<PAGE>
THIS DOCUMENT IS A COPY OF THE EXHIBITS FILED ON JULY 1, 1996 PURSUANT TO A
RULE 201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 (Fee Required) for the fiscal year ended March 30, 1996 [ ] Transition
report under Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee
Required) for the transition period from to ___________ to ___________
Commission File Number: 0-9856
------
AM COMMUNICATIONS, INC.
- ------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Delaware 23-1922958
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1900 AM Drive, Quakertown, Pennsylvania 18951-9004
- ----------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (215)-536-1354
--------------
Securities Registered Under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
on Which Registered
None
- ------------------------------------------------------------------------------
Securities Registered Under Section 12(g) of the Act:
Common Stock, $.10 Par Value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[ ]
Issuer's revenues for fiscal year ended March 30, 1996 were $8,373,000. On
June 11, 1996, the aggregate market value of Registrant's outstanding
voting (Common) Stock held by non-affiliates, was approximately $10,593,000
(based on the average between the bid and the asked prices of such stock on that
date).
On June 11, 1996, there were 30,962,962 shares of the Registrant's Common
Stock, par value $.10 per share, outstanding.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AM COMMUNICATIONS, INC.
(Registrant)
/s/ Keith D. Schneck
--------------------------
By : Keith D. Schneck
President, Chief Financial Officer and
Chief Accounting Officer
Date: July 8, 1996
-----------------------
In accordance with the Securities Exchange Act, this report has been signed
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
/s/ Henry I. Boreen /s/ Keith D. Schneck
- --------------------------------- ------------------------------
Henry I. Boreen Keith D. Schneck
Chairman, Chief Executive Officer President, Chief Financial Officer,
and Director and Director
Date: July 8, 1996 Date: July 8, 1996
------------------------ --------------------------
/s/ Alvin Hoffman /s/ Herman O. Benninghoff, II
- --------------------------------- ------------------------------
Alvin Hoffman Herman O. Benninghoff, II
Director Director
Date: July 8, 1996 Date: July 8, 1996
------------------------ --------------------------
/s/ Hal Krisbergh
- ---------------------------------
Hal Krisbergh
Director
Date: July 8, 1996
<PAGE>
PURCHASE AGREEMENT
BETWEEN
AM COMMUNICATIONS, INC.
1900 AM DRIVE
QUAKERTOWN, PA 18951
AND
LUCENT TECHNOLOGIES INC.
FOR THE PURCHASE OF TRANSPONDER BASED MONITORING SYSTEM
CONTRACT G17826D
EFFECTIVE APRIL 1, 1996
<PAGE>
CONTRACT NO. G 17826 D
TABLE OF CONTENTS
PAGE
MATERIAL ................................................... 1
PRICE ...................................................... 1
F.O.B ...................................................... 1
FREIGHT CLASSIFICATION ..................................... 1
TERMS OF PAYMENT ........................................... 1
SPECIFICATIONS OR DRAWINGS ................................. 1
LIST SPECIFICATIONS ........................................ 2
DEFINITIONS ................................................ 2
BANKRUPTCY AND TERMINATION FOR FINANCIAL INSECURITY ........ 3
BAR CODE SHIPPING AND RECEIVING LABELS ..................... 3
ELECTRONIC DATA INTERCHANGE (EDI) .......................... 3
INNOVATIONS OR CHANGES ..................................... 4
CLAUSE HEADINGS ............................................ 4
DEFAULT .................................................... 4
MCU/MCR PRODUCT CONFORMANCE ................................ 5
EMERGENCY SERVICE .......................................... 5
GOVERNMENT CONTRACT PROVISIONS ............................. 6
INSTALLATION/CUTOVER ASSISTANCE ............................ 6
INDEMNITY .................................................. 6
INSURANCE .................................................. 6
INSIGNIA ................................................... 7
MARKING .................................................... 8
NON-COMMITMENT SUPPLIER INITIATED STOCKING PROGRAM ......... 8
NONEXCLUSIVE MARKET RIGHTS ................................. 8
NOTICES .................................................... 8
OFFSETTING OF INVOICES ..................................... 9
PRODUCT DOCUMENTATION ...................................... 9
PUBLICITY .................................................. 9
REGISTRATION AND RADIATION STANDARDS ....................... 9
