such balance sheets to be as at the end of such fiscal quarter and such statements of income and stockholders' equity and cash flow to be for such fiscal quarter and for the year to date, in each case together with a comparison to budget." v. By deleting from clause (iii) of Section 3.6 of the Letter Agreement the words "annual and monthly" and by substituting in their stead the following: "annual, quarterly or monthly" w. By deleting in its entirety clause (iv) of Section 3.6 of the Letter Agreement and by substituting in its stead the following: "(iv) Monthly, within 10 days after the end of each month (and more frequently if required by the Bank), (A) an aging report in form satisfactory to the Bank covering all Receivables of the Borrower outstanding as at the end of such month (or as at such other date as is requested by the Bank), and (B) a certificate of the chief financial officer of the Borrower setting forth the Borrowing Base as at the end of such month (or as of such other date as is requested by the Bank), all in form reasonably satisfactory to the Bank. Notwithstanding the foregoing, the Borrower need not provide such an aging report and Borrowing Base certificate as at the end of any month if no Revolving Loans or letters of credit are outstanding at such month-end; provided that if the Borrower omits delivery of such aging report and Borrowing Base certificate for any month-end in reliance on the preceding provisions of this sentence, then the Borrower will provide a current aging report and Borrowing Base certificate in connection with any subsequent Revolving Loan or letter of credit issuance or at any time at the Bank's request." x. By deleting in their entireties Section 3.7 through 3.9 of the Letter Agreement and by substituting in their stead the following: -7- 8 "3.7 Debt to Worth. The Borrower will maintain as at the end of each fiscal quarter (commencing with September 30, 1996) on a consolidated basis a Leverage Ratio of not more than the following: not more than 1.35 to 1 as at September 30, 1996; and not more than 1.25 to 1 as at December 31, 1996 and as at the end of each fiscal quarter thereafter. As used herein, 'Leverage Ratio' means, as at any date when same is to be determined, the ratio of (x) all outstanding Liabilities of the Borrower and/or its Subsidiaries to (y) the Borrower's consolidated Capital Base. 3.8 Capital Base. The Borrower will maintain as at the end of each fiscal quarter (commencing with September 30, 1996) a consolidated Capital Base of not less than the then-effective Capital Base Requirement. The Capital Base Requirement is deemed to have been $3,000,000 as at June 30, 1996; and as at the last day of each fiscal quarter thereafter (beginning with September 30, 1996) the Capital Base Requirement will be deemed to become an amount equal to the sum of: (i) that Capital Base Requirement which had been in effect on the last day of the immediately preceding fiscal quarter, plus (ii) 75% of the net proceeds of any equity securities sold by the Borrower during the fiscal quarter then ended and 75% of the proceeds of any Subordinated Debt issued by the Borrower and/or its Subsidiaries during such fiscal quarter then ended (nothing contained herein being deemed to approve the issuance of any additional Subordinated Debt), plus (iii) 75% of the consolidated Net Income of the Borrower and Subsidiaries during said fiscal quarter then ended (but without giving effect to any Net Income which is less than zero for any fiscal quarter). 3.9 Profitability. The Borrower will achieve quarterly consolidated Net Income of at least the following: at least $200,000 for its fiscal quarter ending September 30, 1996, at least $500,000 for its fiscal quarter ending December 31, 1996, and at least $150,000 for its fiscal quarter ending March 31, 1997 and for each subsequent fiscal quarter. Without limitation of the foregoing, the Borrower will achieve annual consolidated Net Income of at least $500,000 for its fiscal year ending December 31, 1996 and for each fiscal year thereafter." y. By inserting into the introduction to Article IV of the Letter Agreement, immediately after the words "any Revolving Loan", the following: "or any Term Loan" z. By deleting from clause (i) of Section 4.1 of the Letter Agreement the words "the Revolving Note" and by substituting in their stead the following: -8- 9 "the Notes" aa. By deleting from Section 4.12 of the Letter Agreement the words "Revolving Loan" and by substituting in their stead the following: "Loan" bb. By inserting into clause (a) of Section 5.1 of the Letter Agreement, immediately after the words "Revolving Note", the following: "or the Term Note" cc. By deleting from clause (b) of Section 5.1 of the Letter Agreement the word "Revolving". dd. By inserting into clause (a) of Section 5.2 of the Letter Agreement, immediately after the words "Revolving Note", the following: "and the Term Note" ee. By inserting into clause (b) of Section 5.2 of the Letter Agreement, immediately after the words "revolving financing arrangements", the following: "and term loan facility" ff. By inserting into clause (c) of Section 5.2 of the Letter Agreement, immediately after the words "Revolving Note", the following: ", under the Term Note" gg. By inserting into the first sentence of Section 6.1 of the Letter Agreement, immediately after the words "the Revolving Note", in both places. where same appear, the following: ", the Term Note" hh. By deleting from the first sentence of Section 6.1 of the Letter Agreement the words "Revolving Loan" and by substituting in their stead the following: "Loan" ii. By inserting into the second sentence of Section 6.1 of the Letter Agreement, immediately after the words "the Revolving Note", the following: "the Term Note" -9- 10 jj. By deleting from the first paragraph of Section 6.2 of the Letter Agreement, in both places where same appear, the words "the within-described revolving loan facility" and by substituting in their stead the following: "any Term Loans, the within-described revolving loan facility and/or the within-described term loan facility" kk. By deleting in its entirety Section 6.3 of the Letter Agreement and by substituting in its stead the following: "6.3. Facility Fees. With respect to the within arrangements for Revolving Loans, the Borrower will pay to the Bank, on September 26, 1996 and thereafter on the first day of each calendar quarter (commencing on October 1, 1996) as long as the within-described revolving loan arrangements are in effect a non-refundable quarterly facility fee payable in advance in the amount of $9,375 per quarter (appropriately pro-rated for any partial calendar quarter). In addition, if the within-described revolving financing arrangements are terminated by the Borrower for any reason or by the Bank as the result of the Borrower's default, the Borrower shall forthwith upon such termination pay to the Bank a sum equal to all of the fees which would have become due pursuant to the immediately preceding sentence from the date of such termination through the Expiration Date. Fees described in this Section are in addition to any balances and fees required by the Bank or any of its affiliates in connection with any other services now or hereafter made available to the Borrower." ll. By deleting from Section 6.6 of the Letter Agreement the words "Fleet Bank of Massachusetts, N.A." and by substituting in their stead the following: "Fleet National Bank" mm. By inserting into the fourth sentence of Section 6.7 of the Letter Agreement, immediately after the words "termination to the Bank", the following: "together with the payment required by the second sentence of Section 6.3 above" nn. By deleting from the first sentence of Section 6.8 of the Letter Agreement the words "the Revolving Note" and by substituting in their stead the following: "any of the Notes" -10- 11 oo. By modifying the defined term "Aggregate Bank Liabilities" appearing in Section 7.1 of the Letter Agreement so that it will read "Aggregate Revolving Bank Liabilities". pp. By deleting from the definition of "Expiration Date" appearing in Section 7.1 of the Letter Agreement the date "August 1, 1996" (such date having been inserted by the 1995 Modification and having been extended through October 1, 1996 by the aforesaid allonges) and by substituting in its stead the following: "September 1, 1997" As a result, from and after the date hereof, for the purposes of the Letter Agreement and the other Financing Documents, the "Expiration Date" will be deemed to be September 1, 1997. qq. By inserting into Section 7.1 of the Letter Agreement, immediately after the definition of "Expiration Date", the following: "'First Half Qualifying Equipment' - Items of computer-related equipment shown on an Equipment List approved in writing for this purpose by the Bank, which items meet all of the criteria set forth below in the first sentence of the definition of 'Qualifying Equipment' except that such items were acquired on or after January 1, 1996 and prior to July 1, 1996." rr. By inserting into Section 7.1 of the Letter Agreement, immediately after the definition of "Liabilities", the following: "'Loan' - Any Revolving Loan or any Term Loan." ss. By inserting into the definition of "Loan Documents" appearing in Section 7.1 of the Letter Agreement, immediately after the words "Revolving Note", the following: "the Term Note," tt. By deleting from the definition of "Maximum Revolving Amount" appearing in Section 7.1 of the Letter Agreement the amount "$3,000,000" (said amount having been inserted by the 1995 Modification) and by inserting in its stead the following: "$5,000,000" uu. By inserting into Section 7.1 of the Letter Agreement, immediately after the definition of "Net Income", the following: "'Notes' - Collectively, the Revolving Note and the Term Note." vv. By inserting into the definition of "Principal Office" appearing in Section 7.1 of the Letter Agreement, immediately after the words "of the Bank", the following: -11- 12 "in Boston, MA" ww. By inserting into Section 7.1 of the Letter Agreement, immediately after the definition of "Qualified Receivables", the following: " 'Qualifying Equipment' - Computer-related equipment (excluding pre-packaged software) purchased by the Borrower after June 30, 1996 for use in the Borrower's business which meets all of the following criteria: (i) such equipment consists of one of the items shown on an equipment list heretofore delivered by the Borrower to the Bank or has otherwise been approved by the Bank for use in supporting a Term Loan, (ii) each item of such equipment has been delivered to or installed at the Premises and has become fully operational and (iii) the Borrower has paid in full for each item of such equipment and holds title to same, free of all interests and claims of any other Person (other than the security interest of the Bank). In addition, and without limitation of the foregoing, 'Qualifying Equipment' will be deemed to include First Half Qualifying Equipment." xx. By adding to paragraph (a) of Section 7.2 of the Letter Agreement, immediately after the words "Revolving Note", the following: "the Term Note" yy. By adding to the Letter Agreement, as an exhibit thereto, Item 1.4 in the form attached to this Agreement. 3. Each of the IAR Security Agreement, the Supplementary Security Agreement, the Subordination Agreement, the Trademark Assignment and the Patent Assignment is hereby modified by providing that all references therein to the "Bank" or to "Fleet Bank of Massachusetts, N.A." will be deemed to refer to Fleet National Bank. 4. Wherever in any Financing Document, or in any certificate or opinion to be delivered in connection therewith, reference is made to a "letter agreement" or to the "Letter Agreement", from and after the date hereof same will be deemed to refer to the Letter Agreement, as hereby amended. 5. Simultaneously with the execution and delivery of this Agreement, the Borrower is executing and delivering to the Bank the 1996 Revolving Note, in substitution for the 1995 Revolving Note. The 1996 Revolving Note is a $5,000,000 promissory note of the Borrower, substantially in the form attached hereto as Exhibit 1. Wherever in any of the Financing Documents or in any certificate or opinion to be delivered in connection therewith, reference is made to a "Revolving Note", from and after the date hereof same will be deemed to refer to the 1996 Revolving Note. -12- 13 6. In order to induce the Bank to enter into this Agreement, the Borrower further represents and warrants as follows: a. The execution, delivery and performance of this Agreement, the 1996 Revolving Note and the Term Note have been duly authorized by the Borrower by all necessary corporate and other action, will not require the consent of any third party and will not conflict with, violate the provisions of, or cause a default or constitute an event which, with the passage of time or the giving of notice or both, could cause a default on the part of the Borrower under its charter documents or by-laws or under any contract, agreement, law, rule, order, ordinance, franchise, instrument or other document, or result in the imposition of any lien or encumbrance (except in favor of the Bank) on any property or assets of the Borrower. b. The Borrower has duly executed and delivered each of this Agreement, the 1996 Revolving Note and the Term Note. c. Each of this Agreement, the 1996 Revolving Note and the Term Note is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its respective terms. d. The statements, representations and warranties made in the Letter Agreement, in the IAR Security Agreement and/or in the Supplementary Security Agreement continue to be correct as of the date hereof; except as amended, updated and/or supplemented by the attached Supplemental Disclosure Schedule. e. The covenants and agreements of the Borrower contained in the Letter Agreement, in the IAR Security Agreement and/or in the Supplementary Security Agreement have been complied with on and as of the date hereof. f. No event which constitutes or which, with notice or lapse of time, or both, could constitute, an Event of Default (as defined in the Letter Agreement) has occurred and is continuing. g. No material adverse change has occurred in the financial condition of the Borrower from that disclosed in the annual consolidated financial statements of the Borrower dated December 31, 1995, heretofore furnished to the Bank. 7. Except as expressly affected hereby, the Letter Agreement and each of the other Financing Documents remains in full force and effect as heretofore. 8. Nothing contained herein will be deemed to constitute a waiver or a release of any provision of any of the Financing Documents. Nothing contained herein will in any event be deemed to constitute an agreement to give a waiver or release or to agree to any amendment or modification of any provision of any of the Financing Documents on any other or future occasion. -13- 14 9. By its signature below, MTDC agrees: (i) that all references in the Subordination Agreement to the "Bank" will be deemed to refer to Fleet National Bank, (ii) that the number "$3,000,000" set forth in Section 1 of the Subordination Agreement (as amended by the 1995 Modification) is hereby amended to read "$6,000,000", (iii) that, as amended hereby, the Subordination Agreement remains in full force and effect and runs to the benefit of Fleet National Bank, and (iv) that the term "Senior Debt", as used in the Subordination Agreement, includes the Letter Agreement (as amended hereby), all Loans (as defined in the Letter Agreement, as so amended), the 1996 Revolving Note and the Term Note. Executed, as an instrument under seal, as of the day and year first above written. VOICETEK CORPORATION By: /s/ Roger Tuttle ----------------------------- Name: Roger Tuttle Title: Chief Financial Officer Accepted and agreed: FLEET NATIONAL BANK By: /s/ Catherine Bruton ------------------------ Name: Catherine Bruton ---------------- Title: VP ---------------- Accepted and agreed as Subordinated Lender: MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORP. By: /s/ Robert J. Creeden -------------------------- Name: Robert J. Creeden ------------------ Title: Vice President ------------------ -14- 15 EXHIBIT 1.4 PROMISSORY NOTE $1,000,000.00 Boston, Massachusetts September 26, 1996 FOR VALUE RECEIVED, the undersigned Voicetek Corporation, a Massachusetts corporation (the "Borrower") hereby promises to pay to the order of FLEET NATIONAL BANK (the "Bank") the principal amount of One Million and 00/100 ($ 1,000,000.00) Dollars or such portion thereof as maybe advanced by the Bank pursuant to Section 1.4 of the below described Letter Agreement and remains outstanding from time to time thereunder ("Principal"), with interest, at the rate hereinafter set forth, on the daily balance of all unpaid Principal, from the date hereof until payment in full of all Principal and interest hereunder. As used herein, "Letter Agreement" means that certain letter agreement dated September 21, 1994, as amended, between the Borrower and Fleet Bank of Massachusetts, N.A., the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder. Interest on all unpaid Principal shall be due and payable monthly in arrears, on the first day of each month commencing on the first such date after the advance of any Principal and continuing on the first day of each month thereafter and on the date of payment of this note in full, at a fluctuating rate per annum (computed on the basis of a year of three hundred sixty (360) days for the actual number of days elapsed) which shall at all times be equal to the sum of (i) one (1.0%) percent per annum plus (ii) the Prime Rate, as in effect from time to time (but in no event in excess of the maximum rate permitted by then applicable law). A change in the aforesaid rate of interest will become effective on the same day on which any change in the Prime Rate is effective. Overdue principal shall bear interest at a fluctuating rate per annum which at all times shall be equal to the sum of (i) two (2%) percent per annum plus (ii) the per annum rate otherwise payable under this note (but in no event in excess of the maximum rate permitted by then applicable law), compounded monthly and payable on demand. As used herein, "Prime Rate" means that rate of interest per annum announced by the Bank from time to time as its prime rate, it being understood that such rate is merely a reference rate, not necessarily the lowest, which serves as the basis upon which effective rates of interest are calculated for obligations making reference thereto. If the entire amount of any required Principal and/or interest is not paid within ten (10) days after the same is due, the Borrower shall pay to the Bank a late fee equal to five percent (5%) of the required payment, provided that such late fee shall be reduced to three percent (3%) of any required Principal and interest that is not paid within fifteen (15) days of the date it is due if this note is secured by a mortgage on an owner-occupied residence of 1-4 units. All advances of Principal made at any time on or prior to September 30, 1996 are hereinafter referred to as the "Tranche A Term Loans". Principal of the Tranche A Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount, equal to 1/36th of the aggregate principal amount of Tranche A Term Loans outstanding at the close of business on September 30, 1996), such installments to commence October 1, 1996 and to continue thereafter on the first day of each month through and including September 1, 1999, on which date all then remaining Principal of the 16 Tranche A Term Loans and all interest accrued but unpaid thereon will be due and payable in full. All advances of Principal made at any time on or after October 1, 1996 and prior to January 1, 1997 are hereinafter referred to as the "Tranche B Term Loans". Principal of the Tranche B Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of Tranche B Term Loans outstanding at the close of business on December 31, 1996), such installments to commence January 1, 1997 and to continue thereafter on the first day of each month through and including December 1, 1999, on which date all then remaining Principal of the Tranche B Term Loans and all interest accrued but unpaid thereon will be due and payable in full. All advances of Principal made at any time on or after January 1, 1997 and prior to April 1, 1997 are hereinafter referred to as the "Tranche C Term Loans". Principal of the Tranche C Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of Tranche C Term Loans outstanding at the close of business on March 31, 1997), such installments to commence April 1, 1997 and to continue thereafter on the first day of each month through and including March 1, 2000, on which date all then remaining Principal of the Tranche C Term Loans and all interest accrued but unpaid thereon will be due and payable in full. All advances of Principal made at any time on or after April 1, 1997 and prior to July 1, 1997 are hereinafter referred to as the "Tranche D Term Loans". Principal of the Tranche D Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of Tranche D Term Loans outstanding at the close of business on June 30, 1997), such installments to commence July 1, 1997 and to continue thereafter on the first day of each month through and including June 1, 2000, on which date all then remaining Principal of the Tranche D Term Loans and all interest accrued but unpaid thereon will be due and payable in full. All advances of Principal made at any time on or after July 1, 1997 are hereinafter referred to as the "Tranche E Term Loans". Principal of the Tranche E Term Loans shall be repaid by the Borrower to the Bank in 36 equal consecutive monthly installments (each in an amount equal to 1/36th of the aggregate principal amount of Tranche E Term Loans outstanding at the close of business on September 30, 1997), such installments to commence October 1, 1997 and to continue thereafter on the first day of each month through and including September 1, 2000, on which date all then remaining Principal of the Tranche E Term Loans and all interest accrued but unpaid thereon will be due and payable in full. The Borrower may at any time and from time to time, without premium or penalty, prepay all or any portion of the Principal; provided that each such Principal prepayment shall be accompanied by payment of all interest on this note accrued but unpaid to the date of -2- 17 payment. Any partial prepayment of Principal will be applied against Principal installments in inverse order of normal maturity. Payments of both Principal and interest shall be made, in immediately available funds, at the office of the Bank located at 75 State Street, Boston, Massachusetts 02109, or at such other address as the Bank may from time to time designate. The undersigned Borrower irrevocably authorizes the Bank to make or cause to be made, on a schedule attached to this note or on the books of the Bank, at or following the time of making any Term Loan (as defined in the Letter Agreement) and of receiving any payment of Principal, an appropriate notation reflecting such transaction and the then unpaid balance of Principal. Failure of the Bank to make any such notation shall not, however, affect any obligation of the Borrower hereunder or under the Letter Agreement. The unpaid Principal amount of this note, as recorded by the Bank from time to time on such schedule or on such books, shall constitute presumptive evidence of the aggregate outstanding principal amount of the Term Loans. The Borrower hereby (a) waives notice of and consents to any and all advances, settlements, compromises, favors and indulgences (including, without limitation, any extension or postponement of the time for payment), any and all receipts, substitutions, additions, exchanges and releases of collateral, and any and all additions, substitutions and releases of any person primarily or secondarily liable, (b) waives presentment, demand, notice, protest and all other demands and notices generally in connection with the delivery, acceptance, performance, default or enforcement of or under this note, and (c) agrees to pay all costs and expenses, including, without limitation, reasonable attorneys' fees, incurred or paid by the Bank in enforcing this note and any collateral or security therefor, all whether or not litigation is commenced. This note is the Term Note referred to in, and is entitled to the benefits of, the Letter Agreement. This note is secured by the Security Agreement (as defined in the Letter Agreement). This note is subject to prepayment as set forth in the Letter Agreement. The maturity of this note may be accelerated upon the occurrence of an Event of Default, as provided in the Letter Agreement. Executed, as an instrument under seal, as of the day and year first above written. CORPORATE SEAL VOICETEK CORPORATION ATTEST: By: ----------------------- - ------------------------- Clerk Name: Title: -3- 18 EXHIBIT 1 PROMISSORY NOTE $5,000,000.00 Boston, Massachusetts September 26, 1996 FOR VALUE RECEIVED, the undersigned Voicetek Corporation, a Massachusetts corporation (the "Borrower) hereby promises to pay to the order of FLEET NATIONAL BANK (the "Bank") the principal amount of Five Million and 00/100 ($5,000,000.00) Dollars or such portion thereof as has been advanced by the Bank and/or its corporate predecessor or may hereafter be advanced by the Bank pursuant to Section 1.2 of that certain letter agreement between the Borrower and Fleet Bank of Massachusetts, N.A. dated September 21, 1994, as amended (as so amended, the "Letter Agreement") (the Bank having succeeded to the rights of Fleet Bank of Massachusetts, N.A. thereunder) and remains outstanding from time to time hereunder ("Principal"), with interest, at the rate hereinafter set forth, on the daily balance of all unpaid Principal, from the date hereof until payment in full of all Principal and interest hereunder. Interest on all unpaid Principal shall be due and payable monthly in arrears, on the first day of each month, commencing on the first such date after the advance of any Principal and continuing on the first day of each month thereafter and on the date of payment of this note in full, at a fluctuating rate per annum (computed on the basis of a year of three hundred sixty (360) days for the actual number of days elapsed) which shall at all times be equal to the sum of (i) three-quarters of one percent (0.75%) per annum plus (ii) the Prime Rate, as in effect from time to time (but in no event in excess of the maximum rate permitted by then applicable law). A change in the aforesaid rate of interest shall become effective on the same day on which any change in the Prime Rate is effective. Overdue Principal and, to the extent permitted by law, overdue interest from and after the date on which same becomes past due shall bear interest at a fluctuating rate per annum which at all times shall be equal to the sum of (i) two (2%) percent per annum plus (ii) the per annum rate otherwise payable under this note (but in no event in excess of the maximum rate permitted by then applicable law), compounded monthly and payable on demand. As used herein, "Prime Rate" means that rate of interest per annum announced by the Bank from time to time as its prime rate, it being understood that such rate is merely a reference rate, not necessarily the lowest, which serves as the basis upon which effective rates of interest are calculated for obligations making reference thereto. If the entire amount of any required Principal and/or interest is not paid within ten (10) days after the same is due, the Borrower shall pay to the Bank a late fee equal to five percent (5%) of the required payment, provided that such late fee shall be reduced to three percent (3%) of any required Principal and interest that is not paid within fifteen (15) days of the date it is due if this note is secured by a mortgage on an owner-occupied residence of 1-4 units. All outstanding Principal and all interest accrued thereon shall be due and payable in full on the first to occur of: (i) an acceleration under Section 5.2 of the Letter Agreement or (ii) September 1, 1997. The Borrower may at any time and from time to time prepay all or any portion of said 19 Principal, without premium or penalty. Under certain circumstances set forth in the Letter Agreement, prepayments of Principal may be required. Payments of both Principal and interest shall be made, in immediately available funds, at the office of the Bank located at 75 State Street, Boston, Massachusetts 02109, or at such other address as the Bank may from time to time designate. The undersigned Borrower irrevocably authorizes the Bank to make or cause to be made, on a schedule attached to this note or on the books of the Bank, at or following the time of making any Revolving Loan (as defined in the Letter Agreement) and of receiving any payment of Principal, an appropriate notation reflecting such transaction and the then aggregate unpaid balance of Principal. Failure of the Bank to make any such notation shall not, however, affect any obligation of the Borrower hereunder or under the Letter Agreement. The unpaid Principal balance of this note, as recorded by the Bank from time to time on such schedule or on such books, shall constitute presumptive evidence of the aggregate unpaid principal amount of the Revolving Loans. The Borrower hereby (a) waives notice of and consents to any and all advances, settlements, compromises, favors and indulgences (including, without limitation, any extension or postponement of the time for payment), any and all receipts, substitutions, additions, exchanges and releases of collateral, and any and all additions, substitutions and releases of any person primarily or secondarily liable, (b) waives presentment, demand, notice, protest and all other demands and notices generally in connection with the delivery, acceptance, performance, default or enforcement of or under this note, and (c) agrees to pay all costs and expenses, including, without limitation, reasonable attorneys' fees, incurred or paid by the Bank in enforcing this note and any collateral or security therefor, all whether or not litigation is commenced. This note is the Revolving Note referred to in the Letter Agreement. This note is secured by, and is entitled to the benefits of, the Security Agreement (as defined in the Letter Agreement). This note is subject to prepayment as set forth in the Letter Agreement. The maturity of this note may be accelerated upon the occurrence of an Event of Default, as provided in the Letter Agreement. Executed, as an instrument under seal, as of the day and year first above written. CORPORATE SEAL VOICETEK CORPORATION ATTEST: By:___________________ _____________________ Clerk Name: Title: -2- 20 SUPPLEMENTAL DISCLOSURE SCHEDULE None. EX-10.11 15 EXECUTIVE EMPLOYMENT AGREEMENT 1 EXHIBIT 10.11 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT, dated and entered into as of the 13th day of January, 1997, by and between Voicetek Corporation , a Massachusetts corporation (the "Company"), and Sheldon Dinkes, an individual residing at 85 East India Row, Apt. 21F, Boston, MA 02110 (the "Executive"). WHEREAS, the Company desires to engage the full-time services of the Executive; WHEREAS, the Executive desires to be so employed by the Company; and WHEREAS, the Company desires to be assured that the unique and expert services of the Executive will be available solely to the Company on such full-time basis, and that the Executive is willing and able to render such services on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: Section 1. Employment. The Company hereby employs the Executive as its President and Chief Executive Officer, and the Executive hereby accepts such employment under and subject to the terms and conditions hereinafter set forth. The Executive further agrees to serve as a member of the Board of Directors (the "Board") of the Company if elected or appointed to such office in accordance with the Company's By-Laws. Section 2. Term. Unless sooner terminated as provided in Section 7, the term of employment under this Agreement shall begin on the date hereof and shall conclude on 2 January 12, 2000 (the "Term"). Section 3. Duties. The Executive shall serve as President and Chief Executive Officer, and he shall perform additional duties as the Board of Directors of the Corporation may assign to him from time to time. The Executive hereby agrees to devote his full business time and best efforts to the faithful performance of such duties and to the promotion and forwarding of the business and affairs of the Company for the Term. Section 4. Salary Compensation. In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the "Base Salary") at the rate of Two Hundred Thousand Dollars ($200,000) per calendar year. The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried key executive employees, and the Board may change the Base Salary from time to time in its sole discretion; provided, however, that in no event shall the Base Salary for any calendar year be less than the Base Salary in effect for the immediately prior calendar year. