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EXHIBIT 10.14
[HUGHES NETWORK SYSTEMS LOGO]
8050025
AMENDMENT #1 TO THE
TERMS AND CONDITIONS
FOR
38GHZ ODU
BETWEEN
HUGHES NETWORK SYSTEMS
A HUGHES ELECTRONICS CORPORATION COMPANY
11717 EXPLORATION LANE
GERMANTOWN, MARYLAND 20876
AND
ENDGATE CORPORATION
321 SOQUEL WAY
SUNNYVALE, CALIFORNIA 94086
DATE: OCTOBER 5, 1998
CONTRACT NO.: JBG-020798-1
[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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NOTICE OF PROPRIETARY INFORMATION
All information contained in or disclosed by this document is confidential and
proprietary to Hughes Network Systems, Inc. By accepting this material the
recipient agrees that this material and the information contained therein will
be held in confidence and will not be reproduced, disclosed, or used in whole or
in part except for purposes of this document.
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SUBCONTRACT AGREEMENT
8050025 (12/93P)
TERMS AND CONDITIONS
This Amendment #1 to Contract No. JBG-020798-1 dated March 13, 1998, made
between Hughes Network Systems, a Hughes Electronics Corporation company, having
its principal place of business at 11717 Exploration Lane, Germantown, Maryland
20876 (hereinafter called "HNS"), and Endgate Corporation having its principal
place of business at 321 Soquel Way, Sunnyvale, CA 94016 (hereinafter called the
"Contractor" or "Endgate") shall be effective October 5, 1998.
WITNESSETH:
WHEREAS HNS desires to buy and Contractor desires to sell Equipment and
Services as hereinafter specified and the Parties desire to define the terms and
conditions under which such Equipment and Services will be furnished.
NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants
herein expressed, agree with each other as follows:
ARTICLE SCOPE OF WORK ADD THE FOLLOWING PARAGRAPH
Contractor shall provide the necessary personnel, material, services,
equipment and facilities to perform the work specified in the statement of work
(Exhibit A) No. HNS-15009 revision 5 entitled statement of work for manufacture
of a 24-GHz radio integrated outdoor unit for subscriber and hub stations and
dated september 29, 1998 and the specification 1026128 (Exhibit B) at its then
current revision which are attached hereto and made a part of this contract for
any future point to multipoint developments, if any, contractor shall provide
the necessary personnel, material, services, equipment and facilities to perform
the work specified in a referenced statement of work and specification.
Terms such as 24GHz, 38GHz, odu, subscriber unit, hub unit, 24dbm, 30dbm
are for reference only. Actual specifications are contained in the relevant
documents.
ARTICLE STRATEGIC RELATIONSHIP AMEND AS SHOWN IN BOLD
The Parties agree that they are hereby entering into a strategic
relationship in which Contractor shall supply millimeter wave equipment to HNS
in accordance with this Contract. Contractor agrees to give the highest priority
commitment for the life of this relationship for the following elements:
1. Factory capacity to ensure timely delivery of Work ordered by HNS.
2. Design services and product changes to permit this Work to retain its
technical leadership and competitive position in the market and to
permit/adapt its use at other frequency bands as indicated in the SOW.
Contractor hereby grants to HNS market exclusivity for the
Point-To-Multipoint market for a [*] after completion of Acceptance of the Work
or any changes, enhancements, or derivatives before offering to sell such Work
or modified Work to others. Exclusivity will terminate if HNS fails to order [*]
of the forecasted quantity for a period of [*]. The first
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
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year Production forecast for this Contract is [*] or more for
38GHZ ODU AND [*] FOR 24GHZ ODU. CONTRACTOR SHALL NOT SELL OR OFFER
FOR SALE TO ANY THIRD PARTY WORK DEVELOPED UNDER THIS CONTRACT WITHOUT THE PRIOR
WRITTEN CONSENT OF HNS. HNS agrees to provide the Contractor with a first
opportunity to bid on requirements for new Point to Multipoint assemblies at
frequencies of 18 GHz and above. FOR ANY FUTURE DEVELOPMENTS THE REQUIRED
FORECAST INFORMATION FOR THIS ARTICLE WILL BE PROVIDED IN THE PURCHASE ORDER.