REJECTIONS ................................................. 10
SEVERABILITY ............................................... 10
SERVICES ................................................... 10
STANDARD NATIONAL/ASSIGNMENT ORDER ......................... 10
TECHNICAL SUPPORT .......................................... 10
TERMINATION OF CONTRACT OR PURCHASE ORDERS ................. 11
TRAINING ................................................... 11
TOXIC SUBSTANCES AND PRODUCT HAZARDS ....................... 12
CFC PACKAGING .............................................. 13
OZONE DEPLETING SUBSTANCES LABELING ........................ 13
HEAVY METALS IN PACKAGING .................................. 13
TIMELY PERFORMANCE ......................................... 13
<PAGE>
CONTRACT NO. G 17826 D
TABLE OF CONTENTS
PAGE
WARRANTY ................................................... 14
SUPPLIERS INFORMATION ...................................... 15
MEDIATION .................................................. 15
ORDER PLACEMENT ............................................ 15
QUALITY" ................................................... 15
ASSIGNMENT BY COMPANY ...................................... 15
UTILIZATION OF MINORITY AND WOMEN-OWNED BUSINESS ENTERPRISES 17
<PAGE>
PD-60-59A
GLOBAL PROCUREMENT
GUILFORD CENTER
P.O. BOX 25000
GREENSBORO, NC 27420-5000
AREA CODE 910-279-7000
CONTRACT NO. G 17826D
PAGE 1 OF 21 PAGES
AM COMMUNICATIONS, INC. ACCEPTANCE SHALL BE INDICATED BY
Attn: Mr. David Delane SIGNING AND RETURNING DUPLICATE TO:
1900 AM Drive J. B. PHIPPS - GM1094010
Quakertown, PA 18951
LUCENT TECHNOLOGIES INC. ("Company") agrees to purchase and AM Communications,
Inc. ("Supplier") agrees to sell in accordance with the terms and conditions
stated in this Agreement and Attachment A to this Agreement and the terms and
conditions set forth on the reverse side of page one of this Agreement.
MATERIAL - Such quantities of Transponder based Status Monitoring System (the
"MATERIAL") as set forth in Attachment A of Supplier's manufacture as may be
ordered by Company during the period from April 1, 1996 through March 31, 2001.
This Agreement is a non-commitment Agreement and MATERIAL shall be furnished by
Supplier on an as-ordered basis.
MANUFACTURING INTERVAL - See Attachment A.
PRICE - As set forth in Attachment A.
F.O.B. - Quakertown, PA - Freight Collect
FREIGHT CLASSIFICATION - ELECTRONIC APPLIANCES OR INSTRUMENTS, NOI.
TERMS OF PAYMENT - Net 30 DaysNT
INSPECTION - Paragraph 1 on Reverse Side of Page 1 Applies.
SPECIFICATION OR DRAWINGS - The following specifications, copies of which
Supplier has in its possession, as changed from time to time with Supplier's
written approval, is hereby made a part of this Agreement. The material shall
comply in all respects to such specifications.
<PAGE>
Applicable to PD-60-59 and 59A
TERMS AND CONDITIONS (3-94)
ASSIGNMENT AND SUBCONTRACTING - Supplier shall not assign any right or interest
under this Agreement (excepting monies due or to become due) or delegate or
subcontract any Work or other obligation to be performed or owed under this
Agreement without the prior written consent of Company. Any attempted
assignment, delegation or subcontracting in contravention of the above
provisions shall be void and ineffective. Any assignment of monies shall be void
and ineffective to the extent that (1) Supplier shall not have given Company at
least thirty (30) days prior written notice of such assignment or (2) such
assignment attempts to impose upon Company obligations to the assignee
additional to the payment of such monies, or to preclude Company from dealing
solely and directly with Supplier in all matters pertaining to this Agreement
including the negotiation of amendments or settlements of charges due. All Work
performed by Supplier's subcontractor(s) at any tier shall be deemed Work
performed by Supplier.
CHOICE OF LAW - The construction, interpretation and performance of this
Agreement and all transactions under it shall be governed by the laws of the
State of New Jersey excluding its choice of laws rules and excluding the
Convention for the International Sale of Goods. The parties agree that the
provisions of the New Jersey Uniform Commercial Code apply to this Agreement and
all transactions under it, including agreements and transactions relating to the
furnishing of services, the lease or rental of equipment or material, and the
license of software. Supplier agrees to submit to the jurisdiction of any court
wherein an action is commenced against Company based on a claim for which
Supplier has agreed to indemnify Company under this Agreement.