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 6. Fringe Benefits. As a key executive employee of the Company, the Executive shall be eligible to participate in all employee fringe benefit programs as are made available from time to time to the Company's key executive employees. Section 6. Benefits. In addition to the compensation detailed in Section 4 and 5 of this Agreement, the Executive shall be entitled to the following additional benefits: -2- 3 Section 6.01. Paid Vacation. The Executive shall be entitled to four (4) weeks paid vacation per calendar year, such vacation to extend for such periods and shall be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive's duties hereunder and consistent with the Company's vacation policy. Section 6.02. Insurance Coverage. During the Term, the Company shall provide the Executive with group health, dental and life insurance protection to the same extent that it makes such protection available to its other key executive employees. Section 6.03. Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable expenses actually incurred by the Executive in connection with the business affairs of the Company and the performance of his duties hereunder. The Executive shall comply with such reasonable limitations and reporting requirements with respect to such expenses as the Board may establish from time to time. Section 6.04. Disability and Other Benefits. If the Executive suffers any illness, disability or incapacity which prevents the Executive from performing the Executive's duties hereunder, and such illness, disability or incapacity shall be deemed by a duly licensed physician (who may be the Executive's personal physician) to be permanent; or, if the Executive is unable to render full-time services to the Company of the character required hereunder for a period of six (6) consecutive months by reason of illness, disability or incapacity, and the Board has determined that the Executive has been permanently disabled; then, and in either of such events, the Executive shall render such advisory and consulting services to the Company as may be reasonably requested of the Executive by the Board and officers of the Company but only to the -3- 4 extent that the Executive is able to perform such services. In such event, the Executive shall be paid the amount of Two Hundred Thousand Dollars ($200,000) annually, payable in equal installments in conformity with the Company's normal payroll period. Such disability compensation shall commence upon the first day of the first month following the determination that the Executive's illness, disability or incapacity is permanent, and shall be paid for the balance of the Term even if the Executive's Employee's illness, disability or incapacity prevents the rendering by the Executive of any services to the Company and continues for the entire remaining Term. During such periods of disability, the Company reserves the right to, at its own expense, have a licensed physician examine the person of the Executive when and as often as it may reasonably require to determine if the Executive is permanently disabled. The Executive's disability compensation hereunder shall be reduced by the amount of any disability insurance proceeds paid to or for the benefit of the Executive under any policy, the premiums for which have been paid by the Company. The Executive will also be provided with those other benefits generally equivalent to those made available to key executive employees performing similar functions for similarly situated companies. Section 7. Termination. This Agreement shall be terminated at the end of the Term, or earlier as follows: Section 7.01. Death. This Agreement shall terminate upon the death of the Executive, except that the compensation provided in Section 4 shall continue through the end of the month in which the Executive's death occurs. -4- 5 Section 7.02. Permanent Disability. In the event of any physical or mental disability of the Executive rendering the Executive unable to perform his or her duties hereunder for a period of at least one hundred twenty (120) consecutive days and the further determination that the disability is permanent with regard to the Executive's ability to return to work in his or full capacity, this Agreement shall terminate automatically. Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive. Section 7.03. By The Company For Cause. The employment of the Executive may be terminated by the Company for Cause (as defined below) at any time effective upon written notice to the Executive. The Company shall provide the Executive with at least ten (10) business days' prior written notice of a Board meeting at which a termination for Cause will be considered and the Executive will have an opportunity to attend and participate in that meeting. For purposes hereof, the term "Cause" shall mean that the Board has determined that any one or more of the following has occurred: (a) The Executive shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any felony or a crime involving moral turpitude; (b) The Executive shall have repeatedly failed or refused to perform his duties hereunder and such failure or refusal shall have continued for a period of ten (10) days following written notice from the Board, it being understood that the Company's failure to achieve its business plan or projections shall not itself be considered a failure or refusal to perform duties; (c) the Executive shall have intentionally committed any fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or other act of dishonesty against the Company which has a material adverse effect on the Company; or -5- 6 (d) the Executive shall have (i) failed to perform his duties hereunder in a manner that is reasonably satisfactory to the Board, (ii) refused to carry out the duties assigned to him by the Board, or (iii) breached any one or more of the material provisions of this Agreement, which failure, refusal or breach shall have continued for a period of at least ten (10) days after notice from the Company describing such failure, refusal or breach in reasonable detail. Section 7.04. By the Company Without Cause. The Company may terminate the Executive's employment at any time without Cause effective upon written notice to the Executive. Section 7.05. Termination Without Cause Following Change of Control. In the event the Company undergoes a Change of Control, termination of the Executive's employment for any reason within sixty days after such Change of Control shall be deemed to be a termination without Cause. In addition, each of the following events at any time subsequent to such Change of Control shall be deemed to be a termination without Cause: (i) any reduction in the compensation payable to the Executive set forth in Section 4 herein; (ii) any change in the location of the place of work of the Executive to a location more than thirty miles from downtown Boston; and (iii) any violation by the Company of any provision of this Agreement. For purposes hereof a "Change of Control" shall mean the happening of any of the following events: (i) an acquisition by any person or group of persons of 50% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; (ii) the approval by the Directors or Shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all substantially all of the assets of the Company which would result in the voting securities of the - 6 - 7 Company immediately prior to such transaction continuing to represent less than 50% of the combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such transaction, or (iii) the members of the Board of Directors of the Company (or their respective successors designated by the stockholders which designated current members of the Board of Directors) on the date hereof shall not constitute a majority of the Board of Directors of the Company. Section 7.06. By the Executive Voluntarily. The Executive may terminate this Agreement at any time effective upon at least fifteen (15) business days' prior written notice to the Company. Section 8. Termination Payments and Benefits. Section 8.01. Voluntary Termination, Termination For Cause. Upon any termination of this Agreement: (1) voluntarily by the Executive or (2) by the Company for Cause as provided in Section 7.04, all payments, salary and other benefits hereunder shall cease at the effective date of termination except as specifically provided in this Section 8.02. Section 8.02. Termination without Cause, Company Election Not To Renew, Death, Disability In the event that this Agreement is terminated by the Company without Cause, or because of the death or permanent disability of the Executive, the Executive shall receive as a termination settlement an amount equal to twelve (12) month's salary as is in effect at the effective date of termination (the "Termination Payment"). The Termination Payment shall be paid in twelve (12) monthly installments on the first business day of each month following the effective date of termination. If twelve (12) months following the termination, the Executive has -7- 8 not obtained employment with similar salary, benefits and responsibilities as described herein, the Executive shall receive as an additional termination settlement an amount equal to six (6) month's salary (the "Additional Termination Payment"); provided, however, such Additional Termination Payment shall be mitigated by the amount of salary the Executive shall receive during such additional six (6) month period. The Termination Payment shall be reduced by any statutorily-mandated severance, change of control, plant closing, or similar payment to the Executive by the Company or its stockholders. In addition to the Termination Payment, the Executive shall continue to receive the insurance benefits included as part of the fringe benefits referenced in Section 6 for a period of twelve (12) months following the effective date of termination and any death and disability benefits hereunder for a period of (eighteen) 18 months following the effective date of termination. Section 8.03. Acceleration of Options. In the event the Executive's employment terminates for any reason, other than for Cause or voluntarily by the Executive, any and all options to purchase Common Stock held by the Executive shall immediately vest and become fully exercisable. In addition, in the event the Company undergoes a Change of Control, all options of the Executive to purchase Common Stock of the Company which, by the terms of the grant of such options otherwise would become exercisable within one year following the date of the Change of Control, shall become exercisable upon the Change of Control, and all other options shall become exercisable one year earlier than provided for in the grant of such options. Section 8.04. Health and Life Insurance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall continue to provide the -8- 9 Executive the benefits set forth in Section 6.02 hereof for a period of six (6) months following the date of such termination. Section 8.05. Outplacement Assistance. In the event the Executive's employment terminates for any reason , other than for Cause, the Company shall provide outplacement assistance to the Executive as is then reasonable and customary for similarly situated businesses up to a $15,000 maximum expenditure by the Company. Section 8.06. Public Statement of Termination. In the event the Executive's employment terminates for any reason, the Company and the Executive shall agree upon a public statement pertaining to the Executive's termination of employment, and the terms of said statement shall not be subject to subsequent modification by either party unless required by law; provided, however, that in the event the Company and the Executive are unable in good faith to agree on such a statement, the Company may make public statements as are necessary to comply with the law. Section 8.07. No Other Benefits. Except as specifically provided in this section 8, the Executive shall not be entitled to any compensation, severance or other benefits from the Company upon the termination of this Agreement for any reason whatsoever. Section 9. Merger Clause. The Company shall not consolidate, merge or transfer all or a substantial portion of its assets without requiring the transferee to assume this Agreement and the obligations hereunder. Section 10. Severable Provisions. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. -9- 10 In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law. Section 11. Notices. All notices hereunder, to be effective, shall be in writing and shall be delivered by hand or mailed by certified mail, postage and fees prepaid, as follows: If to the Company: Voicetek Corporation 19 Alpha Road Chelmsford, MA 01824-4175 Attn: President Copy to: Anthony J. Medaglia, Jr., Esq. HUTCHINS, WHEELER & DITTMAR A Professional Corporation 101 Federal Street Boston, MA 02110 If to the Executive: Sheldon Dinkes 85 East India Row, Apt. 21F Boston, MA 02110 or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 11. Section 12. Miscellaneous. Section 12.01. Modification. This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior -10- 11 understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties. Section 12.02. Assignment and Transfer. This Agreement shall not be terminated by the merger or consolidation of the Company with any corporate or other entity or by the transfer of all or substantially all of the assets of the Company to any other person, corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any such successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of the Executive shall be assignable by the Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement be encumbered, transferred or in any way anticipated. Section 12.03. Captions. Captions herein have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement. Section 12.04. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of The Commonwealth of Massachusetts. [The Rest of This Page Intentionally Left Blank] IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a sealed instrument as of the day and year first above written. -11- 12 VOICETEK By:_____________________________________ Vice President EXECUTIVE By:_____________________________________ Name: - 12 - EX-10.12 16 EXECUTIVE EMPLOYMENT AGREEMENT/ R.TUTTLE 1 EXHIBIT 10.12 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT, dated and entered into as of the 13th day of January, 1997, by and between Voicetek Corporation, a Massachusetts corporation (the "Company"), and Roger Tuttle, an individual residing at 73 Cambridge Road, Bedford, NH 03110 (the "Executive"). WHEREAS, the Company desires to engage the full-time services of the Executive; WHEREAS, the Executive desires to be so employed by the Company; and WHEREAS, the Company desires to be assured that the unique and expert services of the Executive will be available solely to the Company on such full-time basis, and that the Executive is willing and able to render such services on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: Section 1. Employment. The Company hereby employs the Executive as its Vice President of Finance and Chief Financial Officer, and the Executive hereby accepts such employment under and subject to the terms and conditions hereinafter set forth. The Executive further agrees to serve as a member of the Board of Directors (the "Board") of the Company if elected or appointed to such office in accordance with the Company's By-Laws. Section 2. Term. Unless sooner terminated as provided in Section 7, the term of employment under this Agreement shall begin on the date hereof and shall conclude on 2 January 12, 2000 (the "Term"). Section 3. Duties. The Executive shall serve as Vice President of Finance and Chief Financial Officer, and he shall perform additional duties as the Board of Directors or the President of the Corporation may assign to him from time to time. The Executive hereby agrees to devote his full business time and best efforts to the faithful performance of such duties and to the promotion and forwarding of the business and affairs of the Company for the Term. Section 4. Salary Compensation. In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the "Base Salary") at the rate of One Hundred Twenty Thousand Dollars ($120,000) per calendar year. The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried key executive employees, and the Board may change the Base Salary from time to time in its sole discretion; provided, however, that in no event shall the Base Salary for any calendar year be less than the Base Salary in effect for the immediately prior calendar year. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 6. Fringe Benefits. As a key executive employee of the Company, the Executive shall be eligible to participate in all employee fringe benefit programs as are made available from time to time to the Company's key executive employees. Section 6. Benefits. In addition to the compensation detailed in Section 4 and 5 of this Agreement, the Executive shall be entitled to the following additional benefits: - 2 - 3 Section 6.01. Paid Vacation. The Executive shall be entitled to fifteen (15) business days paid vacation per calendar year. The Executive shall be entitled to an additional vacation day for each full year during which the Executive has been in the full time employment of the Company, with an additional vacation day per year granted upon each subsequent anniversary of the commencement of the Executive's full time employment with the Company, which occurred on October 3, 1994; provided that the number of paid vacation days to which the Executive shall be entitled in a calendar year shall not exceed twenty (20) business days. Such vacation shall extend for such periods and shall be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive's duties hereunder and consistent with the Company's vacation policy. Section 6.02. Insurance Coverage. During the Term, the Company shall provide the Executive with group health, dental and life insurance protection to the same extent that it makes such protection available to its other key executive employees. Section 6.03. Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable expenses actually incurred by the Executive in connection with the business affairs of the Company and the performance of his duties hereunder. The Executive shall comply with such reasonable limitations and reporting requirements with respect to such expenses as the Board may establish from time to time. Section 6.04. Disability and Other Benefits. If the Executive suffers any illness, disability or incapacity which prevents the Executive from performing the Executive's duties hereunder, and such illness, disability or incapacity shall be deemed by a duly licensed physician - 3 - 4 (who may be the Executive's personal physician) to be permanent; or, if the Executive is unable to render full-time services to the Company of the character required hereunder for a period of six (6) consecutive months by reason of illness, disability or incapacity, and the Board has determined that the Executive has been permanently disabled; then, and in either of such events, the Executive shall render such advisory and consulting services to the Company as may be reasonably requested of the Executive by the Board and officers of the Company but only to the extent that the Executive is able to perform such services. In such event, the Executive shall be paid the amount of One Hundred Twenty Thousand Dollars ($120,000) annually, payable in equal installments in conformity with the Company's normal payroll period. Such disability compensation shall commence upon the first day of the first month following the determination that the Executive's illness, disability or incapacity is permanent, and shall be paid for the balance of the Term even if the Executive's Employee's illness, disability or incapacity prevents the rendering by the Executive of any services to the Company and continues for the entire remaining Term. During such periods of disability, the Company reserves the right to, at its own expense, have a licensed physician examine the person of the Executive when and as often as it may reasonably require to determine if the Executive is permanently disabled. The Executive's disability compensation hereunder shall be reduced by the amount of any disability insurance proceeds paid to or for the benefit of the Executive under any policy, the premiums for which have been paid by the Company. The Executive will also be provided with those other benefits generally equivalent to those made available to key executive employees performing similar functions for similarly situated companies. - 4 - 5 Section 7. Termination. This Agreement shall be terminated at the end of the Term, or earlier as follows: Section 7.01. Death. This Agreement shall terminate upon the death of the Executive, except that the compensation provided in Section 4 shall continue through the end of the month in which the Executive's death occurs. Section 7.02. Permanent Disability. In the event of any physical or mental disability of the Executive rendering the Executive unable to perform his or her duties hereunder for a period of at least one hundred twenty (120) consecutive days and the further determination that the disability is permanent with regard to the Executive's ability to return to work in his or full capacity, this Agreement shall terminate automatically. Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive. Section 7.03. By The Company For Cause. The employment of the Executive may be terminated by the Company for Cause (as defined below) at any time effective upon written notice to the Executive. The Company shall provide the Executive with at least ten (10) business days' prior written notice of a Board meeting at which a termination for Cause will be considered and the Executive will have an opportunity to attend and participate in that meeting. For purposes hereof, the term "Cause" shall mean that the Board has determined that any one or more of the following has occurred: (a) The Executive shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any felony or a crime involving moral turpitude; - 5 - 6 (b) The Executive shall have repeatedly failed or refused to perform his duties hereunder and such failure or refusal shall have continued for a period of ten (10) days following written notice from the Board, it being understood that the Company's failure to achieve its business plan or projections shall not itself be considered a failure or refusal to perform duties; (c) the Executive shall have intentionally committed any fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or other act of dishonesty against the Company which has a material adverse effect on the Company; or (d) the Executive shall have (i) failed to perform his duties hereunder in a manner that is reasonably satisfactory to the Board, (ii) refused to carry out the duties assigned to him by the Board, or (iii) breached any one or more of the material provisions of this Agreement, which failure, refusal or breach shall have continued for a period of at least ten (10) days after notice from the Company describing such failure, refusal or breach in reasonable detail. Section 7.04. By the Company Without Cause. The Company may terminate the Executive's employment at any time without Cause effective upon written notice to the Executive. Section 7.05. Termination Without Cause Following Change of Control. In the event the Company undergoes a Change of Control, termination of the Executive's employment for any reason within sixty days after such Change of Control shall be deemed to be a termination without Cause. In addition, each of the following events at any time subsequent to such Change of Control shall be deemed to be a termination without Cause: (i) any reduction in the compensation payable to the Executive set forth in Section 4 herein; (ii) any change in the location of the place of work of the Executive to a location more than thirty miles from downtown Boston; and (iii) any violation by the Company of any provision of this Agreement. - 6 - 7 For purposes hereof a "Change of Control" shall mean the happening of any of the following events: (i) an acquisition by any person or group of persons of 50% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; (ii) the approval by the Directors or Shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all substantially all of the assets of the Company which would result in the voting securities of the Company immediately prior to such transaction continuing to represent less than 50% of the combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such transaction, or (iii) the members of the Board of Directors of the Company (or their respective successors designated by the stockholders which designated current members of the Board of Directors) on the date hereof shall not constitute a majority of the Board of Directors of the Company. Section 7.06. By the Executive Voluntarily. The Executive may terminate this Agreement at any time effective upon at least fifteen (15) business days' prior written notice to the Company. Section 8. Termination Payments and Benefits. Section 8.01. Voluntary Termination, Termination For Cause. Upon any termination of this Agreement: (1) voluntarily by the Executive or (2) by the Company for Cause as provided in Section 7.04, all payments, salary and other benefits hereunder shall cease at the effective date of termination except as specifically provided in this Section 8.02. - 7 - 8 Section 8.02. Termination without Cause, Company Election Not To Renew, Death, Disability In the event that this Agreement is terminated by the Company without Cause, or because of the death or permanent disability of the Executive, the Executive shall receive as a termination settlement an amount equal to six (6) month's salary as is in effect at the effective date of termination (the "Termination Payment"). The Termination Payment shall be paid in six (6) monthly installments on the first business day of each month following the effective date of termination. If six (6) months following the termination, the Executive has not obtained employment with similar salary, benefits and responsibilities as described herein, the Executive shall receive as an additional termination settlement an amount equal to six (6) month's salary (the "Additional Termination Payment"); provided, however, such Additional Termination Payment shall be mitigated by the amount of salary the Executive shall receive during such additional six (6) month period. The Termination Payment shall be reduced by any statutorily-mandated severance, change of control, plant closing, or similar payment to the Executive by the Company or its stockholders. In addition to the Termination Payment, the Executive shall continue to receive the insurance benefits included as part of the fringe benefits referenced in Section 6 for a period of six (6) months following the effective date of termination and any death and disability benefits hereunder for a period of (eighteen) 18 months following the effective date of termination. Section 8.03. Acceleration of Options. In the event the Executive's employment terminates for any reason, other than for Cause or voluntarily by the Executive, any and all options to purchase Common Stock held by the Executive shall immediately vest and become - 8 - 9 fully exercisable. In addition, in the event the Company undergoes a Change of Control, all options of the Executive to purchase Common Stock of the Company which, by the terms of the grant of such options otherwise would become exercisable within one year following the date of the Change of Control, shall become exercisable upon the Change of Control, and all other options shall become exercisable one year earlier than provided for in the grant of such options. Section 8.04. Health and Life Insurance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall continue to provide the Executive the benefits set forth in Section 6.02 hereof for a period of six (6) months following the date of such termination. Section 8.05. Outplacement Assistance. In the event the Executive's employment terminates for any reason , other than for Cause, the Company shall provide outplacement assistance to the Executive as is then reasonable and customary for similarly situated businesses up to a $15,000 maximum expenditure by the Company. Section 8.06. Public Statement of Termination. In the event the Executive's employment terminates for any reason, the Company and the Executive shall agree upon a public statement pertaining to the Executive's termination of employment, and the terms of said statement shall not be subject to subsequent modification by either party unless required by law; provided, however, that in the event the Company and the Executive are unable in good faith to agree on such a statement, the Company may make public statements as are necessary to comply with the law. - 9 - 10 Section 8.07. No Other Benefits. Except as specifically provided in this section 8, the Executive shall not be entitled to any compensation, severance or other benefits from the Company upon the termination of this Agreement for any reason whatsoever. Section 9. Merger Clause. The Company shall not consolidate, merge or transfer all or a substantial portion of its assets without requiring the transferee to assume this Agreement and the obligations hereunder. Section 10. Severable Provisions. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law. Section 11. Notices. All notices hereunder, to be effective, shall be in writing and shall be delivered by hand or mailed by certified mail, postage and fees prepaid, as follows: If to the Company: Voicetek Corporation 19 Alpha Road Chelmsford, MA 01824-4175 Attn: President - 10 - 11 Copy to: Anthony J. Medaglia, Jr., Esq. HUTCHINS, WHEELER & DITTMAR A Professional Corporation 101 Federal Street Boston, MA 02110 If to the Executive: Roger Tuttle 73 Cambridge Road Bedford, NH 03110 or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 11. Section 12. Miscellaneous. Section 12.01. Modification. This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties. Section 12.02. Assignment and Transfer. This Agreement shall not be terminated by the merger or consolidation of the Company with any corporate or other entity or by the transfer of all or substantially all of the assets of the Company to any other person, corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any such successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of the Executive shall be assignable by the Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement be encumbered, transferred or in any way anticipated. - 11 - 12 Section 12.03. Captions. Captions herein have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement. Section 12.04. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of The Commonwealth of Massachusetts. [The Rest of This Page Intentionally Left Blank] - 12 - 13 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a sealed instrument as of the day and year first above written. VOICETEK By:_____________________________________ President EXECUTIVE By:_____________________________________ Name - 13 - EX-10.13 17 EXECUTIVE EMPLOYMENT AGREEMENT/ P. GAGNE 1 EXHIBIT 10.14 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT, dated and entered into as of the 13th day of January, 1997, by and between Voicetek Corporation , a Massachusetts corporation (the "Company"), and Scott Ganson, an individual residing at 229 Beacon Street, Apt. 4, Boston, MA 02116 (the "Executive"). WHEREAS, the Company desires to engage the full-time services of the Executive; WHEREAS, the Executive desires to be so employed by the Company; and WHEREAS, the Company desires to be assured that the unique and expert services of the Executive will be available solely to the Company on such full-time basis, and that the Executive is willing and able to render such services on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: Section 1. Employment. The Company hereby employs the Executive as its Vice President of Sales and Customer Service, and the Executive hereby accepts such employment under and subject to the terms and conditions hereinafter set forth. The Executive further agrees to serve as a member of the Board of Directors (the "Board") of the Company if elected or appointed to such office in accordance with the Company's By-Laws. 2 Section 2. Term. Unless sooner terminated as provided in Section 7, the term of employment under this Agreement shall begin on the date hereof and shall conclude on January 12, 2000 (the "Term"). Section 3. Duties. The Executive shall serve as Vice President of Sales and Customer Service, and he shall perform additional duties as the Board of Directors or the President of the Corporation may assign to him from time to time. The Executive hereby agrees to devote his full business time and best efforts to the faithful performance of such duties and to the promotion and forwarding of the business and affairs of the Company for the Term. Section 4. Salary Compensation. In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the "Base Salary") at the rate of One Hundred Sixty-One Thousand Five Hundred Dollars ($161,500) per calendar year. The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried key executive employees, and the Board may change the Base Salary from time to time in its sole discretion; provided, however, that in no event shall the Base Salary for any calendar year be less than the Base Salary in effect for the immediately prior calendar year. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 6. Fringe Benefits. As a key executive employee of the Company, the Executive shall be eligible to participate in all employee fringe benefit programs as are made available from time to time to the Company's key executive employees. - 2 - 3 Section 6. Benefits. In addition to the compensation detailed in Section 4 and 5 of this Agreement, the Executive shall be entitled to the following additional benefits: Section 6.01. Paid Vacation. The Executive shall be entitled to fifteen (15) business days paid vacation per calendar year. Furthermore, the Executive shall be entitled to an additional vacation day for each full year during which the Executive has been in the full time employment of the Company, with an additional vacation day per year granted upon each subsequent anniversary of the commencement of the Executive's full time employment with the Company, which occurred on May 10, 1993; provided that the number of paid vacation days to which the Executive shall be entitled in a calendar year shall not exceed twenty (20) business days. Such vacation shall extend for such periods and shall be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive's duties hereunder and consistent with the Company's vacation policy. Section 6.02. Insurance Coverage. During the Term, the Company shall provide the Executive with group health, dental and life insurance protection to the same extent that it makes such protection available to its other key executive employees. Section 6.03. Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable expenses actually incurred by the Executive in connection with the business affairs of the Company and the performance of his duties hereunder. The Executive shall comply with such reasonable limitations nd reporting requirements with respect to such expenses as the Board may establish from time to time. - 3 - 4 Section 6.04. Disability and Other Benefits. If the Executive suffers any illness, disability or incapacity which prevents the Executive from performing the Executive's duties hereunder, and such illness, disability or incapacity shall be deemed by a duly licensed physician (who may be the Executive's personal physician) to be permanent; or, if the Executive is unable to render full-time services to the Company of the character required hereunder for a period of six (6) consecutive months by reason of illness, disability or incapacity, and the Board has determined that the Executive has been permanently disabled; then, and in either of such events, the Executive shall render such advisory and consulting services to the Company as may be reasonably requested of the Executive by the Board and officers of the Company but only to the extent that the Executive is able to perform such services. In such event, the Executive shall be paid the amount of One Hundred Sixty-One Thousand Five Hundred Dollars ($161,500) annually, payable in equal installments in conformity with the Company's normal payroll period. Such disability compensation shall commence upon the first day of the first month following the determination that the Executive's illness, disability or incapacity is permanent, and shall be paid for the balance of the Term even if the Executive's Employee's illness, disability or incapacity prevents the rendering by the Executive of any services to the Company and continues for the entire remaining Term. During such periods of disability, the Company reserves the right to, at its own expense, have a licensed physician examine the person of the Executive when and as often as it may reasonably require to determine if the Executive is permanently disabled. The Executive's disability compensation hereunder shall be reduced by the amount of any disability insurance proceeds paid to or for the benefit of the Executive under any policy, the premiums for - 4 - 5 which have been paid by the Company. The Executive will also be provided with those other benefits generally equivalent to those made available to key executive employees performing similar functions for similarly situated companies. Section 7. Termination. This Agreement shall be terminated at the end of the Term, or earlier as follows: Section 7.01. Death. This Agreement shall terminate upon the death of the Executive, except that the compensation provided in Section 4 shall continue through the end of the month in which the Executive's death occurs. Section 7.02. Permanent Disability. In the event of any physical or mental disability of the Executive rendering the Executive unable to perform his or her duties hereunder for a period of at least one hundred twenty (120) consecutive days and the further determination that the disability is permanent with regard to the Executive's ability to return to work in his or full capacity, this Agreement shall terminate automatically. Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive. Section 7.03. By The Company For Cause. The employment of the Executive may be terminated by the Company for Cause (as defined below) at any time effective upon written notice to the Executive. The Company shall provide the Executive with at least ten (10) business days' prior written notice of a Board meeting at which a termination for Cause will be considered and the Executive will have an opportunity to attend and participate in that meeting. For - 5 - 6 purposes hereof, the term "Cause" shall mean that the Board has determined that any one or more of the following has occurred: (a) The Executive shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any felony or a crime involving moral turpitude; (b) The Executive shall have repeatedly failed or refused to perform his duties hereunder and such failure or refusal shall have continued for a period of ten (10) days following written notice from the Board, it being understood that the Company's failure to achieve its business plan or projections shall not itself be considered a failure or refusal to perform duties; (c) the Executive shall have intentionally committed any fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or other act of dishonesty against the Company which has a material adverse effect on the Company; or (d) the Executive shall have (i) failed to perform his duties hereunder in a manner that is reasonably satisfactory to the Board, (ii) refused to carry out the duties assigned to him by the Board, or (iii) breached any one or more of the material provisions of this Agreement, which failure, refusal or breach shall have continued for a period of at least ten (10) days after notice from the Company describing such failure, refusal or breach in reasonable detail. Section 7.04. By the Company Without Cause. The Company may terminate the Executive's employment at any time without Cause effective upon written notice to the Executive. Section 7.05. Termination Without Cause Following Change of Control. In the event the Company undergoes a Change of Control, each of the following events at any time subsequent to such Change of Control shall be deemed to be a termination without Cause: (i) any reduction in the compensation payable to the Executive set forth in Section 4 herein; (ii) any change in the location of the place of work of the Executive to a location more than - 6 - 7 thirty miles from downtown Boston; and (iii) any violation by the Company of any provision of this Agreement. For purposes hereof a "Change of Control" shall mean the happening of any of the following events: (i) an acquisition by any person or group of persons of 50% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; (ii) the approval by the Directors or Shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all substantially all of the assets of the Company which would result in the voting securities of the Company immediately prior to such transaction continuing to represent less than 50% of the combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such transaction, or (iii) the members of the Board of Directors of the Company (or their respective successors designated by the stockholders which designated current members of the Board of Directors) on the date hereof shall not constitute a majority of the Board of Directors of the Company. Section 7.06. By the Executive Voluntarily. The Executive may terminate this Agreement at any time effective upon at least fifteen (15) business days' prior written notice to the Company. Section 8. Termination Payments and Benefits. Section 8.01. Voluntary Termination, Termination For Cause. Upon any termination of this Agreement: (1) voluntarily by the Executive or (2) by the Company for Cause as provided - 7 - 8 in Section 7.04, all payments, salary and other benefits hereunder shall cease at the effective date of termination except as specifically provided in this Section 8.02. Section 8.02. Termination without Cause, Company Election Not To Renew, Death, Disability. In the event that this Agreement is terminated by the Company without Cause, or because of the death or permanent disability of the Executive, the Executive shall receive as a termination settlement an amount equal to six (6) month's salary as is in effect at the effective date of termination (the "Termination Payment"). The Termination Payment shall be paid in six (6) monthly installments on the first business day of each month following the effective date of termination. If six (6) months following the termination, the Executive has not obtained employment with similar salary, benefits and responsibilities as described herein, the Executive shall receive as an additional termination settlement an amount equal to six (6) month's salary (the "Additional Termination Payment"); provided, however, such Additional Termination Payment shall be mitigated by the amount of salary the Executive shall receive during such additional six (6) month period. The Termination Payment shall be reduced by any statutorily-mandated severance, change of control, plant closing, or similar payment to the Executive by the Company or its stockholders. In addition to the Termination Payment, the Executive shall continue to receive the insurance benefits included as part of the fringe benefits referenced in Section 6 for a period of six (6) months following the effective date of termination and any death and disability benefits hereunder for a period of (eighteen) 18 months following the effective date of termination. - 8 - 9 Section 8.03. Acceleration of Options. In the event the Executive's employment terminates for any reason, other than for Cause or voluntarily by the Executive, any and all options to purchase Common Stock held by the Executive shall immediately vest and become fully exercisable. In addition, in the event the Company undergoes a Change of Control, all options of the Executive to purchase Common Stock of the Company which, by the terms of the grant of such options otherwise would become exercisable within one year following the date of the Change of Control, shall become exercisable upon the Change of Control, and all other options shall become exercisable one year earlier than provided for in the grant of such options. Section 8.04. Health and Life Insurance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall continue to provide the Executive the benefits set forth in Section 6.02 hereof for a period of six (6) months following the date of such termination. Section 8.05. Outplacement Assistance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall provide outplacement assistance to the Executive as is then reasonable and customary for similarly situated businesses up to a $15,000 maximum expenditure by the Company. Section 8.06. Public Statement of Termination. In the event the Executive's employment terminates for any reason, the Company and the Executive shall agree upon a public statement pertaining to the Executive's termination of employment, and the terms of said statement shall not be subject to subsequent modification by either party unless required by law; provided, however, that in the event the Company and the Executive are unable in good faith to - 9 - 10 agree on such a statement, the Company may make public statements as are necessary to comply with the law. Section 8.07. No Other Benefits. Except as specifically provided in this section 8, the Executive shall not be entitled to any compensation, severance or other benefits from the Company upon the termination of this Agreement for any reason whatsoever. Section 9. Merger Clause. The Company shall not consolidate, merge or transfer all or a substantial portion of its assets without requiring the transferee to assume this Agreement and the obligations hereunder. Section 10. Severable Provisions. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law. Section 11. Notices. All notices hereunder, to be effective, shall be in writing and shall be delivered by hand or mailed by certified mail, postage and fees prepaid, as follows: If to the Company: Voicetek Corporation 19 Alpha Road Chelmsford, MA 01824-4175 Attn: President - 10 - 11 Copy to: Anthony J. Medaglia, Jr., Esq. HUTCHINS, WHEELER & DITTMAR A Professional Corporation 101 Federal Street Boston, MA 02110 If to the Executive: Scott Ganson 229 Beacon Street, Apt. 4 Boston, MA 02116 or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 11. Section 12. Miscellaneous. Section 12.01. Modification. This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties. Section 12.02. Assignment and Transfer. This Agreement shall not be terminated by the merger or consolidation of the Company with any corporate or other entity or by the transfer of all or substantially all of the assets of the Company to any other person, corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any such successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of the Executive shall be assignable by the Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement be encumbered, transferred or in any way anticipated. - 11 - 12 Section 12.03. Captions. Captions herein have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement. Section 12.04. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of The Commonwealth of Massachusetts. [The Rest of This Page Intentionally Left Blank] - 12 - 13 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a sealed instrument as of the day and year first above written. VOICETEK By:_____________________________________ President EXECUTIVE By:_____________________________________ Name: - 13 - 14 EXHIBIT 10.13 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT, dated and entered into as of the 13th day of January, 1997, by and between Voicetek Corporation , a Massachusetts corporation (the "Company"), and Paul Gagne, an individual residing at 162 Duck Pond Road, Groton, MA 01450 (the "Executive"). WHEREAS, the Company desires to engage the full-time services of the Executive; WHEREAS, the Executive desires to be so employed by the Company; and WHEREAS, the Company desires to be assured that the unique and expert services of the Executive will be available solely to the Company on such full-time basis, and that the Executive is willing and able to render such services on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: Section 1. Employment. The Company hereby employs the Executive as its Executive Vice President of Engineering, and the Executive hereby accepts such employment under and subject to the terms and conditions hereinafter set forth. The Executive further agrees to serve as a member of the Board of Directors (the "Board") of the Company if elected or appointed to such office in accordance with the Company's By-Laws. Section 2. Term. Unless sooner terminated as provided in Section 7, the term of employment under this Agreement shall begin on the date hereof and shall conclude on 15 January 12, 2000 (the "Term"). Section 3. Duties. The Executive shall serve as Executive Vice President of Engineering, and he shall perform additional duties as the Board of Directors or the President of the Corporation may assign to him from time to time. The Executive hereby agrees to devote his full business time and best efforts to the faithful performance of such duties and to the promotion and forwarding of the business and affairs of the Company for the Term. Section 4. Salary Compensation. In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the "Base Salary") at the rate of One Hundred Seventy Thousand Dollars ($170,000) per calendar year. The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried key executive employees, and the Board may change the Base Salary from time to time in its sole discretion; provided, however, that in no event shall the Base Salary for any calendar year be less than the Base Salary in effect for the immediately prior calendar year. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 6. Fringe Benefits. As a key executive employee of the Company, the Executive shall be eligible to participate in all employee fringe benefit programs as are made available from time to time to the Company's key executive employees. Section 6. Benefits. In addition to the compensation detailed in Section 4 and 5 of this Agreement, the Executive shall be entitled to the following additional benefits: - 2 - 16 Section 6.01. Paid Vacation. The Executive shall be entitled to four (4) weeks paid vacation per calendar year, such vacation to extend for such periods and shall be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive's duties hereunder and consistent with the Company's vacation policy. Section 6.02. Insurance Coverage. During the Term, the Company shall provide the Executive with group health, dental and life insurance protection to the same extent that it makes such protection available to its other key executive employees. Section 6.03. Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable expenses actually incurred by the Executive in connection with the business affairs of the Company and the performance of his duties hereunder. The Executive shall comply with such reasonable limitations and reporting requirements with respect to such expenses as the Board may establish from time to time. Section 6.04. Disability and Other Benefits. If the Executive suffers any illness, disability or incapacity which prevents the Executive from performing the Executive's duties hereunder, and such illness, disability or incapacity shall be deemed by a duly licensed physician (who may be the Executive's personal physician) to be permanent; or, if the Executive is unable to render full-time services to the Company of the character required hereunder for a period of six (6) consecutive months by reason of illness, disability or incapacity, and the Board has determined that the Executive has been permanently disabled; then, and in either of such events, the Executive shall render such advisory and consulting services to the Company as may be reasonably requested of the Executive by the Board and officers of the Company but only to the - 3 - 17 extent that the Executive is able to perform such services. In such event, the Executive shall be paid the amount of One Hundred Seventy Thousand Dollars ($170,000) annually, payable in equal installments in conformity with the Company's normal payroll period. Such disability compensation shall commence upon the first day of the first month following the determination that the Executive's illness, disability or incapacity is permanent, and shall be paid for the balance of the Term even if the Executive's Employee's illness, disability or incapacity prevents the rendering by the Executive of any services to the Company and continues for the entire remaining Term. During such periods of disability, the Company reserves the right to, at its own expense, have a licensed physician examine the person of the Executive when and as often as it may reasonably require to determine if the Executive is permanently disabled. The Executive's disability compensation hereunder shall be reduced by the amount of any disability insurance proceeds paid to or for the benefit of the Executive under any policy, the premiums for which have been paid by the Company. The Executive will also be provided with those other benefits generally equivalent to those made available to key executive employees performing similar functions for similarly situated companies. Section 7. Termination. This Agreement shall be terminated at the end of the Term, or earlier as follows: Section 7.01. Death. This Agreement shall terminate upon the death of the Executive, except that the compensation provided in Section 4 shall continue through the end of the month in which the Executive's death occurs. - 4 - 18 Section 7.02. Permanent Disability. In the event of any physical or mental disability of the Executive rendering the Executive unable to perform his or her duties hereunder for a period of at least one hundred twenty (120) consecutive days and the further determination that the disability is permanent with regard to the Executive's ability to return to work in his or full capacity, this Agreement shall terminate automatically. Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive. Section 7.03. By The Company For Cause. The employment of the Executive may be terminated by the Company for Cause (as defined below) at any time effective upon written notice to the Executive. The Company shall provide the Executive with at least ten (10) business days' prior written notice of a Board meeting at which a termination for Cause will be considered and the Executive will have an opportunity to attend and participate in that meeting. For purposes hereof, the term "Cause" shall mean that the Board has determined that any one or more of the following has occurred: (a) The Executive shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any felony or a crime involving moral turpitude; (b) The Executive shall have repeatedly failed or refused to perform his duties hereunder and such failure or refusal shall have continued for a period of ten (10) days following written notice from the Board, it being understood that the Company's failure to achieve its business plan or projections shall not itself be considered a failure or refusal to perform duties; (c) the Executive shall have intentionally committed any fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or other act of dishonesty against the Company which has a material adverse effect on the Company; or - 5 - 19 (d) the Executive shall have (i) failed to perform his duties hereunder in a manner that is reasonably satisfactory to the Board, (ii) refused to carry out the duties assigned to him by the Board, or (iii) breached any one or more of the material provisions of this Agreement, which failure, refusal or breach shall have continued for a period of at least ten (10) days after notice from the Company describing such failure, refusal or breach in reasonable detail. Section 7.04. By the Company Without Cause. The Company may terminate the Executive's employment at any time without Cause effective upon written notice to the Executive. Section 7.05. Termination Without Cause Following Change of Control. In the event the Company undergoes a Change of Control, each of the following events at any time subsequent to such Change of Control shall be deemed to be a termination without Cause: (i) any reduction in the compensation payable to the Executive set forth in Section 4 herein; (ii) any change in the location of the place of work of the Executive to a location more than thirty miles from downtown Boston; and (iii) any violation by the Company of any provision of this Agreement. For purposes hereof a "Change of Control" shall mean the happening of any of the following events: (i) an acquisition by any person or group of persons of 50% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; (ii) the approval by the Directors or Shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all substantially all of the assets of the Company which would result in the voting securities of the Company immediately prior to such transaction continuing to represent less than 50% of the - 6 - 20 combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such transaction, or (iii) the members of the Board of Directors of the Company (or their respective successors designated by the stockholders which designated current members of the Board of Directors) on the date hereof shall not constitute a majority of the Board of Directors of the Company. Section 7.06. By the Executive Voluntarily. The Executive may terminate this Agreement at any time effective upon at least fifteen (15) business days' prior written notice to the Company. Section 8. Termination Payments and Benefits. Section 8.01. Voluntary Termination, Termination For Cause. Upon any termination of this Agreement: (1) voluntarily by the Executive or (2) by the Company for Cause as provided in Section 7.04, all payments, salary and other benefits hereunder shall cease at the effective date of termination except as specifically provided in this Section 8.02. Section 8.02. Termination without Cause, Company Election Not To Renew, Death, Disability In the event that this Agreement is terminated by the Company without Cause, or because of the death or permanent disability of the Executive, the Executive shall receive as a termination settlement an amount equal to six (6) month's salary as is in effect at the effective date of termination (the "Termination Payment"). The Termination Payment shall be paid in six (6) monthly installments on the first business day of each month following the effective date of termination. If six (6) months following the termination, the Executive has not obtained employment with similar salary, benefits and responsibilities as described herein, the Executive - 7 - 21 shall receive as an additional termination settlement an amount equal to six (6) month's salary (the "Additional Termination Payment"); provided, however, such Additional Termination Payment shall be mitigated by the amount of salary the Executive shall receive during such additional six (6) month period. The Termination Payment shall be reduced by any statutorily-mandated severance, change of control, plant closing, or similar payment to the Executive by the Company or its stockholders. In addition to the Termination Payment, the Executive shall continue to receive the insurance benefits included as part of the fringe benefits referenced in Section 6 for a period of six (6) months following the effective date of termination and any death and disability benefits hereunder for a period of (eighteen) 18 months following the effective date of termination. Section 8.03. Acceleration of Options. In the event the Executive's employment terminates for any reason, other than for Cause or voluntarily by the Executive, any and all options to purchase Common Stock held by the Executive shall immediately vest and become fully exercisable. In addition, in the event the Company undergoes a Change of Control, all options of the Executive to purchase Common Stock of the Company which, by the terms of the grant of such options otherwise would become exercisable within one year following the date of the Change of Control, shall become exercisable upon the Change of Control, and all other options shall become exercisable one year earlier than provided for in the grant of such options. Section 8.04. Health and Life Insurance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall continue to provide the - 8 - 22 Executive the benefits set forth in Section 6.02 hereof for a period of six (6) months following the date of such termination. Section 8.05. Outplacement Assistance. In the event the Executive's employment terminates for any reason , other than for Cause, the Company shall provide outplacement assistance to the Executive as is then reasonable and customary for similarly situated businesses up to a $15,000 maximum expenditure by the Company. Section 8.06. Public Statement of Termination. In the event the Executive's employment terminates for any reason, the Company and the Executive shall agree upon a public statement pertaining to the Executive's termination of employment, and the terms of said statement shall not be subject to subsequent modification by either party unless required by law; provided, however, that in the event the Company and the Executive are unable in good faith to agree on such a statement, the Company may make public statements as are necessary to comply with the law. Section 8.07. No Other Benefits. Except as specifically provided in this section 8, the Executive shall not be entitled to any compensation, severance or other benefits from the Company upon the termination of this Agreement for any reason whatsoever. Section 9. Merger Clause. The Company shall not consolidate, merge or transfer all or a substantial portion of its assets without requiring the transferee to assume this Agreement and the obligations hereunder. Section 10. Severable Provisions. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. - 9 - 23 In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law. Section 11. Notices. All notices hereunder, to be effective, shall be in writing and shall be delivered by hand or mailed by certified mail, postage and fees prepaid, as follows: If to the Company: Voicetek Corporation 19 Alpha Road Chelmsford, MA 01824-4175 Attn: President Copy to: Anthony J. Medaglia, Jr., Esq. HUTCHINS, WHEELER & DITTMAR A Professional Corporation 101 Federal Street Boston, MA 02110 If to the Executive: Paul Gagne 162 Duck Pond Road Groton, MA 01450 or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 11. - 10 - 24 Section 12. Miscellaneous. Section 12.01. Modification. This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties. Section 12.02. Assignment and Transfer. This Agreement shall not be terminated by the merger or consolidation of the Company with any corporate or other entity or by the transfer of all or substantially all of the assets of the Company to any other person, corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any such successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of the Executive shall be assignable by the Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement be encumbered, transferred or in any way anticipated. Section 12.03. Captions. Captions herein have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement. Section 12.04. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of The Commonwealth of Massachusetts. [The Rest of This Page Intentionally Left Blank] - 11 - 25 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a sealed instrument as of the day and year first above written. VOICETEK By:_____________________________________ President EXECUTIVE By:_____________________________________ Name: - 12 - EX-10.14 18 EXECUTIVE EMPLOYMENT AGREEMENT/ S. GANSON 1 EXHIBIT 10.14 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT, dated and entered into as of the 13th day of January, 1997, by and between Voicetek Corporation , a Massachusetts corporation (the "Company"), and Scott Ganson, an individual residing at 229 Beacon Street, Apt. 4, Boston, MA 02116 (the "Executive"). WHEREAS, the Company desires to engage the full-time services of the Executive; WHEREAS, the Executive desires to be so employed by the Company; and WHEREAS, the Company desires to be assured that the unique and expert services of the Executive will be available solely to the Company on such full-time basis, and that the Executive is willing and able to render such services on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: Section 1. Employment. The Company hereby employs the Executive as its Vice President of Sales and Customer Service, and the Executive hereby accepts such employment under and subject to the terms and conditions hereinafter set forth. The Executive further agrees to serve as a member of the Board of Directors (the "Board") of the Company if elected or appointed to such office in accordance with the Company's By-Laws. 2 Section 2. Term. Unless sooner terminated as provided in Section 7, the term of employment under this Agreement shall begin on the date hereof and shall conclude on January 12, 2000 (the "Term"). Section 3. Duties. The Executive shall serve as Vice President of Sales and Customer Service, and he shall perform additional duties as the Board of Directors or the President of the Corporation may assign to him from time to time. The Executive hereby agrees to devote his full business time and best efforts to the faithful performance of such duties and to the promotion and forwarding of the business and affairs of the Company for the Term. Section 4. Salary Compensation. In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the "Base Salary") at the rate of One Hundred Sixty-One Thousand Five Hundred Dollars ($161,500) per calendar year. The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried key executive employees, and the Board may change the Base Salary from time to time in its sole discretion; provided, however, that in no event shall the Base Salary for any calendar year be less than the Base Salary in effect for the immediately prior calendar year. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 6. Fringe Benefits. As a key executive employee of the Company, the Executive shall be eligible to participate in all employee fringe benefit programs as are made available from time to time to the Company's key executive employees. - 2 - 3 Section 6. Benefits. In addition to the compensation detailed in Section 4 and 5 of this Agreement, the Executive shall be entitled to the following additional benefits: Section 6.01. Paid Vacation. The Executive shall be entitled to fifteen (15) business days paid vacation per calendar year. Furthermore, the Executive shall be entitled to an additional vacation day for each full year during which the Executive has been in the full time employment of the Company, with an additional vacation day per year granted upon each subsequent anniversary of the commencement of the Executive's full time employment with the Company, which occurred on May 10, 1993; provided that the number of paid vacation days to which the Executive shall be entitled in a calendar year shall not exceed twenty (20) business days. Such vacation shall extend for such periods and shall be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive's duties hereunder and consistent with the Company's vacation policy. Section 6.02. Insurance Coverage. During the Term, the Company shall provide the Executive with group health, dental and life insurance protection to the same extent that it makes such protection available to its other key executive employees. Section 6.03. Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable expenses actually incurred by the Executive in connection with the business affairs of the Company and the performance of his duties hereunder. The Executive shall comply with such reasonable limitations nd reporting requirements with respect to such expenses as the Board may establish from time to time. - 3 - 4 Section 6.04. Disability and Other Benefits. If the Executive suffers any illness, disability or incapacity which prevents the Executive from performing the Executive's duties hereunder, and such illness, disability or incapacity shall be deemed by a duly licensed physician (who may be the Executive's personal physician) to be permanent; or, if the Executive is unable to render full-time services to the Company of the character required hereunder for a period of six (6) consecutive months by reason of illness, disability or incapacity, and the Board has determined that the Executive has been permanently disabled; then, and in either of such events, the Executive shall render such advisory and consulting services to the Company as may be reasonably requested of the Executive by the Board and officers of the Company but only to the extent that the Executive is able to perform such services. In such event, the Executive shall be paid the amount of One Hundred Sixty-One Thousand Five Hundred Dollars ($161,500) annually, payable in equal installments in conformity with the Company's normal payroll period. Such disability compensation shall commence upon the first day of the first month following the determination that the Executive's illness, disability or incapacity is permanent, and shall be paid for the balance of the Term even if the Executive's Employee's illness, disability or incapacity prevents the rendering by the Executive of any services to the Company and continues for the entire remaining Term. During such periods of disability, the Company reserves the right to, at its own expense, have a licensed physician examine the person of the Executive when and as often as it may reasonably require to determine if the Executive is permanently disabled. The Executive's disability compensation hereunder shall be reduced by the amount of any disability insurance proceeds paid to or for the benefit of the Executive under any policy, the premiums for - 4 - 5 which have been paid by the Company. The Executive will also be provided with those other benefits generally equivalent to those made available to key executive employees performing similar functions for similarly situated companies. Section 7. Termination. This Agreement shall be terminated at the end of the Term, or earlier as follows: Section 7.01. Death. This Agreement shall terminate upon the death of the Executive, except that the compensation provided in Section 4 shall continue through the end of the month in which the Executive's death occurs. Section 7.02. Permanent Disability. In the event of any physical or mental disability of the Executive rendering the Executive unable to perform his or her duties hereunder for a period of at least one hundred twenty (120) consecutive days and the further determination that the disability is permanent with regard to the Executive's ability to return to work in his or full capacity, this Agreement shall terminate automatically. Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive. Section 7.03. By The Company For Cause. The employment of the Executive may be terminated by the Company for Cause (as defined below) at any time effective upon written notice to the Executive. The Company shall provide the Executive with at least ten (10) business days' prior written notice of a Board meeting at which a termination for Cause will be considered and the Executive will have an opportunity to attend and participate in that meeting. For - 5 - 6 purposes hereof, the term "Cause" shall mean that the Board has determined that any one or more of the following has occurred: (a) The Executive shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any felony or a crime involving moral turpitude; (b) The Executive shall have repeatedly failed or refused to perform his duties hereunder and such failure or refusal shall have continued for a period of ten (10) days following written notice from the Board, it being understood that the Company's failure to achieve its business plan or projections shall not itself be considered a failure or refusal to perform duties; (c) the Executive shall have intentionally committed any fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or other act of dishonesty against the Company which has a material adverse effect on the Company; or (d) the Executive shall have (i) failed to perform his duties hereunder in a manner that is reasonably satisfactory to the Board, (ii) refused to carry out the duties assigned to him by the Board, or (iii) breached any one or more of the material provisions of this Agreement, which failure, refusal or breach shall have continued for a period of at least ten (10) days after notice from the Company describing such failure, refusal or breach in reasonable detail. Section 7.04. By the Company Without Cause. The Company may terminate the Executive's employment at any time without Cause effective upon written notice to the Executive. Section 7.05. Termination Without Cause Following Change of Control. In the event the Company undergoes a Change of Control, each of the following events at any time subsequent to such Change of Control shall be deemed to be a termination without Cause: (i) any reduction in the compensation payable to the Executive set forth in Section 4 herein; (ii) any change in the location of the place of work of the Executive to a location more than - 6 - 7 thirty miles from downtown Boston; and (iii) any violation by the Company of any provision of this Agreement. For purposes hereof a "Change of Control" shall mean the happening of any of the following events: (i) an acquisition by any person or group of persons of 50% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; (ii) the approval by the Directors or Shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all substantially all of the assets of the Company which would result in the voting securities of the Company immediately prior to such transaction continuing to represent less than 50% of the combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such transaction, or (iii) the members of the Board of Directors of the Company (or their respective successors designated by the stockholders which designated current members of the Board of Directors) on the date hereof shall not constitute a majority of the Board of Directors of the Company. Section 7.06. By the Executive Voluntarily. The Executive may terminate this Agreement at any time effective upon at least fifteen (15) business days' prior written notice to the Company. Section 8. Termination Payments and Benefits. Section 8.01. Voluntary Termination, Termination For Cause. Upon any termination of this Agreement: (1) voluntarily by the Executive or (2) by the Company for Cause as provided - 7 - 8 in Section 7.04, all payments, salary and other benefits hereunder shall cease at the effective date of termination except as specifically provided in this Section 8.02. Section 8.02. Termination without Cause, Company Election Not To Renew, Death, Disability. In the event that this Agreement is terminated by the Company without Cause, or because of the death or permanent disability of the Executive, the Executive shall receive as a termination settlement an amount equal to six (6) month's salary as is in effect at the effective date of termination (the "Termination Payment"). The Termination Payment shall be paid in six (6) monthly installments on the first business day of each month following the effective date of termination. If six (6) months following the termination, the Executive has not obtained employment with similar salary, benefits and responsibilities as described herein, the Executive shall receive as an additional termination settlement an amount equal to six (6) month's salary (the "Additional Termination Payment"); provided, however, such Additional Termination Payment shall be mitigated by the amount of salary the Executive shall receive during such additional six (6) month period. The Termination Payment shall be reduced by any statutorily-mandated severance, change of control, plant closing, or similar payment to the Executive by the Company or its stockholders. In addition to the Termination Payment, the Executive shall continue to receive the insurance benefits included as part of the fringe benefits referenced in Section 6 for a period of six (6) months following the effective date of termination and any death and disability benefits hereunder for a period of (eighteen) 18 months following the effective date of termination. - 8 - 9 Section 8.03. Acceleration of Options. In the event the Executive's employment terminates for any reason, other than for Cause or voluntarily by the Executive, any and all options to purchase Common Stock held by the Executive shall immediately vest and become fully exercisable. In addition, in the event the Company undergoes a Change of Control, all options of the Executive to purchase Common Stock of the Company which, by the terms of the grant of such options otherwise would become exercisable within one year following the date of the Change of Control, shall become exercisable upon the Change of Control, and all other options shall become exercisable one year earlier than provided for in the grant of such options. Section 8.04. Health and Life Insurance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall continue to provide the Executive the benefits set forth in Section 6.02 hereof for a period of six (6) months following the date of such termination. Section 8.05. Outplacement Assistance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall provide outplacement assistance to the Executive as is then reasonable and customary for similarly situated businesses up to a $15,000 maximum expenditure by the Company. Section 8.06. Public Statement of Termination. In the event the Executive's employment terminates for any reason, the Company and the Executive shall agree upon a public statement pertaining to the Executive's termination of employment, and the terms of said statement shall not be subject to subsequent modification by either party unless required by law; provided, however, that in the event the Company and the Executive are unable in good faith to - 9 - 10 agree on such a statement, the Company may make public statements as are necessary to comply with the law. Section 8.07. No Other Benefits. Except as specifically provided in this section 8, the Executive shall not be entitled to any compensation, severance or other benefits from the Company upon the termination of this Agreement for any reason whatsoever. Section 9. Merger Clause. The Company shall not consolidate, merge or transfer all or a substantial portion of its assets without requiring the transferee to assume this Agreement and the obligations hereunder. Section 10. Severable Provisions. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law. Section 11. Notices. All notices hereunder, to be effective, shall be in writing and shall be delivered by hand or mailed by certified mail, postage and fees prepaid, as follows: If to the Company: Voicetek Corporation 19 Alpha Road Chelmsford, MA 01824-4175 Attn: President - 10 - 11 Copy to: Anthony J. Medaglia, Jr., Esq. HUTCHINS, WHEELER & DITTMAR A Professional Corporation 101 Federal Street Boston, MA 02110 If to the Executive: Scott Ganson 229 Beacon Street, Apt. 4 Boston, MA 02116 or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 11. Section 12. Miscellaneous. Section 12.01. Modification. This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties. Section 12.02. Assignment and Transfer. This Agreement shall not be terminated by the merger or consolidation of the Company with any corporate or other entity or by the transfer of all or substantially all of the assets of the Company to any other person, corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any such successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of the Executive shall be assignable by the Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement be encumbered, transferred or in any way anticipated. - 11 - 12 Section 12.03. Captions. Captions herein have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement. Section 12.04. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of The Commonwealth of Massachusetts. [The Rest of This Page Intentionally Left Blank] - 12 - 13 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a sealed instrument as of the day and year first above written. VOICETEK By:_____________________________________ President EXECUTIVE By:_____________________________________ Name: - 13 - EX-10.15 19 EXECUTIVE EMPLOYMENT AGREEMENT/ D. PORENSKI 1 EXHIBIT 10.15 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT, dated and entered into as of the 13th day of January, 1997, by and between Voicetek Corporation , a Massachusetts corporation (the "Company"), and Daniel Poranski, an individual residing at 137 Linebrook Road, Ipswich, MA 01938 (the "Executive"). WHEREAS, the Company desires to engage the full-time services of the Executive; WHEREAS, the Executive desires to be so employed by the Company; and WHEREAS, the Company desires to be assured that the unique and expert services of the Executive will be available solely to the Company on such full-time basis, and that the Executive is willing and able to render such services on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of such employment and the mutual covenants and promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: Section 1. Employment. The Company hereby employs the Executive as its Vice President of Marketing, and the Executive hereby accepts such employment under and subject to the terms and conditions hereinafter set forth. The Executive further agrees to serve as a member of the Board of Directors (the "Board") of the Company if elected or appointed to such office in accordance with the Company's By-Laws. Section 2. Term. Unless sooner terminated as provided in Section 7, the term of employment under this Agreement shall begin on the date hereof and shall conclude on 2 January 12, 2000 (the "Term"). Section 3. Duties. The Executive shall serve as Vice President of Marketing, and he shall perform additional duties as the Board of Directors or the President of the Corporation may assign to him from time to time. The Executive hereby agrees to devote his full business time and best efforts to the faithful performance of such duties and to the promotion and forwarding of the business and affairs of the Company for the Term. Section 4. Salary Compensation. In consideration of the services rendered by the Executive under this Agreement, the Company shall pay the Executive a base salary (the "Base Salary") at the rate of One Hundred Thirty-Two Thousand Dollars ($132,000) per calendar year. The Base Salary shall be paid in such installments and at such times as the Company pays its regularly salaried key executive employees, and the Board may change the Base Salary from time to time in its sole discretion; provided, however, that in no event shall the Base Salary for any calendar year be less than the Base Salary in effect for the immediately prior calendar year. Section 5. Bonus Compensation. The Executive shall be entitled to receive such incentive or performance bonuses as the Board may determine from time to time. Section 6. Fringe Benefits. As a key executive employee of the Company, the Executive shall be eligible to participate in all employee fringe benefit programs as are made available from time to time to the Company's key executive employees. Section 6. Benefits. In addition to the compensation detailed in Section 4 and 5 of this Agreement, the Executive shall be entitled to the following additional benefits: -2- 3 Section 6.01. Paid Vacation. The Executive shall be entitled to fifteen (15) business days paid vacation per calendar year. The Executive shall be entitled to an additional vacation day for each full year during which the Executive has been in the full time employment of the Company, with an additional vacation day per year granted upon each subsequent anniversary of the commencement of the Executive's full time employment with the Company, which occurred on April 1, 1996; provided that the number of paid vacation days to which the Executive shall be entitled in a calendar year shall not exceed twenty (20) business days. Such vacation shall extend for such periods and shall be taken at such intervals as shall be appropriate and consistent with the proper performance of the Executive's duties hereunder and consistent with the Company's vacation policy. Section 6.02. Insurance Coverage. During the Term, the Company shall provide the Executive with group health, dental and life insurance protection to the same extent that it makes such protection available to its other key executive employees. Section 6.03. Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable expenses actually incurred by the Executive in connection with the business affairs of the Company and the performance of his duties hereunder. The Executive shall comply with such reasonable limitations and reporting requirements with respect to such expenses as the Board may establish from time to time. Section 6.04. Disability and Other Benefits. If the Executive suffers any illness, disability or incapacity which prevents the Executive from performing the Executive's duties hereunder, and such illness, disability or incapacity shall be deemed by a duly licensed physician -3- 4 (who may be the Executive's personal physician) to be permanent; or, if the Executive is unable to render full-time services to the Company of the character required hereunder for a period of six (6) consecutive months by reason of illness, disability or incapacity, and the Board has determined that the Executive has been permanently disabled; then, and in either of such events, the Executive shall render such advisory and consulting services to the Company as may be reasonably requested of the Executive by the Board and officers of the Company but only to the extent that the Executive is able to perform such services. In such event, the Executive shall be paid the amount of One Hundred Thirty-Two Thousand Dollars ($132,000) annually, payable in equal installments in conformity with the Company's normal payroll period. Such disability compensation shall commence upon the first day of the first month following the determination that the Executive's illness, disability or incapacity is permanent, and shall be paid for the balance of the Term even if the Executive's Employee's illness, disability or incapacity prevents the rendering by the Executive of any services to the Company and continues for the entire remaining Term. During such periods of disability, the Company reserves the right to, at its own expense, have a licensed physician examine the person of the Executive when and as often as it may reasonably require to determine if the Executive is permanently disabled. The Executive's disability compensation hereunder shall be reduced by the amount of any disability insurance proceeds paid to or for the benefit of the Executive under any policy, the premiums for which have been paid by the Company. The Executive will also be provided with those other benefits generally equivalent to those made available to key executive employees performing similar functions for similarly situated companies. -4- 5 Section 7. Termination. This Agreement shall be terminated at the end of the Term, or earlier as follows: Section 7.01. Death. This Agreement shall terminate upon the death of the Executive, except that the compensation provided in Section 4 shall continue through the end of the month in which the Executive's death occurs. Section 7.02. Permanent Disability. In the event of any physical or mental disability of the Executive rendering the Executive unable to perform his or her duties hereunder for a period of at least one hundred twenty (120) consecutive days and the further determination that the disability is permanent with regard to the Executive's ability to return to work in his or full capacity, this Agreement shall terminate automatically. Any determination of disability shall be made by the Board in consultation with a qualified physician or physicians selected by the Board and reasonably acceptable to the Executive. Section 7.03. By The Company For Cause. The employment of the Executive may be terminated by the Company for Cause (as defined below) at any time effective upon written notice to the Executive. The Company shall provide the Executive with at least ten (10) business days' prior written notice of a Board meeting at which a termination for Cause will be considered and the Executive will have an opportunity to attend and participate in that meeting. For purposes hereof, the term "Cause" shall mean that the Board has determined that any one or more of the following has occurred: (a) The Executive shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any felony or a crime involving moral turpitude; -5- 6 (b) The Executive shall have repeatedly failed or refused to perform his duties hereunder and such failure or refusal shall have continued for a period of ten (10) days following written notice from the Board, it being understood that the Company's failure to achieve its business plan or projections shall not itself be considered a failure or refusal to perform duties; (c) the Executive shall have intentionally committed any fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or other act of dishonesty against the Company which has a material adverse effect on the Company; or (d) the Executive shall have (i) failed to perform his duties hereunder in a manner that is reasonably satisfactory to the Board, (ii) refused to carry out the duties assigned to him by the Board, or (iii) breached any one or more of the material provisions of this Agreement, which failure, refusal or breach shall have continued for a period of at least ten (10) days after notice from the Company describing such failure, refusal or breach in reasonable detail. Section 7.04. By the Company Without Cause. The Company may terminate the Executive's employment at any time without Cause effective upon written notice to the Executive. Section 7.05. Termination Without Cause Following Change of Control. IN THE EVENT THE COMPANY UNDERGOES A CHANGE OF CONTROL, EACH OF THE FOLLOWING EVENTS AT ANY TIME SUBSEQUENT TO SUCH CHANGE OF CONTROL SHALL BE DEEMED TO BE A TERMINATION WITHOUT CAUSE: (i) ANY REDUCTION IN THE COMPENSATION PAYABLE TO THE EXECUTIVE SET FORTH IN SECTION 4 HEREIN; (ii) ANY CHANGE IN THE LOCATION OF THE PLACE OF WORK OF THE EXECUTIVE TO A LOCATION MORE THAN THIRTY MILES FROM DOWNTOWN BOSTON; AND (iii) ANY VIOLATION BY THE COMPANY OF ANY PROVISION OF THIS AGREEMENT. For purposes hereof a "Change of Control" shall mean the happening of any of the following events: (i) an acquisition by any person or group of persons of 50% or more of the -6- 7 combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; (ii) the approval by the Directors or Shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all substantially all of the assets of the Company which would result in the voting securities of the Company immediately prior to such transaction continuing to represent less than 50% of the combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such transaction, or (iii) the members of the Board of Directors of the Company (or their respective successors designated by the stockholders which designated current members of the Board of Directors) on the date hereof shall not constitute a majority of the Board of Directors of the Company. Section 7.06. By the Executive Voluntarily. The Executive may terminate this Agreement at any time effective upon at least fifteen (15) business days' prior written notice to the Company. Section 8. Termination Payments and Benefits. Section 8.01. Voluntary Termination, Termination For Cause. Upon any termination of this Agreement: (1) voluntarily by the Executive or (2) by the Company for Cause as provided in Section 7.04, all payments, salary and other benefits hereunder shall cease at the effective date of termination except as specifically provided in this Section 8.02. Section 8.02. Termination without Cause, Company Election Not To Renew, Death, Disability In the event that this Agreement is terminated by the Company without Cause, or because of the death or permanent disability of the Executive, the Executive shall receive as a -7- 8 termination settlement an amount equal to six (6) month's salary as is in effect at the effective date of termination (the "Termination Payment"). The Termination Payment shall be paid in six (6) monthly installments on the first business day of each month following the effective date of termination. If six (6) months following the termination, the Executive has not obtained employment with similar salary, benefits and responsibilities as described herein, the Executive shall receive as an additional termination settlement an amount equal to six (6) month's salary (the "Additional Termination Payment"); provided, however, such Additional Termination Payment shall be mitigated by the amount of salary the Executive shall receive during such additional six (6) month period. The Termination Payment shall be reduced by any statutorily-mandated severance, change of control, plant closing, or similar payment to the Executive by the Company or its stockholders. In addition to the Termination Payment, the Executive shall continue to receive the insurance benefits included as part of the fringe benefits referenced in Section 6 for a period of six (6) months following the effective date of termination and any death and disability benefits hereunder for a period of (eighteen) 18 months following the effective date of termination. Section 8.03. Acceleration of Options. In the event the Executive's employment terminates for any reason, other than for Cause or voluntarily by the Executive, any and all options to purchase Common Stock held by the Executive shall immediately vest and become fully exercisable. In addition, in the event the Company undergoes a Change of Control, all options of the Executive to purchase Common Stock of the Company which, by the terms of the grant of such options otherwise would become exercisable within one year following the date of -8- 9 the Change of Control, shall become exercisable upon the Change of Control, and all other options shall become exercisable one year earlier than provided for in the grant of such options. Section 8.04. Health and Life Insurance. In the event the Executive's employment terminates for any reason, other than for Cause, the Company shall continue to provide the Executive the benefits set forth in Section 6.02 hereof for a period of six (6) months following the date of such termination. Section 8.05. Outplacement Assistance. In the event the Executive's employment terminates for any reason , other than for Cause, the Company shall provide outplacement assistance to the Executive as is then reasonable and customary for similarly situated businesses up to a $15,000 maximum expenditure by the Company. Section 8.06. Public Statement of Termination. In the event the Executive's employment terminates for any reason, the Company and the Executive shall agree upon a public statement pertaining to the Executive's termination of employment, and the terms of said statement shall not be subject to subsequent modification by either party unless required by law; provided, however, that in the event the Company and the Executive are unable in good faith to agree on such a statement, the Company may make public statements as are necessary to comply with the law. Section 8.07. No Other Benefits. Except as specifically provided in this section 8, the Executive shall not be entitled to any compensation, severance or other benefits from the Company upon the termination of this Agreement for any reason whatsoever. -9- 10 Section 9. Merger Clause. The Company shall not consolidate, merge or transfer all or a substantial portion of its assets without requiring the transferee to assume this Agreement and the obligations hereunder. Section 10. Severable Provisions. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the parties hereto agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law. Section 11. Notices. All notices hereunder, to be effective, shall be in writing and shall be delivered by hand or mailed by certified mail, postage and fees prepaid, as follows: If to the Company: Voicetek Corporation 19 Alpha Road Chelmsford, MA 01824-4175 Attn: President Copy to: Anthony J. Medaglia, Jr., Esq. HUTCHINS, WHEELER & DITTMAR A Professional Corporation 101 Federal Street Boston, MA 02110 If to the Executive: Daniel Poranski 137 Linebrook Road Ipswich, MA 01938 -10- 11 or to such other address as a party may notify the other pursuant to a notice given in accordance with this Section 11. Section 12. Miscellaneous. Section 12.01. Modification. This Agreement constitutes the entire Agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties. Section 12.02. Assignment and Transfer. This Agreement shall not be terminated by the merger or consolidation of the Company with any corporate or other entity or by the transfer of all or substantially all of the assets of the Company to any other person, corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any such successor in interest to the Company. Neither this Agreement nor any of the rights, duties or obligations of the Executive shall be assignable by the Executive, nor shall any of the payments required or permitted to be made to the Executive by this Agreement be encumbered, transferred or in any way anticipated. Section 12.03. Captions. Captions herein have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement. Section 12.04. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of The Commonwealth of Massachusetts. [The Rest of This Page Intentionally Left Blank] -11- 12 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a sealed instrument as of the day and year first above written. VOICETEK By:_____________________________________ President EXECUTIVE By:_____________________________________ Name: -12- EX-10.16 20 1992 EQUITY INCENTIVE PLAN 1 EXHIBIT 10.16 VOICETEK CORPORATION 1992 Equity Incentive Plan -------------------------- Section 1. Purpose ------- The purpose of the Voicetek Corporation 1992 Equity Incentive Plan (the "Plan") is to attract and retain key employees and consultants to provide an incentive for them to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company. Section 2. Definitions ----------- "Affiliate" means any business entity in which the Company owns directly or indirectly 50% or more of the total combined voting power or has a significant financial interest as determined by the Committee. "Award" means any Option, Stock Appreciation Right, Performance Share or Restricted Stock awarded under the Plan. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Committee" means a committee of not less than three members of the Board appointed by the Board to administer the Plan, provided that if and when the Company is subject to Rule 16b-3 under the Securities Exchange Act of 1934, or any successor provision ("Rule 16b-3"), each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3. "Common Stock" or "Stock" means the Common Stock, $.01 par value per share, of the Company. "Company" means Voicetek Corporation. "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. "Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time. 2 "Incentive Stock Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 6 which is intended to meet the requirements of Section 422 of the Code or any successor provision. "Nonstatutory Stock Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 6 which is not intended to be an Incentive Stock Option. "Option" means an Incentive Stock Option or a Nonstatutory Stock Option. "Participant" means a person selected by the Committee to receive an Award under the Plan. "Performance Cycle" or "Cycle" means the period of time selected by the Committee during which performance is measured for the purpose of determining the extent to which an award of Performance Shares has been earned. "Performance Shares" mean shares of Common Stock which may be earned by the achievement of performance goals awarded to a Participant under Section 8. "Reporting Person" means a person subject to Section 16 of the Securities Exchange Act of 1934 or any successor provision. "Restricted Period" means the period of time selected by the Committee during which an award of Restricted Stock may be forfeited to the Company. "Restricted Stock" means shares of Common Stock subject to forfeiture awarded to a Participant under Section 9. "Stock Appreciation Right" or "SAR" means a right to receive any excess in value of shares of Common Stock over the exercise price awarded to a Participant under Section 7. Section 3. Administration -------------- The Plan shall be administered by the Committee. The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Committee's decisions shall be final and binding. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not Reporting Persons and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards for the group and a maximum for any one Participant. 2 3 Section 4. Eligibility ----------- All employees (including part-time employees), and in the case of Awards other than Incentive Stock Options, consultants of the Company or any Affiliate capable of contributing significantly to the successful performance of the Company, other than a person who has irrevocably elected not to be eligible, are eligible to be Participants in the Plan. Section 5. Stock Available for Awards -------------------------- (a) Subject to adjustment under subsection (b) below, Awards may be made under the Plan for up to 1,436,552 shares of Common Stock. If any Award in respect of shares of Common Stock expires or is terminated unexercised or is forfeited for any reason or settled in a manner that results in fewer shares outstanding than were initially awarded, the shares subject to such Award or so surrendered, as the case may be, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for award under the Plan, subject, however, in the case of Incentive Stock Options, to any limitation required under the Code. Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) In the event that the Committee determines that any stock dividend, extraordinary cash dividend, creation of a class of equity securities, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or other similar transaction affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee, subject, in the case of Incentive Stock Options, to any limitation required under the Code, shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards, and (iii) the award, exercise or conversion price with respect to any of the foregoing, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Award, provided that the number of shares subject to any Award shall always be a whole number. Section 6. Stock Options ------------- (a) General. ------- (i) Subject to the provisions of the Plan, the Committee may award Incentive Stock Options and Nonstatutory Stock Options and determine the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the 3 4 exercise of the Option. The terms and conditions of Incentive Stock Options shall be subject to and comply with Section 422 of the Code, or any successor provision, and any regulations thereunder. See subsection (b) below. (ii) The Committee shall establish the option price at the time each Option is awarded. In the case of Incentive Stock Options, such price shall not be less than 100% of the Fair Market Value of the Common Stock on the date of award. In the case of Nonstatutory Stock Options granted at a time when the Company is subject to Rule 16b-3, such price shall not be less than 50% of the Fair Market Value of the Common Stock on the date of the award. (iii) Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may specify in the applicable Award or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable, (iv) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company. Such payment may be made in whole or in part in cash or, to the extent permitted by the Committee at or after the award of the Option, by delivery of a note or shares of Common Stock owned by the optionee, including Restricted Stock, valued at their Fair Market Value on the date of delivery, or such other lawful consideration as the Committee may determine. (b) Incentive Stock Options ----------------------- Options granted under the Plan which are intended to be Incentive Stock, Options shall be subject to the following additional terms and conditions: (i) All Incentive Stock Options granted under the Plan shall, at the time of grant, be specifically designated as such in the option agreement covering such Incentive Stock Options. The Option exercise period shall not exceed ten years from the date of grant. (ii) If any employee to whom an Incentive Stock Option is to be granted under the Plan is, at the time of the grant of such option, the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (after taking into account the attribution of stock ownership rules of Section 424(d) of the Code), then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual: (x) The purchase price per share of the Common Stock subject to such Incentive Stock Option shall not be less than 110% of the Fair Market Value of one share of Common Stock at the time of grant; and 4 5 (y) The option exercise period shall not exceed five years from the date of grant. (iii) For so long as the Code shall so provide, options granted to any employee under the Plan (and any other incentive stock option plans of the Company) which are intended to constitute Incentive Stock Options shall not constitute Incentive Stock Options to the extent that such options, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate Fair Market Value (determined as of the respective date or dates of grant) of more than $100,000. (iv) No Incentive Stock Option may be exercised unless, at the time of such exercise, the Participant is, and has been continuously since the date of grant of his or her option, employed by the Company, except that: (x) an Incentive Stock Option may be exercised within the period of three months after the date the Participant ceases to be an employee of the Company (or within such lesser period as may be specified in the applicable option agreement), PROVIDED, that the agreement with respect to such Option may designate a longer exercise period and that the exercise after such three-month period shall be treated as the exercise of a Nonstatutory Stock Option under the Plan; (y) if the Participant dies while in the employ of the Company, or within three months after the Participant ceases to be such an employee, the Incentive Stock Option may be exercised by the Participant's Designated Beneficiary within the period of one year after the date of death (or within such lesser period as may be specified in the applicable Option agreement); and (z) if the Participant becomes disabled (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto) while in the employ of the Company, the Incentive Stock Option may be exercised within the period of one year after the date the Participant ceases to be such an employee because of such disability (or within such lesser period as may be specified in the applicable option agreement). For all purposes of the Plan and any Option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). Notwithstanding the foregoing provisions, no Incentive Stock Option may be exercised after its expiration date. 5 6 Section 7. Stock Appreciation Rights ------------------------- (a) Subject to the provisions of the Plan, the Committee may award SARs in tandem with an Option (at or after the award of the Option), or alone and unrelated to an Option. SARs in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem SARs are exercised. SARs granted in tandem with Options shall have an exercise price of not less than the exercise price of the related Option. SARs granted at a time when the Company is subject to Rule 16b-3 shall have an exercise price of not less than 50% of the Fair Market Value of the Common Stock on the date of award, or in the case of SARs granted in tandem with Options, the exercise price of the SAR shall not be less than the exercise price of the related Option. (b) An SAR related to an Option which can only be exercised during limited periods following a change in control of the Company may entitle the Participant to receive an amount based upon the highest price paid or offered for Common Stock in any transaction relating to the change in control or paid during the thirty-day period immediately preceding the occurrence of the change in control in any transaction reported in any stock market in which the Common Stock is usually traded. Section 8. Performance Shares ------------------ (a) Subject to the provisions of the Plan, the Committee may award Performance Shares and determine the number of such shares for each Performance Cycle and the duration of each Performance Cycle. There may be more than one Performance Cycle in existence at any one time, and the duration of Performance Cycles may differ from each other. The payment value of Performance Shares shall be equal to the Fair Market Value of the Common Stock on the date the Performance Shares are earned or, in the discretion of the Committee, on the date the Committee determines that the Performance Shares have been earned. (b) The Committee shall establish performance goals for each Cycle, for the purpose of determining the extent to which Performance Shares awarded for such Cycle are earned, on the basis of such criteria and to accomplish such objectives as the Committee may from time to time select. During any Cycle, the Committee may adjust the performance goals for such Cycle as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine. (c) As soon as practicable after the end of a Performance Cycle, the Committee shall determine the number of Performance Shares which have been earned on the basis of performance in relation to the established performance goals. The payment values of earned Performance Shares shall be distributed to the Participant or, if the Participant has died, to the Participant's Designated Beneficiary, as soon as practicable thereafter. The Committee shall 6 7 determine, at or after the time of award, whether payment values will be settled in whole or in part in cash or other property, including Common Stock or Awards. Section 9. Restricted Stock ---------------- (a) Subject to the provisions of the Plan, the Committee may award shares of Restricted Stock and determine the duration of the Restricted Period during which, and the conditions under which, the shares may be forfeited to the Company and the other terms and conditions of such Awards. Shares of Restricted Stock shall be issued for no cash consideration or such minimum consideration as may be required by applicable law. (b) Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the Committee, during the Restricted Period. Shares of Restricted Stock shall be evidenced in such manner as the Committee may determine. Any certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and unless otherwise determined by the Committee, deposited by the Participant, together with a stock power endorsed in blank, with the Company. At the expiration of the Restricted Period, the Company shall deliver such certificates to the Participant or if the Participant has died, to the Participant's Designated Beneficiary. Section 10. General Provisions Applicable to Awards --------------------------------------- (a) APPLICABILITY OF RULE 16b-3. Those provision of the Plan which make an express reference to Rule 16b-3 shall apply to the Company only at such time as the Company's Common Stock is registered under the Securities Exchange Act of 1934, or any successor provision, and then only to Reporting Persons. (b) REPORTING PERSON LIMITATIONS. Notwithstanding any other provision of the Plan, to the extent required to qualify for the exemption provided by Rule 16b-3 under the Securities Exchange Act of 1934, and any successor provision, (i) any Common Stock or other equity security offered under the Plan to a Reporting Person may not be sold for at least six months after acquisition, or, in the case of an Option or SAR, at least six months elapse between the date of grant of the Option or the SAR and the date of disposition of the Option or SAR or the Common Stock acquired under the Option, except in case of death or disability and (ii) any Option, SAR or other similar right related to an equity security issued under the Plan to a Reporting Person shall not be transferrable other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act ("ERISA"), or the rules thereunder, shall not be exercisable for at least six months except in the case of death or disability and shall be exercisable during the Participant's lifetime only by the Participant or the Participant's guardian or legal representative. 7 8 (c) DOCUMENTATION. Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or comply with applicable tax and regulatory laws and accounting principles. (d) COMMITTEE DISCRETION. Each type of Award may be made alone, in addition to or in relation to any other type of Award. The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of award or at any time thereafter. (e) SETTLEMENT. The Committee shall determine whether Awards are settled in whole or in part in cash, Common Stock, other securities of the Company, Awards or other property. The Committee may permit a Participant to defer all or any portion of a payment under the Plan, including the crediting of interest on deferred amounts denominated in cash and dividend equivalents on amounts denominated in Common Stock. (f) DIVIDENDS AND CASH AWARDS. In the discretion of the Committee, any Award under the Plan may provide the Participant with (i) dividends or dividend equivalents payable currently or deferred with or without interest, and (ii) cash payments in lieu of or in addition to an Award. (g) TERMINATION OF EMPLOYMENT. The Committee shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder. (h) CHANGE IN CONTROL. In order to preserve a Participant's rights under an Award in the event of a change in control of the Company, the Committee in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise or realization of the Award, (ii) provide for the purchase of the Award upon the Participant's request for an amount of cash or other property that could have been received upon the exercise or realization of the Award had the Award been currently exercisable or payable, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Committee may consider equitable and in the best interests of the Company. (i) WITHHOLDING. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of 8 9 Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. (j) FOREIGN NATIONALS. Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or comply with applicable laws. (k) AMENDMENT OF AWARD. The Committee may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. Section 11. Miscellaneous ------------- (a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment. The Company expressly reserves the right at any time to dismiss a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) NO RIGHTS AS SHAREHOLDER. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof. A Participant to whom Common Stock is awarded shall be considered the holder of the Stock at the time of the Award except as otherwise provided in the applicable Award. (c) EFFECTIVE DATE. Subject to the approval of the shareholders of the Company, the Plan shall be effective on May 21, 1992. Prior to such approval, Awards may be made under the Plan expressly subject to such approval. (d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without shareholder approval if such approval is necessary to comply with any applicable tax or regulatory requirement, including any requirement for exemptive relief under Section 16(b) of the Securities Exchange Act of 1934, or any successor provision. Prior to any such approval, Awards may be made under the Plan expressly subject to such approval. 9 10 (e) GOVERNING LAW. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts. 10 EX-10.17 21 1996 STOCK OPTION PLAN 1 EXHIBIT 10.17 VOICETEK CORPORATION 1996 STOCK OPTION PLAN 1. Purpose of the Plan. This stock option plan (the "Plan") is intended to provide incentives: (a) to the officers and other employees of Voicetek Corporation (the "Company") and any present or future subsidiaries of the Company by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or "ISOs"); and (b) to officers, employees, consultants and directors of the Company and any present or future subsidiaries by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"). As used herein, the terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary corporation," respectively, as those terms are defined in Section 424 of the Code and the Treasury Regulations promulgated thereunder (the "Regulations"). 2. Stock Subject to the Plan. (a) The initial maximum number of shares of common stock, par value $.01 per share, of the Company ("Common Stock") available for stock options granted under the Plan through the end of the Company's fiscal year ending December 31, 1996 shall be 500,000 shares of Common Stock. In addition, effective January 1, 1997 and each January 1 thereafter during the term of this Plan, the number of shares of Common Stock available for grants of stock options under this Plan shall be increased such that the total number of shares of Common Stock subject to options under the Plan and all other stock option plans of the Company (excluding the Company's 1996 Stock Option Plan for Non-Employee Directors and Clerk) shall equal fifteen percent of the sum of (i) total number of issued and outstanding shares of Common Stock (including shares held in treasury) and (ii) shares of Common Stock reserved for issuance upon exercise of outstanding options to purchase the Company's Common Stock (excluding those subject to the Company's 1996 Stock Option Plan for Clerk and Non-Employee Directors), each calculated as of the close of business on December 31 of the preceding year. [Notwithstanding the foregoing, the maximum cumulative number of shares of Common Stock available for grants of stock options under the Plan shall be __________.] The maximum number of shares of Common Stock available for grants shall be subject to adjustment in accordance with Section 11 thereof. Shares issued under the Plan may be authorized but unissued shares of Common Stock or shares of Common Stock held in treasury. (b) To the extent that any stock option shall lapse, terminate, expire or otherwise be cancelled without the issuance of shares of Common Stock, the shares of Common Stock covered by such option(s) shall again be available for the granting of stock options. 2 (c) Common Stock issuable under the Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as shall be determined by the Committee (as defined in Section 3 below). 3. Administration of the Plan. (a) The Plan shall be administered by a committee (the "Committee") consisting of two or more members of the Company's Board of Directors, each of whom is a disinterested person as defined from time to time in Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). The Board of Directors may from time to time appoint a member or members of the Committee in substitution for or in addition to the member or members then in office and may fill vacancies on the Committee however caused. The Committee shall choose one of its members as Chairman and shall hold meetings at such times and places as it shall deem advisable. A majority of the members of the Committee shall constitute a quorum and any action may be taken by a majority of those present and voting at any meeting. Any action may also be taken without the necessity of a meeting by a written instrument signed by a majority of the Committee. The decision of the Committee as to all questions of interpretation and application of the Plan shall be final, binding and conclusive on all persons. The Committee shall have the authority to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option agreement granted hereunder in the manner and to the extent it shall deem expedient to carry the Plan into effect and shall be the sole and final judge of such expediency. No Committee member shall be liable for any action or determination made in good faith. Prior to the date of the registration of an equity security of the Company under Section 12 of the Exchange Act, the Plan may be administered by the Board of Directors and in such event all references in this Plan to the Committee shall be deemed to mean the Board of Directors. (b) Subject to the terms of the Plan, the Committee shall have the authority to (i) determine the employees of the Company and its subsidiaries (from among the class of employees eligible under Section 4 to receive ISOs) to whom ISOs may be granted, and to determine (from the class of individuals eligible under Section 4 to receive Non-Qualified Options) to whom Non-Qualified Options may be granted; (ii) determine the time or times at which options may be granted; (iii) determine the option price of shares subject to each option which price shall not be less than the minimum price specified in Section 6; (iv) determine whether each option granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to Section 9) the time or times when each option shall become exercisable and the duration of the exercise period; (vi) determine whether restrictions such as repurchase options are to be imposed on shares subject to options and the nature of such restrictions; and (vii) determine the size of any Options under the Plan, taking into account the position or office of the optionee with the Company, the job performance of the optionee 2 3 and such other factors as the Committee may deem relevant in the good faith exercise of its independent business judgment. 4. Eligibility. Options designated as ISOs may be granted only to officers and other employees of the Company or any subsidiary. Non-Qualified Options may be granted to any officer, employee, consultant or director of the Company or of any of its subsidiaries. In determining the eligibility of an individual to be granted an option, as well as in determining the number of shares to be optioned to any individual, the Committee shall take into account the position and responsibilities of the individual being considered, the nature and value to the Company or its subsidiaries of his or her service and accomplishments, his or her present and potential contribution to the success of the Company or its subsidiaries, and such other factors as the Committee may deem relevant. No option designated as an ISO shall be granted to any employee of the Company or any subsidiary if such employee owns, immediately prior to the grant of an option, stock representing more than 10% of the voting power or more than 10% of the value of all classes of stock of the Company or a parent or a subsidiary, unless the purchase price for the stock under such option shall be at least 110% of its fair market value at the time such option is granted and the option, by its terms, shall not be exercisable more than five years from the date it is granted. In determining the stock ownership under this paragraph, the provisions of Section 424(d) of the Code shall be controlling. In determining the fair market value under this paragraph, the provisions of Section 6 hereof shall apply. 5. Option Agreement. Each option shall be evidenced by an option agreement (the "Agreement") duly executed on behalf of the Company and by the optionee to whom such option is granted, which Agreement shall comply with and be subject to the terms and conditions of the Plan. The Agreement may contain such other terms, provisions and conditions which are not inconsistent with the Plan as may be determined by the Committee, provided that options designated as ISOs shall meet all of the conditions for ISOs as defined in Section 422 of the Code. The date of grant of an option shall be as determined by the Committee. More than one option may be granted to an individual. 6. Option Price. The option price or prices of shares of the Company's Common Stock for options designated as Non-Qualified Options shall be as determined by the Committee, but in no event shall the option price be less than the minimum legal consideration required therefor under the laws of the State of Delaware or the laws of any jurisdiction in which the Company 3 4 or its successors in interest may be organized. The option price or prices of shares of the Company's Common Stock for ISOs shall be the fair market value of such Common Stock at the time the option is granted as determined by the Committee in accordance with the Regulations promulgated under Section 422 of the Code. If such shares are then listed on any national securities exchange, the fair market value shall be the mean between the high and low sales prices, if any, on such exchange on the business day immediately preceding the date of the grant of the option or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales prices on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the shares are not then listed on any such exchange, the fair market value of such shares shall be the mean between the high and low sales prices, if any, as reported in the National Association of Securities Dealers Automated Quotation System National Market System ("NASDAQ/NMS") for the business day immediately preceding the date of the grant of the option, or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the shares are not then either listed on any such exchange or quoted in NASDAQ/NMS, the fair market value shall be the mean between the average of the "Bid" and the average of the "Ask" prices, if any, as reported in the National Daily Quotation Service for the business day immediately preceding the date of the grant of the option, or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales prices on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the fair market value cannot be determined under the preceding three sentences, it shall be determined in good faith by the Committee. 7. Manner of Payment; Manner of Exercise. (a) Options granted under the Plan may provide for the payment of the exercise price by delivery of (i) cash or a check payable to the order of the Company in an amount equal to the exercise price of such options, (ii) shares of Common Stock of the Company owned by the optionee having a fair market value equal in amount to the exercise price of the options being exercised, or (iii) any combination of (i) and (ii), provided, however, that payment of the exercise price by delivery of shares of Common Stock of the Company owned by such optionee may be made only under such circumstances and on such terms as may from time to time be established by the Committee. The fair market value of any shares of the Company's Common Stock which may be delivered upon exercise of an option shall be determined by the Committee in accordance with Section 6 hereof. With the consent of the Committee, payment may also be made by delivery of a properly executed exercise notice to the Company, together with a copy of irrevocable instruments to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. 4 5 (b) To the extent that the right to purchase shares under an option has accrued and is in effect, options may be exercised in full at one time or in part from time to time, by giving written notice, signed by the person or persons exercising the option, to the Company, stating the number of shares with respect to which the option is being exercised, accompanied by payment in full for such shares as provided in subparagraph (a) above. Upon such exercise, delivery of a certificate for paid-up non-assessable shares shall be made at the principal office of the Company to the person or persons exercising the option at such time, during ordinary business hours, after ten business days from the date of receipt of the notice by the Company, as shall be designated in such notice, or at such time, place and manner as may be agreed upon by the Company and the person or persons exercising the option. 8. Exercise of Options. Subject to the provisions of paragraphs 9 through 11, each option granted under the Plan shall be exercisable as follows: (a) Vesting. The option shall either be fully exercisable on the date of grant or shall become exercisable thereafter in such installments as the Committee may specify. (b) Full Vesting of Installments. Once an installment becomes exercisable it shall remain exercisable until expiration or termination of the option, unless otherwise specified by the Committee. (c) Partial Exercise. Each option or installment may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable. (d) Acceleration of Vesting. The Committee shall have the right to accelerate the date of exercise of any installment or any option; provided that the Committee shall not, without the consent of an optionee, accelerate the exercise date of any installment of any option granted to any employee as an ISO if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code. 9. Term of Options; Exercisability. (a) Term. Each option shall expire not more than ten (10) years from the date of the granting thereof, but shall be subject to earlier termination as may be provided in the Agreement. (b) Exercisability. Except as otherwise provided in the Agreement, an option granted to an employee optionee who ceases to be an employee of the Company or one of its subsidiaries shall be exercisable only to the extent that the right to purchase shares under 5 6 such option has accrued and is in effect on the date such optionee ceases to be an employee of the Company or one of its subsidiaries. 10. Options Not Transferable. The right of any optionee to exercise any option granted to him or her shall not be assignable or transferable by such optionee otherwise than by will or the laws of descent and distribution, or (solely with respect to Non-Qualified Options) pursuant to a qualified domestic relations order, as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder, and any such option shall be exercisable during the lifetime of such optionee only by him. Any option granted under the Plan shall be null and void and without effect upon the bankruptcy of the optionee to whom the option is granted, or upon any attempted assignment or transfer, except as herein provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, divorce, except as provided above with respect to Non-Qualified Options, trustee process or similar process, whether legal or equitable, upon such option. 