ARTICLE PRICE AND PAYMENT AMEND AS SHOWN IN BOLD
A. For the full, satisfactory. and timely performance of all the
requirements of this Contract, Contractor shall be entitled to payment
by HNS of the amount indicated in Purchase Order P241537 and
subsequent associated purchase orders, in accordance with this Article
and paragraph C of the Article entitled PRODUCTION PHASE AND PURCHASE
ORDERS. In any event the total amount associated with the Development
Phase [*] for the 38GHz development and [*] for the 24GHz development
and shall be paid based on the successful conclusion of the
Development milestones as shown in paragraph C of this Article. This
amount, which shall be paid to Contractor in accordance with this
Article, includes all taxes, duties and similar liabilities whatsoever
and all charges for packaging and crating deliverable items to
destination(s) in the United States designated by HNS, except as
stated in Paragraph B below.
B. Except with respect to any State or local sales or use taxes on the
sale to HNS or use by HNS of the items delivered under this Contract,
Contractor shall assume responsibility for and shall save HNS harmless
from all taxes, duties, and similar liabilities which may be required
under any applicable Federal, State, or local law or laws and which
become due by reason of the performance of Work under this Contract,
and shall comply with all requirements of said laws, including any
interest payment or penalties related to or arising from such taxes,
duties and similar liabilities.
C. Without limiting the obligations of Contractor to comply with all the
requirements of this Contract, HNS agrees to make payments to
Contractor in accordance with the following schedule:
DEVELOPMENT PHASE 38GHZ
MILESTONE PAYMENT
--------- -------
Project Turn-On [*]
PDR
CDR
Qualification Units [*]
Field Trial Units [*]
FDR
Acceptance
where Acceptance is defined by Chapter 5 of the SOW, but excludes
"Production Testing".
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
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DEVELOPMENT PHASE 24GHZ
MILESTONE PAYMENT
--------- -------
Project Turn-On [*]
PDR
Proto Dely [*]
CDR
Qual Units [*]
FTU [*]
FDR
ARTICLE PRODUCTION PHASE AND PURCHASE ORDERS AMEND AS SHOWN IN BOLD
C. The initial prices for the [*] Subscriber Units shall be [*]. The
initial prices for the [*] 24GHz Subscriber Units with [*] shall be
[*]. The initial prices for the [*]. The initial prices for the [*].
The initial prices for the [*]. Table below represents the initial not
to exceed, volume based, pricing prior to the completion of the design
and experiencing the actual manufacturing costs and O/II. After
commencement of the Production Phase, if any, and prior to shipment of
the [*], HNS and Contractor will negotiate the pricing for the
subsequent Subscriber and the HUB units. The subscriber pricing will
reflect the [*]. The HUB pricing will follow similar guidelines and
will take into account the [*].
38 GHZ AND 24 GHZ ([*] DBM OPTION / "BASE PRICE")
Subscriber Units HUB Units
Quantity Unit Price Quantity Unit Price
(Cumulative)
[*] [*] [*] [*]
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
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IT IS UNDERSTOOD THAT HNS DESIRES TO HAVE SUBSCRIBER AND HUB UNITS
WITH [*]DBM POWER OUTPUT OPTION AVAILABLE AS SOON AS POSSIBLE. CONTRACTOR AGREES
THAT THE BASE PRICE FOR 24GHZ UNITS [*] REGARDLESS OF POWER OUTPUT OPTION
([*]DBM OR [*]DBM) PURCHASED. THE PRICE OF UNITS WITH THE [*]DBM OPTION WILL BE
DETERMINED BY [*]:
24 GHZ([*] DBM OPTION / "PRICE ADDER")
SUBSCRIBER UNITS HUB UNITS
QUANTITY UNIT PRICE QUANTITY UNIT PRICE
[*] [*] [*] [*]
D. It is understood by both Parties that the target pricing of the
Subscriber units beyond the [*] will require an end cost to HNS of no
greater than [*]. To achieve this target price, after commencement of
the Production Phase, if any, and prior to shipment of the [*], HNS
and Contractor agree to negotiate a cost reduction plan, which may
include exercising article HNS design and manufacture, in which both
Parties will work together to achieve cost reductions for the
Products. Such plan will include details of the process both Parties
will follow to identify potential cost reductions and how any cost
reductions achieved will be shared by both Parties subject to
achieving the target price. It is understood that there will be a high
level of commonality in design, materials, and manufacturing processes
between the Subscriber unit and Hub unit. Therefore, any identified
price reductions for the Subscriber unit will be incorporated in the
Hub unit price.
F. HNS non-binding production forecast, which is not to be interpreted as
a commitment, is for [*] of the 38 GHz ODU's to be delivered over a
four year period and [*] of the 24 GHz ODU's over a three year period
starting after the respective Development Phase.