COMPLIANCE WITH LAWS - Supplier and all persons furnished by Supplier shall
comply at their own expense with all applicable federal, state, local and
foreign laws, ordinances, regulations and codes, including those relating to the
use of chlorofluorocarbons, and including the identification and procurement of
required permits, certificates, licenses, insurance, approvals and inspections
in performance under this Agreement. Supplier agrees to indemnify, defend (at
Company's request) and save harmless Company, its affiliates, its and their
customers and each of their officers, directors and employees from and against
any losses, damages, claims, demands, suits, liabilities, fines, penalties and
expenses (including reasonable attorney's fees) that arise out of or result from
any failure to do so.
ENTIRE AGREEMENT - This Agreement shall incorporate the typed or written
provisions on Company's orders issued pursuant to this Agreement and shall
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement and the order(s) and shall not be modified or
rescinded, except by a writing signed by Supplier and Company. All references in
these terms and conditions to this Agreement or to Work, services, material,
equipment, products, software or information furnished under, in performance of,
pursuant to, or in contemplation of, this Agreement shall also apply to any
orders issued pursuant to this Agreement. Printed provisions on the reverse side
of Company's orders (except as specified otherwise in this Agreement) and all
provisions on Supplier's forms shall be deemed deleted. Additional or different
terms inserted in this Agreement by Supplier, or deletions thereto, whether by
alterations, addenda, or otherwise, shall be of no force and effect, unless
expressly consented to by Company in writing. Estimates or forecasts furnished
by Company shall not constitute commitments. The provisions of this Agreement
supersede all contemporaneous oral agreements and all prior oral and written
quotations, communications, agreements and understandings of the parties with
respect to the subject matter of this Agreement. The term "Work" as used in this
Agreement may also be referred to as "services."
FORCE MAJEURE - Neither party shall be held responsible for any delay or failure
in performance of any part of this Agreement to the extent such delay or failure
is caused by fire, flood, explosion, war, strike, embargo, government
requirement, civil or military authority, act of God, or other similar causes
beyond its control and without the fault or negligence of the delayed or
nonperforming party or its subcontractors ("force majeure conditions").
Notwithstanding the foregoing, Supplier's liability for loss or damage to
Company's material in Supplier's possession or control shall not be modified by
this clause. If any force majeure condition occurs, the party delayed or unable
to perform shall give immediate notice to the other party, stating the nature of
the force majeure condition and any action being taken to avoid or minimize its
effect. The party affected by the other's delay or inability to perform may
elect to: (1) suspend this Agreement or an order for the duration of the force
majeure condition and (i) at its option buy, sell, obtain or furnish elsewhere
material or services to be bought, sold, obtained or furnished under this
Agreement or an order (unless such sale or furnishing is prohibited under this
Agreement) and deduct from any commitment the quantity bought, sold, obtained or
furnished or for which commitments have been made elsewhere and (ii) once the
force majeure condition ceases, resume performance under this Agreement or an
order with an option in the affected party to extend the period of this
Agreement or order up to the length of time the force majeure condition endured
and/or (2) when the delay or nonperformance continues for a period of at least
fifteen (15) days, terminate, at no charge, this Agreement or an order or the
part of it relating to material not already shipped, or services not already
performed. Unless written notice is given within forty-five (45) days after the
affected party is notified of the force majeure condition, (1) shall be deemed
selected.
<PAGE>
GOVERNMENT CONTRACT PROVISIONS - The following provisions regarding equal
opportunity, and all applicable laws, rules, regulations and executive orders
specifically related thereto, including applicable provisions and clauses from
the Federal Acquisition Regulation and all supplements thereto are incorporated
in this Agreement as they apply to work performed under specific U.S. Government
contracts: 41 CFR 60-1.4, Equal Opportunity; 41 CFR 60-1.7, Reports and Other
Required Information; 41 CFR 60-1.8, Segregated Facilities; 41 CFR 60-250.4,
Affirmative Action For Disabled Veterans and Veterans of the Vietnam Era (if in
excess of $10,000); and 41 CFR 60-741.4, Affirmative Action for Disabled Workers
(if in excess of $2,500), wherein the terms "contractor" and "subcontractor"
shall mean "Supplier". In addition, orders placed under this Agreement
containing a notation that the material or services are intended for use under
Government contracts shall be subject to such other Government provisions
printed, typed or written thereon, or on the reverse side thereof, or in
attachments thereto.