11. Adjustments. Upon the occurrence of any of the following events, an optionee's rights with respect to options granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the optionee and the Company relating to such option: (a) Stock Dividends and Stock Splits. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) Consolidations or Mergers. If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company's assets or otherwise (an "Acquisition"), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to outstanding options, either (i) make appropriate provision for the continuation of such options by substituting on an equitable basis for the shares then subject to such options the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition; or (ii) upon written notice to the optionees, provide that all options must be exercised, to the extent then exercisable, within a specified number of days of the date of such notice, at the end of which period the options shall terminate; or (iii) terminate all options in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such options (to the extent then exercisable) over the exercise price thereof. 6 7 (c) Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company (other than a transaction described in subparagraph (b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, an optionee upon exercising an option shall be entitled to receive for the purchase price paid upon such exercise the securities he would have received if he had exercised his option prior to such recapitalization or reorganization. (d) Modification of ISOs. Notwithstanding the foregoing, any adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a "modification" of such ISOs (as that term is defined in Section 424 of the Code) or would cause any adverse tax consequences for the holders of such ISOs. If the Committee determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments. (e) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, each option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. (f) Issuances of Securities. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. (g) Fractional Shares. No fractional shares shall be issued under the Plan and the optionee shall receive from the Company cash in lieu of such fractional shares. (h) Adjustments. Upon the happening of any of the events described in subparagraphs (a), (b) or (c) above, the class and aggregate number of shares set forth in Section 2 hereof that are subject to options which previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect the events described in such subparagraphs. The Committee or the Successor Board shall determine the specific adjustments to be made under this paragraph 11 and, subject to Section 3, its determination shall be conclusive. If any person or entity owning restricted Common Stock obtained by exercise of an option made hereunder receives shares or securities or cash in connection with a corporate transaction described in subparagraphs (a), (b) or (c) above as a result of owning such restricted Common Stock, such shares or securities or cash shall be subject to all of the conditions and restrictions applicable to the restricted Common Stock with respect to which 7 8 such shares or securities or cash were issued, unless otherwise determined by the Committee or the Successor Board. 12. No Special Employment Rights. Nothing contained in the Plan or in any option granted under the Plan shall confer upon any option holder any right with respect to the continuation of his employment by the Company (or any subsidiary) or interfere in any way with the right of the Company (or any subsidiary), subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the option holder from the rate in existence at the time of the grant of an option. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Committee at the time. 13. Withholding. The Company's obligation to deliver shares upon the exercise of any option granted under the Plan shall be subject to the option holder's satisfaction of all applicable Federal, state and local income, excise and employment tax withholding requirements. The Company and employee may agree to withhold shares of Common Stock purchased upon exercise of an option to satisfy the above-mentioned withholding requirements. With the approval of the Committee, which it shall have sole discretion to grant, and on such terms and conditions as the Committee may impose, the option holder may satisfy the foregoing condition by electing to have the Company withhold from delivery shares having a value equal to the amount of tax to be withheld. The Committee shall also have the right to require that shares be withheld from delivery to satisfy such condition. 14. Restrictions on Issue of Shares. (a) Notwithstanding the provisions of Section 7, the Company may delay the issuance of shares covered by the exercise of an option and the delivery of a certificate for such shares until one of the following conditions shall be satisfied: (i) The shares with respect to which such option has been exercised are at the time of the issue of such shares effectively registered or qualified under applicable Federal and state securities acts now in force or as hereafter amended; or (ii) Counsel for the Company shall have given an opinion, which opinion shall not be unreasonably conditioned or withheld, that such shares are exempt from registration and qualification under applicable Federal and state securities acts now in force or as hereafter amended. 8 9 (b) It is intended that all exercises of options shall be effective, and the Company shall use its best efforts to bring about compliance with the above conditions within a reasonable time, except that the Company shall be under no obligation to qualify shares or to cause a registration statement or a post-effective amendment to any registration statement to be prepared for the purpose of covering the issue of shares in respect of which any option may be exercised, except as otherwise agreed to by the Company in writing. 15. Purchase for Investment; Rights of Holder on Subsequent Registration. Unless the shares to be issued upon exercise of an option granted under the Plan have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, the Company shall be under no obligation to issue any shares covered by any option unless the person who exercises such option, in whole or in part, shall give a written representation and undertaking to the Company which is satisfactory in form and scope to counsel for the Company and upon which, in the opinion of such counsel, the Company may reasonably rely, that he or she is acquiring the shares issued pursuant to such exercise of the option for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any such shares, and that he or she will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act of 1933, or any other applicable law, and that if shares are issued without such registration, a legend to this effect may be endorsed upon the securities so issued. In the event that the Company shall, nevertheless, deem it necessary or desirable to register under the Securities Act of 1933 or other applicable statutes any shares with respect to which an option shall have been exercised, or to qualify any such shares for exemption from the Securities Act of 1933 or other applicable statutes, then the Company may take such action and may require from each optionee such information in writing for use in any registration statement, supplementary registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for such purpose and may require reasonable indemnity to the Company and its officers and directors and controlling persons from such holder against all losses, claims, damages and liabilities arising from such use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made. 16. Loans. The Company may make loans to optionees to permit them to exercise options. If loans are made, the requirements of all applicable Federal and state laws and regulations regarding such loans must be met. 9 10 17. Modification of Outstanding Options. The Committee may authorize the amendment of any outstanding option with the consent of the optionee when and subject to such conditions as are deemed to be in the best interests of the Company and in accordance with the purposes of this Plan. 18. Approval of Shareholders. The Plan shall be subject to approval by the vote of shareholders holding at least a majority of the voting stock of the Company voting in person or by proxy at a duly held shareholders' meeting, or by written consent of shareholders holding at least a majority of the voting stock of the Company, within twelve (12) months after the adoption of the Plan by the Board of Directors and shall take effect as of the date of adoption by the Board of Directors upon such approval. The Committee may grant options under the Plan prior to such approval, but any such option shall become effective as of the date of grant only upon such approval and, accordingly, no such option may be exercisable prior to such approval. 19. Termination and Amendment. Unless sooner terminated as herein provided, the Plan shall terminate ten (10) years from the date upon which the Plan was duly adopted by the Board of Directors of the Company. The Board of Directors may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that except as provided in this Section 19, the Board of Directors may not, without the approval of the shareholders of the Company obtained in the manner stated in Section 18, increase the maximum number of shares for which options may be granted or change the designation of the class of persons eligible to receive options under the Plan, or make any other change in the Plan which requires shareholder approval under applicable law or regulations, including any approval requirement which is a prerequisite for exemptive relief under Section 16 of the Exchange Act. The Committee may grant options to persons subject to Section 16(b) of the Exchange Act after an amendment to the Plan by the Board of Directors requiring shareholder approval under Section 19, but any such option shall become effective as of the date of grant only upon such approval and, accordingly, no such option may be exercisable prior to such approval. The Committee may terminate, amend or modify any outstanding option without the consent of the option holder, provided, however, that, except as provided in Section 11, without the consent of the optionee, the Committee shall not change the number of shares subject to an option, nor the exercise price thereof, nor extend the term of such option. 20. Compliance with Rule 16b-3. It is intended that the provisions of the Plan and any option granted hereunder to a person subject to the reporting requirements of Section 16(a) of the Exchange Act shall 10 11 comply in all respects with the terms and conditions of Rule 16b-3 under the Exchange Act, or any successor provisions, to the extent the Company has any equity security registered pursuant to Section 12 of the Exchange Act. Any agreement granting options shall contain such provisions as are necessary or appropriate to assure such compliance. To the extent that any provision hereof is found not to be in compliance with such Rule, such provision shall be deemed to be modified so as to be in compliance with such Rule, or if such modification is not possible, shall be deemed to be null and void, as it relates to a recipient subject to Section 16(a) of the Exchange Act. 21. Reservation of Stock. The Company shall at all times during the term of the Plan reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of the Plan and shall pay all fees and expenses necessarily incurred by the Company in connection therewith. 22. Limitation of Rights in the Option Shares. An optionee shall not be deemed for any purpose to be a shareholder of the Company with respect to any of the options except to the extent that the option shall have been exercised with respect thereto and, in addition, a certificate shall have been issued theretofore and delivered to the optionee. 23. Notices. Any communication or notice required or permitted to be given under the Plan shall be in writing, and mailed by registered or certified mail or delivered by hand, if to the Company, to its principal place of business, attention: President, and, if to an optionee, to the address as appearing on the records of the Company. Approved by the Directors:______________ Approved by the Stockholders:_______________ 11 EX-10.18 22 1996 STOCK OPTION PLAN FOR NON-EMPLOYMENT... 1 EXHIBIT 10.18 VOICETEK CORPORATION 1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS AND CLERK 1. PURPOSE The purpose of this Voicetek Corporation 1996 Stock Option Plan for Non-Employee Directors (the "Plan") is to attract and retain the services of experienced and knowledgeable independent directors who are not employees (sometimes referred to herein collectively as "Participants") of Voicetek Corporation ("Voicetek") for the benefit of Voicetek and its stockholders and to provide additional incentive for such Participants to continue to work in the best interests of Voicetek and its stockholders through continuing ownership of its common stock. 2. SHARES SUBJECT TO THE PLAN The total number of shares of common stock, par value $.01 per share ("Shares"), of Voicetek for which options may be granted under the Plan shall not exceed 90,000 in the aggregate, subject to adjustment in accordance with Section 9 hereof. 3. ELIGIBILITY; GRANT OF OPTION Each of John Blaeser, Christopher Lynch, Alan Voulgaris and Sherman Wolf, who are the four current directors of Voicetek who are not otherwise employees of Voicetek or any subsidiary, and upon their election to the Board of Directors of Voicetek (the "Board"), all new non-employee directors duly elected in the five year period commencing on the date of the adoption of the Plan, shall be granted an option to acquire twelve thousand (12,000) Shares under the Plan. In addition, Anthony J. Medaglia, Jr., the Clerk of the Corporation, shall be granted an option to acquire ten thousand (10,000) Shares under the Plan. The date of grant for such options 2 granted to the Clerk and four current non-employee directors named above shall be the date of adoption of the Plan by the Board, but such options shall become effective as of such date of grant only upon shareholder approval of this Plan in accordance with Section 13 hereof. The options shall be non-qualified options not intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The date of grant for each subsequently elected non-employee director shall be the date of election. 4. OPTION AGREEMENT Each option granted under the Plan shall be evidenced by an option agreement (the "Agreement") duly executed on behalf of Voicetek and by the Clerk or the director to whom such option is granted, which Agreements shall (i) comply with and be subject to the terms and conditions of the Plan and (ii) provide that the optionee agrees to continue to serve as the Clerk or a director of Voicetek, as the case may be, during the term for which he was elected. 5. OPTION EXERCISE PRICE Subject to the provisions of Section 9 hereof, the option exercise price for the options granted to the Clerk and four current non-employee directors named above under the Plan shall be $5.00. Subject to the provisions of Section 9 hereof, the option exercise price for options granted to any subsequently elected clerk or non-employee director under the Plan shall be the fair market value of the Shares of the common stock of Voicetek covered by the option on the date of grant of the option. For the purposes of this Section 5 and of Section 6(b) herein, the fair market value of the common stock of Voicetek shall be the mean between the high and low sales prices of the common stock of Voicetek on the NASDAQ National Market System as reported in the Wall Street Journal on the date of grant for the immediately preceding business day; provided 2 3 that if the common stock of Voicetek is not listed on or actually trading on the NASDAQ National Market System, fair market value shall be determined in good faith by the Board. 6. TIME AND MANNER OF EXERCISE OF OPTION (a) Options granted under the Plan shall, subject to the provisions of Section 7, become exercisable in equal increments on the first, second and third anniversaries of the date at the grant of such options; provided, however, that no option granted under the Plan may be exercised prior to approval of the Plan by the stockholders of Voicetek. (b) To the extent that the right to exercise an option has accrued and is in effect, the option may be exercised in full at one time or in part from time to time by giving written notice to Voicetek, signed by the person or persons exercising the option, stating the number of Shares with respect to which the option is being exercised, accompanied by payment in full for such Shares, which payment may be in cash or in whole or in part in Shares of the common stock of Voicetek already owned for a period of at least six months by the person or persons exercising the option, valued at fair market value, as determined under Section 5 hereof, on the date of exercise; provided, however, that there shall be no such exercise at any one time as to fewer than one hundred (100) Shares or all of the remaining Shares then purchasable by the person or persons exercising the option, if fewer than one hundred (100) Shares. Upon such exercise, delivery of a certificate for paid-up non-assessable Shares shall be made at the principal Massachusetts office of Voicetek to the person or persons exercising the option at such time, during ordinary business hours, not more than thirty (30) days from the date of receipt of the notice by Voicetek, as shall be designated in such notice, or at such time, place and manner as may be agreed upon by Voicetek and the person or persons exercising the option. 3 4 7. TERM OF OPTIONS (a) Each option shall expire ten (10) years from the date of the granting thereof, but shall be subject to earlier termination as herein provided. (b) In the event of the death of an optionee, the option granted to such optionee may be exercised, to the extent the optionee was entitled to do so on the date of such optionee's death, by the estate of such optionee or by any person or persons who acquired the right to exercise such option by bequest or inheritance or otherwise by reason of the death of such optionee. Such option may be exercised at any time within one (1) year after the date of death of such optionee, at which time the option shall terminate, or prior to the date on which the option otherwise expires by its terms, whichever is earlier. (c) In the event that an optionee ceases to be the Clerk or a director of Voicetek, as the case may be, the option granted to such optionee may be exercised by him, but only to the extent that under Section 6 hereof the right to exercise the option has accrued and is in effect on the date that the optionee ceases to be the Clerk or a director, as the case may be. Such option may be exercised at any time within seven (7) business days after the date such optionee ceases to be a director of Voicetek, as the case may be, at which time the option shall terminate, but in any event prior to the date on which the option expires by its terms, whichever is earlier, unless termination as a director (a) was by Voicetek for cause, in which case the option shall terminate immediately at the time the optionee ceases to be a director of Voicetek, (b) was because the optionee has become disabled (within the meaning of Section 22(e)(3) of the Code), or (c) was by reason of the death of the optionee. In the case of death, see Section 7(b) above. In the case of disability, the option may be exercised, to the extent exercisable under Section 6 hereof when 4 5 the optionee ceased to be a director, at any time within one (1) year after the date of termination of the optionee's directorship with Voicetek, at which time the option shall terminate, but in any event prior to the date on which the option otherwise expires by its terms, whichever is earlier. 8. OPTIONS NOT TRANSFERABLE The right of any optionee to exercise an option granted to him under the Plan shall not be assignable or transferable by such optionee otherwise than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. Any option granted under the Plan shall be exercisable during the lifetime of such optionee only by him. Any option granted under the Plan shall be null and void and without effect upon the bankruptcy of the optionee, or upon any attempted assignment or transfer, except as herein provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, trustee process or similar process, whether legal or equitable, upon such option. 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event that the outstanding Shares of the common stock of Voicetek are changed into or exchanged for a different number or kind of shares or other securities of Voicetek or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares or dividends payable in capital stock, appropriate adjustment shall be made in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the optionee shall be maintained as before the occurrence of such event, 5 6 and such adjustment in outstanding options shall be made without change in the total price applicable to the unexercised portion of such options and with a corresponding adjustment in the option price per share. 10. RESTRICTIONS ON ISSUE OF SHARES Notwithstanding the provisions of Section 6 hereof, Voicetek may delay the issuance of Shares covered by the exercise of any option and the delivery of a certificate for such Shares until one of the following conditions shall be satisfied: (i) the Shares with respect to which an option has been exercised are at the time of the issue of such Shares effectively registered under applicable Federal and state securities acts now in force or hereafter amended; or (ii) counsel for Voicetek shall have given an opinion, which opinion shall not be unreasonably conditioned or withheld, that such Shares are exempt from registration under applicable Federal and state securities acts now in force or hereafter amended. It is intended that all exercises of options shall be effective. Accordingly, Voicetek shall use its best efforts to bring about compliance with the above conditions within a reasonable time, except that Voicetek shall be under no obligation to cause a registration statement or a post-effective amendment to any registration statement to be prepared at its expense solely for the purpose of covering the issue of Shares in respect of which any option may be exercised, except as otherwise agreed to by Voicetek in writing. 6 7 11. RIGHTS OF HOLDER ON PURCHASE FOR INVESTMENT; SUBSEQUENT REGISTRATION Unless the Shares to be issued upon exercise of an option granted under the Plan have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended, Voicetek shall be under no obligation to issue any Shares covered by any option unless the person who exercises such option, in whole or in part, shall give a written representation and undertaking to Voicetek which is satisfactory in form and scope to counsel to Voicetek and upon which, in the opinion of such counsel, Voicetek may reasonably rely, that he is acquiring the Shares issued to him pursuant to such exercise of the option for his own account as an investment and not with a view to, or for sale in connection with, the distribution of any such Shares, and that he will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act of 1933, or any other applicable law, and that if Shares are issued without such registration a legend to this effect may be endorsed upon the securities so issued. In the event that Voicetek shall, nevertheless, deem it necessary or desirable to register under the Securities Act of 1933 or other applicable statutes any Shares with respect to which an option shall have been exercised, or to qualify any such Shares for exemption from the Securities Act of 1933 or other applicable statutes, then Voicetek shall take such action at its own expense and may require from each optionee such information in writing for use in any registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for such purpose and may require reasonable indemnity to Voicetek and its officers and directors from such holder against all losses, claims, damages and liabilities arising from such use of the information so furnished and caused by any untrue statement of any material fact 7 8 therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made. 12. LOANS PROHIBITED Voicetek shall not, directly or indirectly, lend money to an optionee or to any person or persons entitled to exercise an option by reason of the death of an optionee for the purpose of assisting him or them in the acquisition of Shares covered by an option granted under the Plan. 13. APPROVAL OF STOCKHOLDERS The Plan shall be subject to approval by the affirmative vote of the holders of a majority of the securities of Voicetek present or represented and entitled to vote at a duly held stockholders' meeting, or by written consent of all of the stockholders, and shall take effect immediately as of its date of adoption upon such approval. 14. EXPENSES OF THE PLAN All costs and expenses of the adoption and administration of the Plan shall be borne by Voicetek, and none of such expenses shall be charged to any optionee. 15. TERMINATION AND AMENDMENT OF PLAN Unless sooner terminated as herein provided, the Plan shall terminate ten (10) years from the date upon which the Plan was duly approved by the stockholders. The Board may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that, except as provided in Section 9 hereof, no modification or amendment to the provisions of the Plan may be made more than once every six (6) months other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules 8 9 thereunder, if the effect of such amendment or modification would be to change (i) the requirements for eligibility under the Plan, (ii) the timing of the grants of options to be granted under the Plan or the exercise price or vesting schedule thereof, or (iii) the number of Shares subject to options to be granted under the Plan either in the aggregate or to the Clerk or one director. Any amendment to the provisions of the Plan which (i) materially increases the number of Shares which may be subject to options granted under the Plan, (ii) materially increases the benefits accruing to Participants under the Plan, or (iii) materially modifies the requirement for eligibility to participate in the Plan, shall be subject to approval by the stockholders of Voicetek obtained in the manner stated in Section 13 hereof. Termination or any modification or amendment of the Plan shall not, without the consent of an optionee, affect his rights under an option previously granted to him. 16. LIMITATION OF RIGHTS IN THE OPTION SHARES An optionee shall not be deemed for any purpose to be a stockholder of Voicetek with respect to any of the options except to the extent that the option shall have been exercised with respect thereto and, in addition, a certificate shall have been issued theretofore and delivered to the optionee. 17. NOTICES Any communication or notice required or permitted to be given under the Plan shall be in writing, and mailed by registered or certified mail or delivered by hand, if to Voicetek, to its principal place of business, Attention: President, and, if to an optionee, to the address as appearing on the records of Voicetek. 9 10 18. COMPLIANCE WITH RULE 16b-3. It is the intention of Voicetek that the Plan comply in all respects with Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of 1934 (the "Act") and that Participants remain disinterested persons for purposes of administering other employee benefit plans of Voicetek and having transactions under such other plans be exempt from Section 16(b) of the Act. Therefore, if any Plan provision is found not to be in compliance with Rule 16b-3 or if any Plan provisions would disqualify Participants from remaining disinterested persons, that provisions shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3. APPROVED BY THE BOARD OF DIRECTORS: AUGUST 1, 1996 APPROVED BY THE STOCKHOLDERS: ________________________________________ 10 EX-10.19 23 1997 EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 10.19 VOICETEK CORPORATION 1997 Employee Stock Purchase Plan 1. Purpose It is the purpose of this 1997 Employee Stock Purchase Plan to provide a means whereby eligible employees may purchase Common Stock of Voicetek Corporation (the "Company") and any subsidiaries as defined below through after-tax payroll deductions. It is intended to provide a further incentive for employees to promote the best interests of the Company and to encourage stock ownership by employees in order that they may participate in the Company's economic growth. It is the intention of the Company that the Plan qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code and the provisions of this Plan shall be construed in a manner consistent with the Code and Treasury Regulations promulgated thereunder. 2. Definitions The following words or terms, when used herein, shall have the following respective meanings: (a) "Plan" shall mean the 1996 Employee Stock Purchase Plan. (b) "Company" shall mean Voicetek Corporation, a Massachusetts corporation. (c) "Account" shall mean the Employee Stock Purchase Account established for a Participant under Section 7 hereunder. (d) "Basic Compensation" shall mean the regular rate of salary or wages in effect immediately prior to a Purchase Period, before any deductions or withholdings, and 2 including overtime, bonuses and sales commissions, but excluding amounts paid in reimbursement for expenses. (e) "Board of Directors" shall mean the Board of Directors of Voicetek Corporation. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Committee" shall mean the Compensation Committee appointed by the Board of Directors. (h) "Common Stock" shall mean shares of the Company's common stock, $.01 par value per share. (i) "Effective Date" shall mean the date of the closing of the Company's first public offering of Common Stock made pursuant to an effective Registration Statement filed with the Securities and Exchange Commission. (j) "Eligible Employees" shall mean all persons employed by the Company or one of its Subsidiaries, but excluding: (1) Persons who have been employed by the Company or its Subsidiaries for less than six months on the first day of the Purchase Period; (2) Persons whose customary employment is less than twenty hours per week or five months or less per year; and (3) Persons who are deemed for purposes of Section 423(b)(3) of the Code to own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or a subsidiary. For purposes of the Plan, employment will be treated as continuing intact while a Participant is on military leave, sick leave, or other bona fide leave of absence, for up to 90 days - 2 - 3 or so long as the Participant's right to re-employment is guaranteed either by statute or by contract, if longer than 90 days. (k) "Exercise Date" shall mean the last day of a Purchase Period; provided, however, that if such date is not a business day, "Exercise Date" shall mean the immediately preceding business day. (l) "Participant" shall mean an Eligible Employee who elects to participate in the Plan under Section 6 hereunder. (m) Except as provided below, there shall be two "Purchase Periods" in each full calendar year during which the Plan is in effect, one commencing on January 1 of each calendar year and continuing through June 30 of such calendar year, and the second commencing on July 1 of each calendar year and continuing through December 31 of such calendar year. The first Purchase Period after the Effective Date of the Plan shall commence on July 1, 1997. The last Purchase Period shall commence on January 1, 2007 and end on June 30, 2007. (n) "Purchase Price" shall mean the lower of (i) 85% of the fair market value of a share of Common Stock for the first business day of the relevant Purchase Period, or (ii) 85% of such value on the relevant Exercise Date. If the shares of Common Stock are listed on any national securities exchange, or traded on the National Association of Securities Dealers Automated Quotation System ("Nasdaq") National Market System, the fair market value per share of Common Stock on a particular day shall be the closing price, if any, on the largest such exchange, or if not traded on an exchange, the Nasdaq National Market System, on such day, and, - 3 - 4 if there are no sales of the shares of Common Stock on such particular day, the fair market value of a share of Common Stock shall be determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the particular day in accordance with Treasury Regulations Section 25.2512-2. If the shares of Common Stock are not then listed on any such exchange or the Nasdaq National Market System, the fair market value per share of Common Stock on a particular day shall be the mean between the closing "Bid" and the closing "Asked" prices, if any, as reported in the National Daily Quotation Service for such day. If the fair market value cannot be determined under the preceding sentences, it shall be determined in good faith by the Board of Directors. (o) "Subsidiary" shall mean any present or future corporation which (i) would be a "subsidiary corporation" of the Company as that term is defined in Section 424(f) of the Code and (ii) is designated as a participant in the Plan by the Board. 