ARTICLE PATENT RIGHTS AMEND AS SHOWN IN BOLD
A. For all inventions or other intellectual property rights conceived or
first actually reduced to practice by CONTRACTOR under this Contract,
and for all Patents and Rights issuing thereon, said patents or
intellectual property rights shall be the joint property of the Parties
in accordance with Paragraph G of this Article. Promptly after
acquiring knowledge of each such invention, Contractor will disclose
the same to HNS in writing, and will provide HNS with such additional
information and cooperation as HNS may require to secure Patent
protection on the same, if HNS decides to seek Patent protection. For
all inventions or other intellectual property rights conceived or first
actually reduced to practice solely by HNS and for all patents and
rights issuing thereon, said patents and intellectual property rights
shall be solely owned by HNS.
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
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G. JOINT INVENTIONS
1. Each Party shall have an equal, undivided one-half interest in and to
Joint Inventions, without accounting to either party, as well as in and to
patent applications and patents thereon in all countries. An assignment of
rights in all Joint Inventions shall be executed in the names and for the
benefit of both Endgate and HNS.
ARTICLE ORDER OF PRECEDENCE AMEND AS SHOWN IN BOLD
In the event of any ambiguity and/or inconsistency between the Terms and
Conditions, Statement of Work, Specifications, Drawings or other documents
incorporated by reference, the following descending order of precedence shall
control:
1. Terms and Conditions and any amendments thereto;
2. Exhibit A, Statement of Work Revision 6 and dated March 18, 1998;
3. Exhibit B, Performance Requirements Specification 1024668 and 1025231
at their current revision;
4. Purchase Order(s);
5. Drawings and other documents attached to the Specifications or
incorporated by reference.
The order of precedence for 24GHz odu and any future projects amended to
this contract shall always be as follows, unless specific reference is made
to the contrary in any such amendment:
1. Terms and Conditions of This Contract and Any Amendments Thereto;
2. Statement of Work;
3. Performance Specifications;
4. Purchase Order;
5. Drawings and Other Documents Attached to the Specifications or
Incorporated by Reference.
ARTICLE ACCESS TO WORK IN PROGRESS AND DATA ADD THIS PARAGRAPH
HNS may elect to assign HNS employee(s) to be on site at contractor's
facilities during the development phase of this contract or any subsequent point
to multipoint developments. Contractor shall provide office space at no cost.
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ARTICLE GENERAL ADD THIS PARAGRAPH
F. Within ten (10) days of execution of this amendment and within ten (10)
days of execution of a purchase order for future development work, if
any, contractor shall provide to HNS a detailed design block diagram
for the work product(s) being developed under this contract.
Furthermore, contractor, within ten (10) days, shall disclose to HNS,
in writing, a report of the recurring and non-recurring percentage of
the total selling price to be charged for each block in the detailed
design block diagram. Contractor shall warrant to HNS the accuracy of
the information set forth in the report. In the event that HNS,
pursuant to the articles of this contract entitled, "Changes", "Patent
rights" and/or "HNS design and manufacture" elects to make or have made
any of said components, the parties shall mutually agree in good faith
to reduce the price of the work by an equitable amount not less than
the actual net price that would have been charged by contractor, where
net price is the total selling price including non-recurring
engineering less the price of any interface control documents required
to be created by contractor.
ARTICLE HNS DESIGN AND MANUFACTURE ADD THIS ARTICLE
In order to optimize time to market and recurring cost performance HNS
shall have the right to design and manufacture, with respect to Paragraph D of
the article Production Phase and Purchase Order and Paragraph F of the article
General, any of the components as set forth in the detailed design block
diagram. It is intended that such activities are to utilize the primary
strengths of the parties which are currently recognized to be networks and
baseband processing and if circuitry for HNS and millimeter wave circuits and
antenna systems for Endgate. In the event HNS elects to design and manufacture
any such component contractor agrees to relinquish its obligation for the design
and manufacture of said component and to reduce the contract price appropriately
to account for the reduction in scope of work which reduction in price shall
include, but not be limited to, non-recurring development cost and recurring
manufacturing costs. Furthermore, in the event HNS elects to design and
manufacture any components under this article, contractor hereby grants HNS the
following rights:
a. Except for the millimeter wave circuits and antennas, HNS may
elect to design and manufacture or subcontract the design and
manufacture of any component;
b. HNS may elect how the integration and test of any component will
be performed, e.g., HNS may elect to sell, consign, drop ship or
otherwise transfer said components to contractor for test and
integration into sub-assemblies or final assemblies. likewise,
HNS may elect to have contractor sell its portion of the
component(s) to HNS and HNS shall have the sole right to choose
how to integrate and test with other components.
c. In the event HNS elects to design, manufacture, integrate and
test or subcontract the integration and test of components to a
third party then HNS and contractor shall in good faith mutually
agree to modify the interface control documents and
specifications as needed.