IDENTIFICATION - Supplier shall not, without Company's prior written consent,
engage in advertising, promotion or publicity related to this Agreement, or make
public use of any Identification in any circumstances related to this Agreement.
"Identification" means any copy or semblance of any trade trademark, service
mark, insignia, symbol, logo, or any other product, service or organization
designation, or any specification or drawing of Lucent Technologies, Inc. or its
affiliates, or evidence of inspection by or for any of them. Supplier shall
remove or obliterate any Identification prior to any use or disposition of any
material rejected or not purchased by Company, and, shall indemnify, defend (at
Company's request) and save harmless Lucent Technologies Inc. and its affiliates
and each of their officers, directors and employees from and against any losses,
damages, claims, demands, suits, liabilities, fines, penalties and expenses
(including reasonable attorneys' fees) arising out of Supplier's failure to so
remove or obliterate.
IMPLEADER - Supplier shall not implead or bring an action against Company or its
customers or the employees of either based on any claim by any person for
personal injury or death to an employee of Company or its customers occurring in
the course or scope of employment and that arises out of material or services
furnished under this Agreement.
INFRINGEMENT - Supplier shall indemnify and save harmless Company, its
affiliates, its and their customers, and each of their officers, directors,
employees, successors and assigns (all hereinafter referred to in this clause as
Company) from and against any losses, damages, liabilities, fines, penalties,
and expenses (including reasonable attorneys' fees) that arise out of or result
from any proved or unproved claim (1) of infringement of any patent, copyright,
trademark or trade secret right, or other intellectual property right, private
right, or any other proprietary or personal interest, and (2) related by
circumstances to the existence of this Agreement or performance under or in
contemplation of it (an Infringement Claim). If the Infringement Claim arises
solely from Supplier's adherence to Company's written instructions regarding
services or tangible or intangible goods provided by Supplier (Items) and if the
Items are not (1) commercial items available on the open market or the same as
such items, or (2) items of Supplier's designated origin, design or selection,
Company shall indemnify Supplier. Company or Supplier (at Company's request)
shall defend or settle, at its own expense, any demand, action or suit on any
Infringement Claim against the other for which it is the indemnitor under the
preceding provisions and each shall timely notify the other of any assertion
against it of any Infringement Claim and shall cooperate in good faith with the
other to facilitate the defense of any such claim.
INVOICING - Supplier shall: (1) render original invoice, or as otherwise
specified in this Agreement, showing Agreement and order number, through routing
and weight; (2) render separate invoices for each shipment within twenty-four
(24) hours after shipment; and (3) mail invoices with copies of bills of lading
and shipping notices to the address shown on this Agreement or order. If
prepayment of transportation charges is authorized, Supplier shall include the
transportation charges from the FOB point to the destination as a separate item
on the invoice stating the name of the carrier used. No minimum billing charges
are permitted unless expressly authorized in this Agreement.
PAYMENT TERMS - Unless payment terms more favorable to Company appear on
Supplier's invoice and Company elects to pay on such terms, invoices shall be
paid in accordance with the terms stated in this Agreement, and due dates for
payment of invoices shall be computed from the date of receipt of invoice by
Company.
PRODUCT CONFORMANCE REVIEWS - Section (1) or (2) applies if either is indicated
in this Agreement or order. Section (3) applies to both sections (1) and (2).
(1) All material is subject to a Product Conformance Review ("Review") prior to
shipment. Supplier shall notify Company's Global Manufacturing and Engineering
(GM&E) organization when material is ready for such Review. (2) Supplier may
ship material without a Review but Company may perform such Review prior to
shipment by giving Supplier notice to that effect, in which event Supplier shall
notify Company's GM&E organization when material is ready for such Review. (3)
Supplier will provide, without charge, any production testing facilities and
personnel required to perform or assist in the Review as specified in the
applicable Quality Program Specification or other quality specification provided
under this Agreement or order. Company's Reviews as set forth in sections (1)
and (2) may only be waived by written notification from Company's GM&E
organization.
<PAGE>
RELEASES VOID - Neither party shall require (i) waivers or releases of any
personal rights or (ii) execution of documents which conflict with the terms of
this Agreement, from employees, representatives or customers of the other in
connection with visits to its premises and both parties agree that no such
releases, waivers or documents shall be pleaded by them or third persons in any
action or proceeding.