3. Grant of Option to Purchase Shares. Each Eligible Employee shall be granted an option effective on the first business day of each Purchase Period to purchase shares of Common Stock. The term of the option shall be the length of the Purchase Period. The number of shares subject to each option shall be the quotient of the aggregate payroll deductions in the Purchase Period authorized by each Participant in accordance with Section 6 divided by the Purchase Price, but in no event greater than 2,000 shares per option, or such other number as determined from time to time by the Board of Directors or the Committee (the "Share Limitation"). Notwithstanding the foregoing, no - 4 - 5 employee shall be granted an option which permits his right to purchase shares under the Plan to accrue at a rate which exceeds in any one calendar year $25,000 of the fair market value of the Common Stock as of the date the option to purchase is granted. 4. Shares. There shall be 250,000 shares of Common Stock reserved for issuance to and purchase by Participants under the Plan, subject to adjustment as herein provided. The shares of Common Stock subject to the Plan shall be either shares of authorized but unissued Common Stock or shares of Common Stock reacquired by the Company and held as treasury shares. Shares of Common Stock not purchased under an option terminated pursuant to the provisions of the Plan may again be subject to options granted under the Plan. The aggregate number of shares of Common Stock which may be purchased pursuant to options granted hereunder, the number of shares of Common Stock covered by each outstanding option, and the purchase price for each such option shall be appropriately adjusted for any increase or decrease in the number of outstanding shares of Common Stock resulting from a stock split or other subdivision or consolidation of shares of Common Stock or for other capital adjustments or payments of stock dividends or distributions or other increases or decreases in the outstanding shares of Common Stock effected without receipt of consideration by the Company. 5. Administration. The Plan shall be administered by the Board of Directors or the Compensation Committee appointed from time to time by the Board of Directors. The Board of Directors or the Committee, if one has been appointed, is vested with full authority to make, administer and interpret such equitable rules and regulations regarding the Plan as it may deem advisable. The - 5 - 6 Board of Directors', or the Committee's, if one has been appointed, determinations as to the interpretation and operation of the Plan shall be final and conclusive. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under the Plan. 6. Election to Participate. An Eligible Employee may elect to become a Participant in the Plan for a Purchase Period by completing a "Stock Purchase Agreement" form prior to the first day of the Purchase Period for which the election is made. Such Stock Purchase Agreement shall be in such form as shall be determined by the Board of Directors or the Committee. The election to participate shall be effective for the Purchase Period for which it is made. There is no limit on the number of Purchase Periods for which an Eligible Employee may elect to become a Participant in the Plan. In the Stock Purchase Agreement, the Eligible Employee shall authorize regular payroll deductions of any full percentage of his Basic Compensation, but in no event less than one percent (1%) nor more than ten percent (10%) of his Basic Compensation, not to exceed $25,000 per year. An Eligible Employee may not change his authorization except as otherwise provided in Section 9. Options granted to Eligible Employees who have failed to execute a Stock Purchase Agreement within the time periods prescribed by the Plan will automatically lapse. 7. Employee Stock Purchase Account. An Employee Stock Purchase Account will be established for each Participant in the Plan for bookkeeping purposes, and payroll deductions made under Section 6 will be credited to such Accounts. However, prior to the purchase of shares in accordance with Section 8 or withdrawal from or termination of the Plan in accordance with the provisions hereof, the Company may use - 6 - 7 for any valid corporate purpose all amounts deducted from a Participant's wages under the Plan and credited for bookkeeping purposes to his Account. The Company shall be under no obligation to pay interest on funds credited to a Participant's Account, whether upon purchase of shares in accordance with Section 8 or upon distribution in the event of withdrawal from or termination of the Plan as herein provided. 8. Purchase of Shares. Each Eligible Employee who is a Participant in the Plan automatically and without any act on his part will be deemed to have exercised his option on each Exercise Date to the extent that the balance then in his Account under the Plan is sufficient to purchase at the Purchase Price whole shares of the Common Stock subject to his option, subject to the Share Limitations and the Section 423(b)(8) limitation described in Section 3. Any balance remaining in the Participant's Account shall be refunded to him in cash without interest. 9. Withdrawal. A Participant who has elected to authorize payroll deductions for the purchase of shares of Common Stock may cancel his election by written notice of cancellation ("Cancellation") delivered to the office or person designated by the Company to receive Stock Purchase Agreements, but any such notice of Cancellation must be so delivered not later than ten (10) days before the relevant Exercise Date. A Participant will receive in cash, as soon as practicable after delivery of the notice of Cancellation, the amount credited to his Account. Any Participant who so withdraws from the Plan may again become a Participant at the start of the next Purchase Period in accordance with Section 6. - 7 - 8 Upon dissolution or liquidation of the Company every option outstanding hereunder shall terminate, in which event each Participant shall be refunded the amount of cash then in his Account. If the Company shall at any time merge into or consolidate with another corporation, the holder of each option then outstanding will thereafter be entitled to receive at the next Exercise Date, upon exercise of such option and for each share as to which such option was exercised, the securities or property which a holder of one share of the Common Stock was entitled upon and at such time of such merger or consolidation. In accordance with this paragraph and this Plan, the Board of Directors or Compensation Committee, if any, shall determine the kind or amount of such securities or property which such holder of an option shall be entitled to receive. A sale of all or substantially all of the assets of the Company shall be deemed a merger or consolidation for the foregoing purposes. 10. Issuance of Stock Certificates. The shares of Common Stock purchased by a Participant shall, for all purposes, be deemed to have been issued and sold at the close of business on the Exercise Date. Prior to that date none of the rights or privileges of a shareholder of the Company, including the right to vote or receive dividends, shall exist with respect to such shares. Within a reasonable time after the Exercise Date, the Company shall notify the transfer agent and registrar of the Common Stock of the Participant's ownership of the number of shares of Common Stock purchased by a Participant for the Purchase Period, which shall be registered either in the Participant's name or jointly in the names of the Participant and his spouse with right of survivorship as the Participant shall designate in his Stock Purchase Agreement. Such - 8 - 9 designation may be changed at any time by filing notice thereof with the party designated by the Company to receive such notices. 11. Termination of Employment. (a) Upon a Participant's termination of employment for any reason, other than death, no payroll deduction may be made from any compensation due him and the entire balance credited to his Account shall be automatically refunded, and his rights under the Plan shall terminate. (b) Upon the death of a Participant, no payroll deduction shall be made from any compensation due him at time of death, the entire balance in the deceased Participant's Account shall be paid in cash to the Participant's designated beneficiary, if any, under a group insurance plan of the Company covering such employee, or otherwise to his estate, and his rights under the Plan shall terminate. 12. Rights Not Transferable. The right to purchase shares of Common Stock under this Plan is exercisable only by the Participant during his lifetime and is not transferable by him. If a Participant attempts to transfer his right to purchase shares under the Plan, he shall be deemed to have requested withdrawal from the Plan and the provisions of Section 9 hereof shall apply with respect to such Participant. 13. No Guarantee of Continued Employment. Granting of an option under this Plan shall imply no right of continued employment with the Company for any Eligible Employee. - 9 - 10 14. Notice. Any notice which an Eligible Employee or Participant files pursuant to this Plan shall be in writing and shall be delivered personally or by mail addressed to Voicetek Corporation, 19 Alpha Road, Chelmsford, MA 01824, Attn: Sheldon L. Dinkes. Any notice to a Participant or an Eligible Employee shall be conspicuously posted in the Company's principal office or shall be mailed addressed to the Participant or Eligible Employee at the address designated in the Stock Purchase Agreement or in a subsequent writing. 15. Application of Funds. All funds deducted from a Participant's wages in payment for shares purchased or to be purchased under this Plan may be used for any valid corporate purpose provided that the Participant's Account shall be credited with the amount of all payroll deductions as provided in Section 7. 16. Government Approvals or Consents. This Plan and any offering and sales to Eligible Employees under it are subject to any governmental approvals or consents that may be or become applicable in connection therewith. Subject to the provisions of Section 17, the Board of Directors of the Company may make such changes in the Plan and include such terms in any offering under this Plan as may be necessary or desirable, in the opinion of counsel, to comply with the rules or regulations of any governmental authority, or to be eligible for tax benefits under the Code or the laws of any state. 17. Amendment of the Plan. The Board of Directors may, without the consent of the Participants, amend the Plan at any time, provided that no such action shall adversely affect options theretofore granted hereunder, - 10 - 11 and provided that no such action by the Board of Directors without approval of the Company's shareholders may (a) increase the total number of shares of Common Stock which may be purchased by all Participants, (b) change the class of employees eligible to receive options under the Plan, or (c) make any changes to the Plan which require shareholder approval under applicable law or regulations, including Section 423 of the Code and the regulations promulgated thereunder. For purposes of this Section 17, termination of the Plan by the Board of Directors pursuant to Section 18 shall not be deemed to be an action which adversely affects options theretofore granted hereunder. 18. Term of the Plan. The Plan shall become effective on the Effective Date, provided that it is approved within twelve months after adoption by the Board of Directors by the affirmative vote of holders of a majority of the stock of the Company present or represented and entitled to vote at a duly held shareholders' meeting. The Plan shall continue in effect through June 30, 2007, provided, however, that the Board of Directors shall have the right to terminate the Plan at any time, but such termination shall not affect options then outstanding under the Plan. It will terminate in any case when all or substantially all of the unissued shares of stock reserved for the purposes of the Plan have been purchased. If at any time shares of stock reserved for the purposes of the Plan remain available for purchase but not in sufficient number to satisfy all then unfilled purchase requirements, the available shares shall be apportioned among Participants in proportion to the amount of payroll deductions accumulated on behalf of each Participant that would otherwise be used to purchase stock and the Plan shall terminate. Upon such termination or any other - 11 - 12 termination of the Plan, all payroll deductions not used to purchase stock will be refunded, without interest. 19. Notice to Company of Disqualifying Disposition; Legend. By electing to participate in the Plan, each Participant agrees to notify the Company in writing immediately after the Participant transfers Common Stock acquired under the Plan, if such transfer occurs within two years after the first business day of the Purchase Period in which such Common Stock was acquired. Each Participant further agrees to provide any information about such a transfer as may be requested by the Company or any subsidiary corporation in order to assist it in complying with the tax laws. Such dispositions generally are treated as "disqualifying dispositions" under Sections 421 and 424 of the Code, which have certain tax consequences to Participants and to the Company and its participating Subsidiaries. The Participant further agrees that all stock certificates for Common Stock purchased under the Plan by the Participant shall be held in his name or jointly with his spouse, as the case may be, and not in the name of a broker, nominee or other person or entity for such two-year period, and agrees that such stock certificates shall bear a legend reflecting that such Common Stock was obtained upon the purchase of Common Stock under the Plan. The Participant acknowledges that the Company may send a Form W-2, or substitute therefor, as appropriate, to the Participant with respect to any income recognized by the Participant upon a disqualifying disposition of Common Stock. 20. Withholding of Additional Income Taxes. By electing to participate in the Plan, each Participant acknowledges that the Company and its participating Subsidiaries are required to withhold taxes with respect to the amounts deducted - 12 - 13 from the Participant's compensation and accumulated for the benefit of the Participant under the Plan and each Participant agrees that the Company and its participating Subsidiaries may deduct additional amounts from the Participant's compensation, when amounts are added to the Participant's account, used to purchase Common Stock or refunded, in order to satisfy such withholding obligations. Each Participant further acknowledges that when Common Stock is purchased under the Plan, the Company and its participating Subsidiaries may be required to withhold taxes with respect to all or a portion of the difference between the fair market value of the Common Stock purchased and its purchase price, and each Participant agrees that such taxes may be withheld from compensation otherwise payable to such Participant. It is intended that tax withholding will be accomplished in such a manner that the full amount of payroll deductions elected by the Participant under Section 6 will be used to purchase Common Stock. However, if amounts sufficient to satisfy applicable tax withholding obligations have not been withheld from compensation otherwise payable to any Participant, then, notwithstanding any other provision of the Plan, the Company may withhold such taxes from the Participant's accumulated payroll deductions and apply the net amount to the purchase of Common Stock, unless the Participant pays to the Company, prior to the exercise date, an amount sufficient to satisfy such withholding obligations. Each Participant further acknowledges that the Company and its participating Subsidiaries may be required to withhold taxes in connection with the disposition of stock acquired under the Plan and agrees that the Company or any participating subsidiary may take whatever action it considers appropriate to satisfy such withholding requirements, including deducting from compensation otherwise payable to such Participant an amount sufficient to satisfy such withholding requirements or conditioning any disposition of Common Stock by the - 13 - 14 Participant upon the payment to the Company or such subsidiary of an amount sufficient to satisfy such withholding requirements. 21. General. Whenever the context of this Plan permits, the masculine gender shall include the feminine and neuter genders. Adopted by the Board of Directors __________________. Approved by the Stockholders ___________________. - 14 - EX-10.20 24 REGISTRATION & FIRST REFUSAL RIGHTS AGREEMENT 1 EXHIBIT 10.20 REGISTRATION AND FIRST REFUSAL RIGHTS AGREEMENT This Registration and First Refusal Rights Agreement (the "Agreement") dated as of December 22, 1992 is entered into by and among Voicetek Corporation, a Massachusetts corporation (the "Company"), and the holders of shares of the Company's Senior Preferred Stock, $.01 par value per share (the "Senior Preferred Shares"), Junior Preferred Stock -- Series 1, $.01 par value per share (the "Series 1 Junior Preferred Shares"), and Junior Preferred Stock -- Series 2, $.01 par value per share (the "Series 2 Junior Preferred Shares") (collectively, the Senior Preferred Shares, the Series 1 Junior Preferred Shares and the Series 2 Junior Preferred Shares are referred to as the "Preferred Shares"), listed on the signature pages hereto. WITNESSETH: WHEREAS, the Company and the purchasers of the Company's Senior Preferred Shares (the "Senior Preferred Shareholders") are parties to a certain Senior Preferred Stock Purchase Agreement with the Company dated as of December 22, 1992 (the "Senior Purchase Agreement"); WHEREAS, the Company and the purchasers of the Company's Series 1 Junior Preferred Shares and the Company's Series 2 Junior Preferred Shares (collectively the "Junior Preferred Shareholders") are parties to a certain Junior Preferred Stock Purchase Agreement with the Company dated as of December 22, 1992 (the "Junior Purchase Agreement"); WHEREAS, each of the parties hereto desires to set forth in a single agreement all of the registration and first refusal rights of the Senior Preferred Shareholders and Junior Preferred Shareholders (collectively, the "Preferred Shareholders") with respect to all of the Preferred Shares acquired by the Preferred Shareholders pursuant to the Senior Purchase Agreement and the Junior Purchase Agreement (collectively, the "Purchase Agreements"). NOW THEREFORE, in consideration of the execution of the Senior Purchase Agreement and the Junior Purchase Agreement, the mutual promises, covenants and conditions hereinafter set forth and other good and valuable consideration, the parties hereto agree as follows: 1. Certain Definitions. Any capitalized terms not defined herein shall have the meaning assigned to them in the Purchase Agreements. As used in this Agreement, the following terms shall have the following respective meanings: "Commission" shall mean the securities and Exchange commission, or any other federal agency at the time administering the Securities Act. 2 "Conversion Shares" shall mean shares of Common Stock issued upon conversion of any of the Preferred Shares. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Restricted Securities" shall mean the Preferred Shares and the Conversion Shares, but excluding in each case securities that have been (a) registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with such registration statement or (b) publicly sold pursuant to Rule 144 under the Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 2. Restrictive Legend. Each certificate representing Preferred Shares or Restricted Securities shall, except as otherwise provided in this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend substantially in the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS." 3. Notice of Proposed Transfer. Prior to any proposed transfer of any Restricted Securities (other than under the circumstances described in sections 4, 5 or 6), the holder thereof shall give written notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of its notice; provided, however, that no such opinion of counsel shall be required for a transfer (a) by a partnership to one or more of its partners or - 2 - 3 to another partnership with which such transferring partnership has a general partner in common, (b) by a corporation to one or more of its officers or employees or to another corporation that controls, is controlled by, or is under common control with such transferring corporation, (c) by an individual to (i) any member of his family or to any trust for the benefit of such family member or the holder, in each case by way of gift or (ii) by will or the laws of descent and distribution or (d) to any other individual or entity (other than the Company) that is a party to this Agreement at the time of such transfer. Each certificate for Restricted Securities transferred as above provided shall bear the legend set forth in Section 2 unless (i) such transfer is in accordance with the provisions of Rule 144 under the Securities Act (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. The restrictions provided for in this Section 3 shall not apply to securities which are not required to bear the legend prescribed by Section 2 in accordance with the provisions of that Section. 4. Required Registrations. (a) At any time on up to three occasions after the earlier of (i) six months after any registration statement covering a public offering of equity securities of the Company under the Securities Act shall have become effective and (ii) December 31, 1993, the holders of Restricted Securities constituting at least forty percent (40%) of the total shares of Restricted Securities then outstanding may request the Company to register under the Securities Act all or any portion of the Restricted Securities held by such requesting holder or holders for sale in the manner specified in such notice, provided that the Restricted Securities for which registration has been requested shall constitute at least ten percent (10%) of the total Restricted Securities originally issued if such holder or holders shall request the registration of less than all of the Restricted Securities then held by such holder or holders (or any lesser percentage if the reasonably anticipated aggregate price to the public of such public offering would exceed $2,000,000). The only securities which the Company shall be required to register pursuant this Agreement shall be shares of Common Stock. In any underwritten public offering contemplated by this Agreement, the holders of Preferred Shares shall be entitled to sell such Preferred Shares to the underwriters for conversion and sale (in such public offering) of the shares of Common Stock issued upon conversion or exercise thereof and such Preferred Shares so sold shall be deemed to have been "registered" for purposes of this Agreement. Notwithstanding anything to the contrary contained herein, no request may be made under this Section 4 within 120 days after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering in which the holders of Restricted Securities shall have been entitled to join pursuant to Sections 5 or 6 and in which there shall have been effectively registered all Restricted Securities as to which registration shall have been requested by the holders thereof. If the Company determines to include shares to be sold by it in any registration request pursuant to this Section 4, such registration shall not decrease the number of "demand" registrations available under this Section 4 if the holders of - 3 - 4 Restricted Securities are unable to include in any such registration statement all of the Restricted Securities requested for inclusion in such registration statement. (b) Following receipt of any notice under this Section 4, the Company shall immediately notify all holders of Restricted securities from whom notice has not been received and shall use its best efforts to register under the Securities Act, for public sale in accordance with the method of disposition specified in such notice from requesting holders, the number of Restricted securities specified in such notice (and in all notices received by the Company from other holders within thirty days after the giving of such notice by the Company). If such method of disposition shall be an underwritten public offering of Common Stock, the number of Restricted Securities to be included in such an underwriting may be reduced (pro rata among the requesting holders based upon the number of Restricted Securities owned by such holders) if and to the extent that the lead managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold therein, provided, however, that such number of Restricted Securities shall not be reduced if any shares are to be included in such underwriting for the account of any person other than the Company or requesting holders of Restricted Securities, and provided, further, however, that in no event may less than fifteen percent (15%) of the total number of shares of Common Stock to be included in such underwriting be made available for Restricted Securities. If such method of disposition shall be an underwritten public offering, the holders of a majority of the Restricted Securities to be sold in such offering under this Section 4 may designate the managing underwriter or underwriters of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed. The Company shall be obligated to register Restricted Securities pursuant to this Section 4 on three occasions only, provided, however, that such obligations shall be deemed satisfied on a particular occasion only when a registration statement covering all Restricted Securities specified in notices received as aforesaid, for sale in accordance with the method of disposition specified by the requesting holders, shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto. (c) The Company shall be entitled to include in any registration statement referred to in this Section 4, for sale in accordance with the method of disposition specified by the requesting holders, shares of Common Stock to be sold by the Company for its own account, except as and to the extent that, in the opinion of the lead managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Securities to be sold. Except for registration statements on Form S-4, S-8 or any successor thereto, and unless the Company has previously given the notice referred to in Section 5, the Company will not file with the Commission any other registration statement with respect to Common Stock, whether for its own account or that of other stockholders, from the date of receipt of a notice from requesting holders pursuant to this Section 4 until the completion of the period of distribution of the registration contemplated thereby. - 4 - 5 5. Incidental Registration. If the Company at any time (other than pursuant to Section 4) proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4 and S-8 or another form not available for registering the Restricted Securities for sale to the public), then each such time it will give written notice to all holders of outstanding Restricted Securities of its intention so to do. Upon the written request of any such holder, received by the Company within thirty days after the giving of any such notice by the Company, to register any of its Restricted Securities (which request shall state the intended method of disposition thereof), the Company will use its best efforts to cause the Restricted securities as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Restricted Securities so registered. In the event that any registration pursuant to this Section 5 shall be, in whole or in part, an underwritten public offering of Common Stock, the number of Restricted Securities to be included in such an underwriting may be reduced (pro rata among the requesting holders based upon the proportion which the number of Restricted Securities held by each holder bears to the total number of Restricted Securities outstanding) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein, provided, however, that such number of Restricted Securities shall not be reduced if any securities are to be included in such underwriting for the account of any person other than the Company or requesting holders of Restricted securities, and provided, further, however, that in no event may less than fifteen percent (15%) of the total number of shares to be included in such underwriting be made available for Restricted Securities. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 5 without thereby incurring any liability, other than for the payment of the Registration Expenses referred to in Section 8. 6. Registration on Form S-3. If at any time (i) a holder or holders of Restricted Securities request that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or any portion of the Restricted Securities held by such requesting holder or holders, the reasonably anticipated aggregate price to the public of which would exceed $500,000, and (ii) the Company is a registrant entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of Restricted Securities specified in such notice. Whenever the Company is required by this Section 6 to use its best efforts to effect the registration of Restricted Securities, each of the procedures and requirements of Section 4 (including the requirement that the Company notify all holders of Restricted Securities from whom notice has not been received and provide them with the opportunity to participate in the offering shall apply to such registration, provided, however, that there shall be no limitation on the number of registrations on Form S-3 which may be requested and obtained under this Section 6 (except that the Company shall not be required to - 5 - 6 file more than two such registrations in any one calendar year), and provided, further, however, that the requirements contained in the first sentence of Section 4(a) shall not apply to any registration on Form S-3 which may be requested and obtained under this Section 6. 7. Registration Procedures. If and whenever the Company is required by the provisions of Section 4, 5 or 6 to use its best effort's to effect the registration of any Restricted Securities under the Securities Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission a registration statement (which, in the case of an underwritten public offering pursuant to Section 4, shall be on Form S-1 or other form of general applicability satisfactory to the lead managing underwriter selected as therein provided) with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided); (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted securities covered by such registration statement in accordance with the sellers' intended method of disposition set forth in such registration statement for such period; (c) furnish to each seller of Restricted Securities and to each underwriter such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Securities covered by such registration statement; (d) use its best efforts to register or qualify the Restricted Securities covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the sellers of Restricted Securities or, in the case of an underwritten public offering, the managing underwriter reasonably shall request, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is bus not so qualified or to consent to general service of process in any such jurisdiction; (e) use its best efforts to list or include the Restricted Securities covered by such registration statement with any securities exchange or over-the-counter market system on which Common Stock is then listed or traded, including the National Association of Securities Dealers Automated Quotation (NASDAQ) system; - 6 - 7 (f) immediately notify each seller of Restricted Securities and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the light of the circumstances under which they were made; (g) if the offering is underwritten and at the request of any seller of Restricted Securities, use its best efforts to furnish on the date that Restricted Securities is delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller, stating that such registration statement has become effective under the Securities Act and that (A) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements contained therein) and (C) to such other effects as reasonably may be requested by counsel for the underwriters or by such seller or its counsel and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters and to such seller, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter), with respect to such registration as such underwriters reasonably may request as contemplated by Statement on Auditing Standards No. 49 of the Auditing Standards Board or any successor statement; and (h) make available for inspection by each seller of Restricted Securities, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. For purposes of Sections 4(c), 7(a) and 7(b), the period of distribution of Restricted Securities in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Restricted securities in any other registration shall be deemed to - 7 - 8 extend until the earlier of the sale of all Restricted Securities covered thereby and ninety days after the effective date of the registration statement. In connection with each registration hereunder, the sellers of Restricted Securities will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws. In connection with each registration pursuant to Section 4, 5 or 6 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature. 