For any component HNS elects to design and manufacture, contractor
agrees to supply detailed interface information, including but not limited to,
interface control documents that will ensure design compatibility between HNS
and contractors components.
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ARTICLE TOOLING OWNERSHIP AND RIGHT TO USE ADD THIS ARTICLE
The cost to HNS for all required production tooling which is unique to
HNS product(s) is included in the total price paid by HNS for the development
phase as shown in the article Price and Payment for the 38GHz and 24GHz and as
may be shown on any purchase order which may be issued for future point to
multipoint developments under this contract. All tooling shall be held by
contractor at contractor's risk and be used exclusively in the production of HNS
items required by this contract and subsequent contracts. Contractor shall
require that all tooling which is unique to HNS product(s) be designated as
joint property of the parties with HNS rights to use, such that in the event
that contractor is unable or unwilling to fulfill the requirements of this
contract or is in default pursuant to the article of this contract termination
for default, HNS has unrestricted right to use said tooling at no additional
cost to HNS. The contractor shall establish procedures for the adequate storage,
maintenance and inspection of this equipment and shall maintain inspection
records available to HNS upon request. The requirements of this article shall be
extended by contractor to each of its subcontractors performing work pursuant to
this contract.
ARTICLE MANUFACTURING TRANSFER ADD THIS ARTICLE
It is understood by the parties that contractor intends to take steps to
increase its manufacturing capabilities or to subcontract the manufacture of all
or some components of the work in order to fulfill the forecasted production
requirements as contemplated by this contract. Contractor shall submit to HNS,
within 21 calendar days of the date of execution of this Amendment #1, a
mutually agreeable manufacturing plan to be utilized to accomplish the
forecasted production requirements. Such plan shall include, but not be limited
to, capital equipment order and delivery milestones, staff acquisition plans,
material procurement and delivery schedules, facilities, key personnel and key
processes. Furthermore, the manufacturing plan shall include details for backup
manufacturing capacity, with mutually agreeable backup sources of said capacity,
that may be required for any reason. This plan for backup capacity shall include
an executed frame agreement between Endgate and a mutually agreeable source of
capacity for any production work which will be manufactured by contractor.
HNS, at its sole option, may direct contractor to transfer the manufacture of
the work within a reasonable amount of time to the mutually agreed backup source
of capacity as detailed in the manufacturing plan, at no cost increase to HNS,
in the event that contractor fails to make progress as to endanger performance
of the production requirements, if any, in accordance with the terms of this
contract.
Such transfer of manufacture shall include but not be limited to the transfer
all pertinent and required documentation, including software, artwork, test
procedures/fixtures, specifications, parts lists, drawings, tooling, jigs, dies,
etc. Except for Endgate proprietary technology to enable production and testing
of the work. This article does not relieve contractor of any of its obligations
under this contract.
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ARTICLE FRAME AGREEMENT ADD THIS ARTICLE.
A. By way of Amendment #1 to contract no. JBG-020798-1, the amended terms
and conditions shall represent the agreed to terms and conditions for
the 24GHz odu development and any future point to multipoint
developments at frequencies of 18GHz and above undertaken between HNS
and contractor. All rights and remedies set forth in the provisions of
the contract shall be individually enforceable for each such
procurement.
B. For any future point to multipoint developments undertaken between HNS
and contractor, HNS shall issue a purchase order which references this
contract wherein the prices, schedules, specifications and statements
of work shall be detailed in said purchase order. A signature line
shall be provided on said purchase order wherein a duly authorized
officer of contractor shall execute as acceptance of the purchase order
under the same terms and conditions of this contract and return copy to
HNS. No agreement for any future development shall be in effect unless
or until a purchase order referencing this contract is executed by a
duly authorized officer of the parties.
C. Notwithstanding any provision on any form supplied by HNS or contractor
to the contrary, all purchase orders issued by HNS referencing this
contract shall be subject to and governed by the terms of this
contract. Any terms and conditions that appear on any form supplied by
HNS or contractor which alter, revise, conflict with or supplement the
terms of this contract shall have no force or effect unless mutually
agreed to and put in writing as an amendment to this contract or on the
face of the relevant purchase order.
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment to the
Contract.
HUGHES NETWORK SYSTEMS
ATTEST: BY: /S/ SURESH ARORA
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NAME: SURESH ARORA
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TITLE: VICE PRESIDENT
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ENDGATE CORPORATION
ATTEST: [illegible] BY: /S/ JAMES BYBOKAS
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NAME: JAMES BYBOKAS
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TITLE: VICE PRESIDENT
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