RIGHT OF ENTRY AND PLANT RULES - Each party shall have the right to enter the
premises of the other party during normal business hours with respect to the
performance of this Agreement, subject to all plant rules and regulations,
security regulations and procedures and U.S. Government clearance requirements
if applicable.
SHIPPING - Supplier shall: (1) ship the material covered by this Agreement or
order complete unless instructed otherwise: (2) ship to the destination
designated in the Agreement or order; (3) ship according to routing instructions
given by Company; (4) place the Agreement and order number on all subordinate
documents; (5) enclose a packing memorandum with each shipment and, when more
than one package is shipped, identify the package containing the memorandum; and
(6) mark the Agreement and order number on all packages and shipping papers.
Adequate protective packing shall be furnished at no additional charge. Shipping
and routing instructions may be furnished or altered by Company without a
writing. If Supplier does not comply with the terms of the FOB clause of this
Agreement or order or with Company's shipping or routing instructions, Supplier
authorizes Company to deduct from any invoice of Supplier (or to charge back to
Supplier), any increased costs incurred by Company as a result of Supplier's
noncompliance.
SUPPLIER'S INFORMATION - Supplier shall not provide under, or have provided in
contemplation of, this Agreement any idea, data, program, technical, business or
other intangible information, however conveyed, or any document, print, tape,
disk, semiconductor memory or other information-conveying tangible article,
unless Supplier has the right to do so, and Supplier shall not view any of the
foregoing as confidential or proprietary.
SURVIVAL OF OBLIGATIONS - The obligations of the parties under this Agreement
which by their nature would continue beyond the termination, cancellation or
expiration of this Agreement, including, by way of illustration only and not
limitation, those in the clauses COMPLIANCE WITH LAWS, IDENTIFICATION,
IMPLEADER, INDEMNITY, INFRINGEMENT, INSURANCE, RELEASES VOID, USE OF INFORMATION
and WARRANTY, shall survive termination, cancellation or expiration of this
Agreement.
TAXES - Company shall reimburse Supplier only for the following tax payments
with respect to transactions under this Agreement unless Company advises
Supplier that an exemption applies: state and local sales and use taxes, as
applicable. Taxes payable by Company shall be billed as separate items on
Supplier's invoices and shall not be included in Supplier's prices. Company
shall have the right to have Supplier contest any such taxes that Company deems
improperly levied at Company's expense and subject to Company's direction and
control.
TITLE AND RISK OF LOSS - Title and risk of loss and damage to material purchased
by Company under this Agreement shall vest in Company when the material has been
delivered at the FOB point. If this Agreement or an order issued pursuant to
this Agreement calls for additional services including, but not limited to,
unloading, installation, or testing, to be performed after delivery, Supplier
shall retain title and risk of loss and damage to the material until the
additional services have been performed. Notwithstanding the foregoing sentence,
if Supplier is expressly authorized to invoice Company for material upon
shipment or prior to the performance of additional services, title to such
material shall vest in Company upon payment of the invoice, but risk of loss and
damage shall pass to Company as provided in the foregoing sentence.
USE OF INFORMATION - Supplier shall view as Company's property any idea, data,
program, technical, business or other tangible information, however conveyed,
and any document, print, tape, disk, tool, or other tangible
information-conveying or performance-aiding article owned or controlled by
Company, and provided to, or acquired by, Supplier under or in contemplation of
this Agreement (Information). Supplier shall, at no charge to Company, and as
Company directs, destroy or surrender to Company promptly at its request any
such article or any copy of such Information. Supplier shall keep Information
confidential and use it only in performing under this Agreement and obligate its
employees, subcontractors and others working for it to do so, provided that the
foregoing shall not apply to information previously known to Supplier free of
obligation, or made public through no fault imputable to Supplier.
WAIVER - The failure of either party at any time to enforce any right or remedy
available to it under this Agreement or otherwise with respect to any breach or
failure by the other party shall not be construed to be a waiver of such right
or remedy with respect to any other breach or failure by the other party.