8. Expenses. All expenses incurred by the Company in complying with Sections 4, 5 and 6, including, without limitation, all registration and filing fees, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, listing or any other fees of exchanges or over-the-counter market systems, costs of insurance, printing costs and expenses in connection with the preparation of the registration statement and prospectus, and fees and disbursements of one counsel for the sellers of Restricted Securities, but excluding any Selling Expenses, are called "Registration Expenses". All underwriting discounts and selling commissions applicable to the sale of Restricted Securities are called "Selling Expenses". The Company will pay all Registration Expenses in connection with each registration statement under Section 4, 5 or 6. All Selling Expenses in connection with each registration statement under Section 4, 5 or 6 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree. The Company shall pay all expenses of the holders of Restricted securities in connection with any registration of Restricted securities initiated pursuant to Sections 4, 5 or 6 hereof which is withdrawn, delayed or abandoned at the request of the Company. 9. Indemnification and Contribution. (a) In the event of a registration of any of the Restricted Securities under the Securities Act pursuant to Sections 4, 5 or 6, the Company will and hereby does indemnify and hold harmless each seller of such Restricted Securities thereunder, each underwriter of such Restricted Securities thereunder and each other person, if any, who controls such seller or-underwriter within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such - 8 - 9 seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Restricted Securities was registered under the Securities Act pursuant to Section 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, the Company will not be liable in any such case if and to the extent that any' such loss, claim, damage or liability arises out of or is based solely upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person (or its or their authorized officers, employees, directors or agents) in writing specifically for use in such registration statement or prospectus and provided further that such indemnity with respect to any registration statement shall not inure to the benefit of any party from whom the person asserting any such loss, claim, damage or liability purchased the Restricted Securities which is the subject thereof if such person did not receive a copy of the registration statement (or the registration statement as supplemented) at or prior to the confirmation of the sale of such Restricted Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in such registration statement was corrected in the registration statement (or the registration statement as supplemented). (b) In the event of a registration of any of the Restricted Securities under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such Restricted Securities thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based solely upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Restricted Securities was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based solely upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or - 9 - 10 action, provided, however, that seller will be liable hereunder-in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based solely upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as furnished in writing to the Company by such seller (or its authorized officers, directors, employees or agents) specifically for use in such registration statement or prospectus, (ii) such indemnity with respect to any registration statement shall not inure to the benefit of any party from whom the person asserting any such loss, claim, damage or liability purchased the Restricted Securities which is the subject thereof if such person did not receive a copy of the registration statement (or the registration statement as supplemented) at or prior to the confirmation of the sale of such Restricted Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in such registration statement was corrected in the registration statement (or the registration statement as supplemented), and (iii) the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the shares sold by such seller' under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the proceeds received by such seller from the sale of Restricted Securities covered by such registration statement. Not in limitation of the foregoing, it is hereby understood And agreed that the indemnification obligations of any seller hereunder pursuant to any underwriting agreement entered into in connection herewith shall be limited to the obligations contained in this subparagraph (b). (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 9 and shall only relieve it from any liability which it may have to such indemnified party under this Section 9 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 9 for any legal expenses subsequently incurred by such indemnified party-in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party - 10 - 11 shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Restricted Securities exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 9 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 9 provides for indemnification in such case or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 9, then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Restricted Securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; provided, however, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the public offering price of all such Restricted Securities offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 10. Changes in Common Stock or Preferred Stock. If, and as often as, there is any such change in the Common Stock, the Senior Preferred Shares or the Junior Preferred Shares by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or ,recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock, the Senior Preferred Shares or the Junior Preferred Shares as so changed. 11. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities to the public without registration, at all times after ninety days after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; - 11 - 12 (b) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to each holder of Restricted Securities forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Securities without registration. 12. Right of First Refusal. 12.1. General. Subject to the provisions of Section 12.5, the Company shall not issue, sell or exchange, agree or obligate itself to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange (a) any shares of Common Stock, (b) any other equity securities of the Company, including Preferred Shares, (c) any debt securities of the Company (other than a bank line of credit with no equity feature), including any debt securities that by its terms are convertible into or exchangeable for any equity securities of the Company, (d) any securities of the Company that are a combination of debt and equity, or (e) any options, warrants or other rights to subscribe for, purchase or otherwise acquire any such equity or debt securities of the Company, unless in each case the Company shall have first offered to sell such securities (the "Offered Securities") to the Preferred Shareholders as set forth in this Section 12.1 or the provisions of this Section 12 shall have terminated pursuant to Section 12.6. The Company shall offer to sell to each Preferred Shareholder (a) that portion of the Offered Securities as the number of shares of Common Stock then held by such Preferred Shareholder plus the number of shares obtainable by such Preferred Shareholder upon the conversion of any Preferred Shares then held by such Shareholder bears to the total number of shares of Common Stock then outstanding or then issuable upon the conversion of then outstanding Preferred Shares or then issuable upon the conversion and/or payment of any then outstanding debt securities (such portion being herein referred to as such Preferred Shareholder's "Basic Amount") and (b) subject to the provisions set forth in Section 12.2, such additional portion of the Offered Securities as such Preferred Shareholder shall indicate it will purchase should the other Preferred Shareholders subscribe for less than their Basic Amounts (the "Undersubscription Amount"), at a price and on such other terms as shall have been specified by the Company in writing delivered to such Preferred Shareholder (the "Offer"), which offer by its terms shall remain open and irrevocable for a period of twenty days from receipt of the offer. 12.2. Notice of Acceptance. Notice of each Preferred Shareholder's intention to accept, in whole or in part, any Offer made pursuant to Section 12.1 shall be evidenced by a writing signed by such Preferred Shareholder and delivered to the Company prior to the end of the twenty-day period of such offer, setting forth such of the Preferred Shareholder's Basic - 12 - 13 Amount as such Preferred Shareholder elects purchase and, if such Preferred Shareholder shall elect to purchase all of its Basic Amount, such Undersubscription Amount as such Preferred Shareholder shall elect to purchase (the "Notice of Acceptance"). If the Basic Amounts subscribed for by all Preferred Shareholders are less than the total number of Offered Securities, then each Preferred Shareholder who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amount subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that should the Undersubscription Amounts subscribed for by all of the Preferred Shareholders exceed the difference between the number of Offered Securities and the Basic Amounts subscribed for by all of the Preferred Shareholders (the "Available Undersubscription Amount"), each Preferred Shareholder that has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Preferred Shareholder bears to the initial Basic Amounts of all Preferred Shareholders that subscribe for Undersubscription Amounts, subject to rounding by the Board to the extent it reasonably deems necessary. 12.3. Conditions to Acceptances and Purchases. 12.3.1. Permitted Sales of Refused Securities. In the event that Notices of Acceptances are not given by the Preferred Shareholders in respect of all the offered Securities, the Company shall have sixty days from the expiration of the period set forth in Section 12.1 to sell all or any part of such Offered Securities as to which Notices of Acceptance have not been given by the Preferred Shareholders (the "Refused Securities") to the person or persons specified in the Offer, but only for cash and otherwise in all respects upon terms and conditions, including unit price and interest rates, that are not materially more favorable to such other person or persons or less favorable to the Company than those set forth in the Offer. 12.3.2. Reduction in Amount of Offered Securities. In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 12.3.1 above), then prior to the closing described in Section 12.3.3, each Preferred Shareholder may, at its sole option and in its sole discretion, by written notice to the Company reduce the number of shares (or other units of the Offered Securities) specified in its Notice of Acceptance to an amount that shall be not less than the amount of the offered Securities which the Preferred Shareholder elected to purchase pursuant to Section 12.2 multiplied by a fraction, (a) the numerator of which shall be the number of all Offered Securities which the Company actually proposes to sell and (b) the denominator of which shall be the total number of Offered Securities. In the event that any Preferred Shareholder so elects to reduce the number or amount of Offered Securities specified in its respective Notices of Acceptance, the Company may not sell or otherwise dispose of more than the reduced amount for the Offered Securities until such securities have again been offered to the Preferred Shareholder in accordance with Section 12.1. - 13 - 14 12.3.3. Closing. Upon the closing, which shall include full payment to the Company, of the sale to such other Person or Persons of all or less than all the Refused Securities (or if all such Refused Securities are to be purchased by Shareholders, upon a closing at a time and place agreed upon by the Company and the Preferred Shareholders who have delivered Notices of Acceptance), the Preferred Shareholders shall purchase from the Company, and the Company shall sell to the Preferred Shareholders, the number of offered Securities specified in their respective Notices of Acceptance, as reduced pursuant to Section 12.3.2 if the Preferred Shareholders have so elected, upon the terms and conditions specified in the Offer. The purchase by the Preferred Shareholders of any offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Preferred Shareholders of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Preferred Shareholders and their respective counsel. 12.4. Further Sale. In each case, any offered Securities not purchased by the Preferred Shareholders or other Person or Persons in accordance with Section 12.3 may not be sold or otherwise disposed of until they are again offered to the Preferred Shareholders under the procedures specified in Sections 12.1, 12.2 and 12.3. 12.5. Exceptions. Notwithstanding anything to the contrary herein, the rights of the Preferred Shareholders under this Section 12 shall not apply to: (a) Common Stock issued as a stock dividend to holders of Common Stock or upon any subdivision or combination of shares of Common Stock; (b) Senior Preferred Shares issued as a dividend to holders of Senior Preferred Shares, or upon any subdivision or combination of Senior Preferred Shares; (c) Series 1 Junior Preferred Shares issued as a dividend to holders of Series 1 Junior Preferred Shares, or upon any subdivision or combination of Series I Junior Preferred Shares; (d) Series 2 Junior Preferred Shares issued as a dividend to holders of Series 2 Junior Preferred Stock, or upon any subdivision or combination of Series 2 Junior Preferred Shares; (e) Common Stock issued on conversion of any Preferred Shares; (d) Series 2 Junior Preferred Shares issued as a dividend to holders of Series 2 Junior Preferred Stock, or upon any subdivision or combination of Series 2 Junior Preferred Shares; (e) Common Stock issued on conversion of any Preferred Shares; (f) Demand Promissory Notes, substantially in the form of Exhibit D to the Purchase Agreements, representing in the aggregate not more than $600,000 of indebtedness to existing stockholders of the Company (the "Demand Promissory Notes"); (g) Senior Preferred Stock issued upon conversion and/or payment of the Demand Promissory Notes; - 14 - 15 (h) shares of Common Stock issuable as of the date hereof under the Company's stock option plans; or (i) securities issued solely in consideration for the acquisition (whether by merger or otherwise) by the Company of all or substantially all of the capital stock or assets for any other entity, or securities issued solely in consideration for the grant by or to the Company of marketing rights, distribution rights, license rights or similar rights granted by or to the Company in consideration of the exchange of proprietary technology, whether of the Company or any other entity. 12.6. Termination of Right of First Refusal. The covenants contained in this Section 12 shall terminate upon the earlier of: (a) a closing of an underwritten public offering of Common Stock on a "firm commitment" basis pursuant to a registration statement on Form S-1 (or its then equivalent) filed under the Securities Act with the Commission, provided that (i) the aggregate gross proceeds received by the Company from such offering exceed $5,000,000 and (ii) such Common Stock is offered at a price per share not-less than $.64, and (b) the first date on which no Senior Preferred Shares and Junior Preferred Shares are outstanding. 13. Representations and Warranties of the Company. The Company represents and warrants to the Preferred Shareholders as follows: (a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Articles of Organization or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any of its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company. (b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms. - 15 - 16 14. Miscellaneous. (a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including transferees of any Restricted Securities), whether so expressed or not, provided, however, that registration rights conferred herein on the holders of Restricted Securities shall only inure to the benefit of a transferee of Restricted Securities if (i) there is transferred to such transferee Restricted Securities composed of, convertible into or exercisable for at least 392,950 shares of Common Stock or (ii) such transferee satisfies the description set forth in the proviso to the second sentence of Section 3. (b) All notices, requests, demands and other communications hereunder shall be in writing (including telegraphic communication) and shall be mailed, telegraphed or delivered to each applicable party at the address set forth in the Purchase Agreements or at such other address as to which such party may inform the other parties in writing in compliance with the terms of this Section. If to any subsequent holder of Common Stock or Preferred Shares: at such holder's address for notice as set forth in the register maintained by the Company, or at such other address as shall be designated by such person in a written notice to the other parties complying as to delivery with the terms of this Section. All such notices, requests, demands and other communications shall, when mailed (which mailing must be accomplished by first class mail, postage prepaid; electronic facsimile transmission; express overnight courier service; or registered mail, return receipt requested) or telegraphed, by effective upon the earlier of actual receipt and the third business day after deposited in the mails or delivered to the telegraph company, respectively, addressed as aforesaid, unless otherwise provided herein. Any notice delivered in person shall be deemed to have been given on the date of personal delivery. (c) For any action to be taken hereunder by the holders of, or for any right contingent upon, a specified percentage or proportion of one or more classes or series of the Company's securities, such percentage or proportion shall be determined as if all Preferred Shares had been converted into Common Stock pursuant to the Company's Articles of Organization. (d) This Agreement shall be governed by the laws of The Commonwealth of Massachusetts. (e) This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the holders of at least two-thirds of the outstanding Restricted Securities. The parties hereto acknowledge that the Company has issued and/or may in the future issue the Demand Promissory Notes, and that the holders of - 16 - 17 such Demand Promissory Notes may be entitled to acquire additional Senior Preferred Shares pursuant to the terms of the Demand Promissory Notes. The parties hereto acknowledge that, at such time as any holder of Demand Promissory Notes acquires additional Senior Preferred Shares, this Agreement shall be amended to reflect the addition of such holder as a party hereto and that no further consent or approval of any party to this Agreement will be required in order to effect such amendment. (f) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Additional persons or entities who purchase Restricted Securities shall, as a condition to the purchase of Restricted Securities, become parties to this Agreement and shall become holders of "Restricted Securities" hereunder, subject to the limitation set forth in Section 14(a), upon execution by such persons or entities of a counterpart of this Agreement. (g) If requested in writing by the underwriters for the initial underwritten public offering of securities of the Company, each holder of Restricted Securities shall agree not to sell publicly any Restricted Securities or any other shares of Common stock (other than Restricted Securities or other shares of Common Stock being registered in such offering), without the consent of such underwriters, for a period of not more than ninety days following the effective date of the registration statement relating to such offering; provided, however, that all persons entitled to registration rights with respect to shares of Common Stock whether or not they are parties to this Agreement, all other persons selling shares of Common Stock in such offering and all executive officers and directors of the Company shall also have agreed not to sell publicly their Common Stock under the circumstances and pursuant to the terms set forth in this Section 14(g). (h) Notwithstanding the provisions of Section 7(a), the Company's obligation to file a registration statement, or cause such registration statement to become and remain effective, shall be suspended for a period not to exceed ninety days in,any twenty-four-month period if there exists at the time material non-public information relating to the Company which, in the reasonable opinion of the Company, should not be disclosed. (i) The Company shall not grant any registration rights in conflict with or more favorable than any of those contained herein, and the Company shall not grant any registration rights to any person investing less than $100,000 in cash in the Company so long as any of the registration rights under this Agreement remains in effect. (j) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. - 17 - 18 (k) The Company recognizes that the rights of the holders of Restricted Securities under this Agreement are unique and, accordingly, such holders shall, in addition to such other remedies as may be available to them at law or in equity, have the right to enforce their rights hereunder by actions for injunctive relief and specific performance to the extent permitted by law. This Agreement is not intended to limit or abridge any rights of such holders which may exist apart from this Agreement. (l) The obligations of the Company to register Shares of Restricted Stock under Section 4, 5 or 6 shall terminate on December 22, 2002. - 18 - 19 IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of December 22, 1992. VOICETEK CORPORATION By: _________________________________ Title: PREFERRED SHAREHOLDERS: CORNING PARTNERS II By: __________________________________ Name: Title: - 19 - 20 (i) The Company shall not grant any registration rights in conflict with or more favorable than any of those contained herein, and the Company shall not grant any registration rights to any person investing less than $100,000 in cash in the Company so long as any of the registration rights under this Agreement remains in effect. (j) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. (k) The Company recognizes that the rights of the holders of Restricted Securities under this Agreement are unique and, accordingly, such holders shall, in addition to such other remedies as may be available to them at law or in equity, have the right to enforce their rights hereunder by actions for injunctive relief and specific performance to the extent permitted by law. This Agreement is not intended to limit or abridge any rights of such holders which may exist apart from this Agreement. (l) The obligations of the Company to register Shares of Restricted Stock under Section 4, 5 or 6 shall terminate on December 22, 2002. IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of December 22, 1992. VOICETEK CORPORATION By: /s/ ----------------------------- Title: PREFERRED SHAREHOLDERS: CORNING PARTNERS II By: /s/ ----------------------------- Name: Title: - 20 - 21 EG&G VENTURE PARTNERS By: EG&G VENTURE MANAGEMENT, G.P. By: /s/ ----------------------------- KEARSARGE CAPITAL FUND, L.P. By: /s/ ----------------------------- Name: Title: LPP PARTNERS By: /s/ ----------------------------- Name: Title: MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORPORATION By: /s/ ----------------------------- Name: Title: /s/ Sherman M. Wolf ----------------------------- Sherman M. Wolf NYNEX DEVELOPMENT COMPANY By: /s/ ----------------------------- Name: Title: - 21 - 22 EG&G VENTURE PARTNERS By: ------------------------------- Name: Title: KEARSARGE CAPITAL FUND, L.P. By: ------------------------------- Name: Title: LPP PARTNERS By: ------------------------------- Name: Title: MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORPORATION By: ------------------------------- Name: Title: --------------------------------- Sherman M. Wolf NYNEX DEVELOPMENT COMPANY By: ------------------------------- Name: Title: - 22 - 23 EG&G VENTURE PARTNERS By: ------------------------------- Name: Title: KEARSARGE CAPITAL FUND, L.P. By: ------------------------------- Name: Title: LPP PARTNERS By: ------------------------------- Name: Christopher W. Lynch Title: General Partner MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORPORATION By: ------------------------------- Name: Title: ---------------------------------- Sherman M. Wolf NYNEX DEVELOPMENT COMPANY By: ------------------------------- Name: Title: - 23 - 24 EG&G VENTURE PARTNERS By: ------------------------------- Name: Title: KEARSARGE CAPITAL FUND, L.P. By: ------------------------------- Name: Title: LPP PARTNERS By: ------------------------------- Name: Title: MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORPORATION By: ------------------------------- Name: Michael E. A. O'Malley Title: Vice President --------------------------------- Sherman M. Wolf NYNEX DEVELOPMENT COMPANY By: ------------------------------- Name: Title: - 24 - 25 EG&G VENTURE PARTNERS By: ------------------------------- Name: Title: KEARSARGE CAPITAL FUND, L.P. By: ------------------------------- Name: Title: LPP PARTNERS By: ------------------------------- Name: Title: MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORPORATION By: ------------------------------- Name: Title: --------------------------------- Sherman M. Wolf NYNEX DEVELOPMENT COMPANY By: ------------------------------- Name: Title: - 25 - 26 EG&G VENTURE PARTNERS By: ------------------------------- Name: Title: KEARSARGE CAPITAL FUND, L.P. By: ------------------------------- Name: Title: LPP PARTNERS By: ------------------------------- Name: Christopher W. Lynch Title: General Partner MASSACHUSETTS TECHNOLOGY DEVELOPMENT CORPORATION By: ------------------------------- Name: Title: ---------------------------------- Sherman M. Wolf NYNEX DEVELOPMENT COMPANY By: ------------------------------- Name: R. A. Jelmen Title: Vice President - 26 - 27 PIONEER VENTURES LIMITED PARTNERSHIP By: Christopher W. Lynch ------------------------------- Name: Christopher W. Lynch Title: Vice President PROVIDENCE PARTNERSHIP II By: /s/ ------------------------------- Name: Title: WOOD INVESTMENT By: /s/ ------------------------------- Name: Title: - 27 - EX-11.1 25 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 VOICETEK CORPORATION STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Historical Pro Forma -------------------------------- ---------- Primary Fully Diluted ---------- -------------- For the year ended December 31, 1996: Net income available to common stockholders.......................... $2,967,000 $4,063,000(2) $4,063,000(2) ========== ========== ========== Weighted average common stock outstanding during the period.......... 401,000 401,000 401,000 Weighted average cheap stock outstanding during the period(1)........ 59,000 59,000 59,000 Assumed conversion of Preferred Stock................................ -- 4,577,000 4,577,000 Assumed exercise of common stock options, less purchase of common stock under treasury stock method........................... 643,000 653,000 643,000 ---------- ---------- ---------- Weighted average shares outstanding.................................. 1,103,000 5,690,000 5,680,000 ========== ========== ========== Net income per share................................................. $ 2.69 $ 0.71 $ 0 .72 ========== ========== ========== For the year ended December 31, 1995: Net income available to common stockholders.......................... $1,396,000 $2,392,000(2) ========== ========== Weighted average common stock outstanding during the period.......... 252,000 252,000 Weighted average cheap stock outstanding during the period(1)........ 59,000 59,000 Assumed conversion of Preferred Stock................................ 4,577,000 Assumed exercise of common stock options, less purchase of common stock under the treasury stock method.............................. 785,000 1,030,000 ---------- ---------- Weighted average shares outstanding.................................. 1,096,000 5,918,000 ========== ========== Net income per share................................................. $ 1.27 $ 0.40 ========== ========== For the year ended December 31, 1994: Net income available to common stockholders.......................... $ 444,000 $ 854,000(2) ========== ========== Weighted average common stock outstanding during the period.......... 149,000 149,000 Weighted average cheap stock outstanding during the period(1)........ 59,000 59,000 Assumed conversion of preferred stock................................ 4,577,000 Assumed exercise of common stock options, less purchase of common stock under the treasury stock method.............................. 143,000 642,000 ---------- ---------- Weighted average shares outstanding.................................. 351,000 5,427,000 ========== ========== Net income per share................................................. $ 1.26 $ 0.16 ========== ==========
- ---------- (1) In accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 83, issuances of Common Stock and Common Stock equivalents within one year prior to the initial filing date of the registration statement, at share prices less than the assumed initial public offering price of $11.00 per share (cheap stock), are considered to have been made in anticipation of the contemplated public offering for which this registration statement was prepared. Accordingly, these equity issuances are treated as if issued and outstanding, using the treasury stock method, for all periods presented. (2) Adjusted to add back accretion of the Preferred Stock to redemption value as the Preferred Stock is assumed to be converted for the Pro Forma and Fully Diluted calculations. EX-23.1 26 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this Registration Statement on Form S-1 of our report dated February 3, 1997, except as to the information presented in Note 11, for which the date is February 12, 1997, on our audits of the financial statements of Voicetek Corporation. We also consent to the references to our firm under the captions "Experts" and "Selected Financial Data." /s/ Coopers & Lybrand L.L.P. Coopers & Lybrand L.L.P. Boston, Massachusetts February 14, 1997 EX-27.1 27 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1 0 0 7,970 70 1,188 12,204 5,191 3,291 16,015 7,608 0 11,297 0 5 (3,131) 16,015 16,239 22,101 5,183 8,344 12,835 39 229 704 (3,359) 4,063 0 0 0 4,063 $2.69 $0.71
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