<PAGE>
WARRANTY - Supplier warrants to Company and its customers that material
furnished will be new, merchantable, free from defects in design, material and
workmanship and will conform to and perform in accordance with the
specifications, drawings and samples. These warranties extend to the future
performance of the material and shall continue for the longer of (a) the
warranty period applicable to Company's sales to its customers of the material
or of products which incorporate the material, (b) one year after the material
is accepted by Company or (c) such greater period as may be specified elsewhere
in this Agreement. Supplier also warrants to Company and its customers that
services will be performed in a first class, workmanlike manner. In addition, if
material furnished contains one or more manufacturers' warranties, Supplier
hereby assigns such warranties to Company and its customers. All warranties
shall survive inspection, acceptance and payment. Material or services not
meeting the warranties will be, at Company's option, returned for refund,
repaired, replaced or reperformed by Supplier at no cost to Company or its
customers and with transportation costs and risk of loss and damage in transit
borne by Supplier. Repaired and replacement material shall be warranted as set
forth above in this clause.
<PAGE>
LIST SPECIFICATIONS
See Attachment D
In accordance with the notification requirements outlined in the clause NOTICES,
Supplier shall provide Company with at least sixty (60) days prior written
notice of a change involving form, fit and function (including any updates or
enhancements) proposed to be made by Supplier in the MATERIAL furnished pursuant
to said Specifications under this Agreement.
If Company, in its sole discretion, does not agree to the change proposed by
Supplier, then in addition to all other rights and remedies at law or equity or
otherwise, and without any cost to or liability or obligation of Company,
Company shall have the right to terminate this Agreement and to terminate any or
all purchase orders for MATERIAL affected by such change.
Supplier agrees to continue to supply MATERIAL to Company pursuant to the
specifications for the term of this Agreement. If Supplier is unable to continue
to thus supply or discontinues manufacture of MATERIAL, Company shall be
entitled to one year's advance notice, plus a manufacturing license and
appropriate specifications and drawings to enable requirements of the
specifications. Company shall have the right to review the test setups, test
procedures, and test data used by Supplier in meeting the specifications.
DEFINITIONS
The following terms, when utilized herein, have the respective indicated
meanings:
"Product" means the HFC 2000 Monitoring System, developed by Supplier
specifically for the Company.
"Product Proprietary Rights" means rights in all inventions, know-how,
discoveries, improvements, designs, programs, source codes, algorithms, circuit
designs, protocols and other confidential information, including all
intellectual property rights in the foregoing made, conceived or acquired by
Supplier in the development of the Product, exclusive of Supplier Proprietary
Rights.
"Supplier Proprietary Rights" means rights in all inventions, know-how,
discoveries, improvements, designs, programs, source codes, algorithms, circuit
designs, protocols and other confidential information, including all
intellectual property rights in the foregoing, which either are or were owned by
or in the possession of Supplier prior to the commencement of the development
project for the Product.
"Product Proprietary Rights" means rights in all inventions, know-how,
discoveries, improvements, designs, programs, source codes, algorithms, circuit
designs, protocols and other confidential information, including all
intellectual property rights in the foregoing made, conceived or acquired by
Supplier in the development of the Product, exclusive of Supplier Proprietary
Rights.
"Supplier Proprietary Rights" means rights in all inventions, know-how,
discoveries, improvements, designs, programs, source codes, algorithms, circuit
designs, protocols and other confidential information, including all
intellectual property rights in the foregoing, which either are or were owned by
or in the possession of Supplier prior to the commencement of the development
project for the Product.
<PAGE>
BANKRUPTCY AND TERMINATION FOR FINANCIAL INSECURITY
Either party may terminate this Agreement by notice in writing:
1) if the other party makes an assignment for the benefit of creditors
(other than solely an assignment of monies due); or
2) if the other party evidences an inability to pay debts as they
become due, unless adequate assurance of such ability to pay is
provided within thirty (30) days of such notice.
If a proceeding is commenced under any provision of the United States Bankruptcy
Code, voluntary or involuntary, by or against either party, and this Agreement
has not been terminated, the non-debtor party may file a request with the
bankruptcy court to have the court set a date within sixty (60) days after the
commencement of the case, by which the debtor party will assume or reject this
Agreement, and the debtor party shall cooperate and take whatever steps
necessary to assume or reject the Agreement by such date.
- No later than (negotiable), Supplier shall at its sole expense place
Company's specified bar code labels on all shipping packages and containers for
the material shipped under this Agreement. Such bar code labels and the
placement thereof shall meet the "Shipping & Receiving Bar Code Label Standard
Lucent Technologies Inc. 801-001-105," Issue 3 (a copy of which Supplier has in
its possession). Company may change such specification upon written notice to
Supplier and Supplier shall comply with such changes.
- - Supplier and Company agree that they will use electronic means of issuing
purchase orders, acknowledgements, purchase order changes, ship notices, or such
other purchasing communications as may be agreed upon by Supplier and Company
for transactions under this Agreement ("Electronic Data Interchange" or "EDI").
Such EDI shall be effective on April 30, 1996. In order to implement and operate
such EDI, Supplier shall, no later than April 30, 1996, at its sole expense
obtain, make fully operational and maintain all equipment, software and other
materials set forth in Company's EDI Planning Guide (a copy of which Supplier
has in its possession). Supplier shall also execute an Electronic Purchasing
Agreement with Company at the time of execution of this Agreement.
- Each party shall periodically review the material produced and if a change
appears appropriate to reduce costs or to improve quality, such change shall
promptly be described in a written proposal signed by the Representative of the
submitting party. Supplier shall comment in writing on each such proposal
regardless of its origin within a reasonable time stating whether or not such
change is in Supplier's opinion technically proper and feasible and setting
forth a charge or credit, as the case may be, fully reflecting increases or
decreases in price resulting from (a) the addition or deduction of labor or
materials and (b) increases or decreases in Supplier's other costs directly
connected with the proposed change. If Company elects to make the proposed
change, a change order shall be prepared, approved by Company's Representative,
and signed by both parties setting forth the change, its effect on prices or
delivery dates or both, and if material is in production what items of material
will be affected.
For purpose of this Agreement, the term "change" includes but is not limited to:
1. A change in the specification;
2. A change in the drawings or the design;
3. A change in the method or manner or performance of the work; and
4. A change in Company or Supplier furnished facilities, equipment,
materials, or services.
If the change results in a reduction in the unit price, such reduction shall be
shared equally between Company and Supplier, and one-half of the reduction in
the unit price shall be made immediately following Company's written approval of
the change and implementation of said change by Supplier. If Company suggest a
change which results in a price decrease of the item, then the entire reduction
shall be passed on to Company and not shared with Supplier.
- - The headings of the clauses in this Agreement are inserted for convenience
only and are not intended to affect the meaning or interpretation of this
Agreement.
- In the event Supplier shall be in breach or default of any of the terms,
conditions, or covenants of this Agreement or any purchase order and such breach
or default shall continue for a period of thirty (30) days after the giving of
written notice to Supplier thereof by Company, then in addition to all other
rights and remedies which Company may have at law or equity or otherwise,
Company shall have the right to cancel this Agreement and/or purchase orders
placed by Company without any charge to or obligation or liability of Company.
- Supplier agrees to use its best efforts to ensure that future
changes/enhancements made by Supplier to this product will not interfere with
Company's customer ATS Network.
<PAGE>
Supplier agrees to freeze, i.e., (not make any changes) to Supplier's current
version of the MCU/MCR firmware that Supplier will supply to Company under the
terms and conditions of the Agreement.
Supplier shall develop and turn over to Company, Supplier's current
specification including both the interface protocol as well as the operational
behavior. This specification will be in such form as to allow Company sufficient
data to either turn it over to another supplier for manufacture or to
manufacture itself. Such specification shall be subject to Company's review and
acceptance.
Supplier will make its best efforts to keep their MCU/MCR software compatible
with Supplier's current specification and maintain a documentation trail
regarding all future changes and communicate these changes to Company in writing
when required by Company.
In the event Company decides to update Suppliers firmware changes made by
Supplier, Company will be allowed to do so free of cost. Company will be
responsible for system testing these changes and pay Supplier for any MCU/MCR
software changes as part of this upgrade at a mutually agreed price.
- Supplier shall attain and maintain "acceptable" ratings on all quality system
elements per a Quality System Audit (QSA) specified by Company, and periodically
performed by Company.
Supplier shall insure that all manufacturing and design operations which
contribute to the design, development, production, and service of MATERIAL are
ISO 9001 certified by date to be mutually determined.
Supplier shall establish an end of line Quality Assurance product audit on
MATERIAL by date to be mutually determined (date). The focus of this audit shall
be to replicate user application of MATERIAL as specified to customer. Test and
examination of MATERIAL under the quality audit be at a system level, and shall
include but it not limited to:
a) Exercising said MATERIAL over the full spectrum of temperature
ranges over which MATERIAL is designed to operate.
b) Full operation of MATERIAL over a period of time not less than
72 hours.
c) A system for continuous monitoring of all primary and ancillary
product functions and fault detection of the MATERIAL while under
this test.
<PAGE>
Supplier also agrees to continously review customer return (defect) data to
insure that the scope of the Quality Assurance audit function, includes the
requirement(s)/condition(s) under which the return failed.
Supplier agrees to perform a detailed failure mode analysis of all MATERIAL
found defective through the Quality Assurance audit in line with the
requirements and process outlined.
Supplier shall establish a program of tracking return rates. MATERIAL which has
been in operation for any period of time up to, and including one full year
shall be considered part of this tracking program. For the purpose of this
artile, the term "circuit packs" shall be used to define the lowest replaceable
unit of MATERIAL supplier to Company.
For the purpose of calculating the return rate, the following definitions apply:
RTM(x) = The quality of circuit packs which were manufactured in the
Target Month; (x) that have been returned during the period
beginning 4 months after the Target Month and ending after 15
months from the Target Month.
PTM(x) = The total number of circuit packs manufactured in the Target
Month; (x).
All returns will be included in the calculation of the return rate including,
but not limited to, failures, no trouble founds, and recalls.
A Target Quarter Return Rate (TQRR) is to be calculated using the following:
Where:
"(1)" refers to the first month of the Target Quarter "(2)" refer to the
second month of the Target Quarter "(3)" refers to the third month of the
Target Quarter
This calculation shall be made on a quarterly basis for the product manufactured
under this contract.
The Supplier agrees to update and report TQRR's on a quarterly basis to Company,
and to comply with the Annual Return Rate (AAR) requirement in accordance with
the following schedule:
Manufacture Annual
Year Requirement Measurement Due
Jan 94 - Dec 94 xx in 10,000 April, 1996
Jan 95 - Dec 95 xx in 10,000 April, 1997
Jan 96 - Dec 96 xx in 10,000 April, 1998
Jan 97 - Dec 97 xx in 10,000 April, 1999
The ARR is 10,000 times the summation of the number of returns received for the
Target Months of the Manufacture year divided by the summation of the
manufacturing populations for the Target Months of the Manufacture Year.
Supplier shall maintain a system for tracking and analysis all defective
MATERIAL returned, as well as any MATERIAL failures which occur through the
Company's end of the line quality assurance audit. For all MATERIAL in the above
two categories, Supplier agrees to perform a failure mode analysis, which at a
minimum will be down to the component level. Component level failure modes will
be recorded, and failed components found defective will be accumulated for the
purpose of determined repetitive occurences.
MATERIAL shall be considered defective if it fails to meet the specifications
under this Agreement (including performance, appearance specifications, and
warranty requirements), or if during customer testing, installatino, or use, the
MATERIAL fails to operate as expected to specified.
<PAGE>
If the return rate is excess of the requirements as outlined herein, or
repetitive occurrences are observed with regard to component level failures then
the Supplier shall provide a written Correction Action Report to the Company,
explaining in detail the nature of the problem detected, and the step(s)
Supplier proposes to correct the problem. As part of the plan to correct the
problem, it is agreed that the Supplier shall:
a) Incorporate the remedy in affected MATERIAL.
b) Ship all subsequent MATERIAL incorporating the required modification
correcting the problem at no additional charge to Company; and
c) Repair and/or replace previously shipped MATERIAL that may contain the
same problem trend. In the event that Company incurs costs due to such
repair and/or replacement, including but not limited to labor and shipping
costs, Supplier shall reimburse Company for such costs. Supplier shall
bear risk of in transit loss and damage for such repaired and/or replaced
MATERIAL.
Supplier and Company shall mutually agree in writing as to the
implementation schedule of the corrective action plan. Supplier agrees to
use its best efforts to implement the plan in accordance with the agreed
upon schedule. It is also agreed that the Company shall be entitled to
postpone at no charge to Company, further deliveries of orders until such
time as the remedy is implemented consistent with this Article.
In the event that the Supplier 1) fails to meet the customer return rate
established herein by more than xx% during any period of three months or
more, then Company may 1a) develop and implement such remedy for already
purchased MATERIAL defined under the Corrective Action Plan, the cost of
which will be borne by the Supplier; and/or 2a) cancel or postpone other
orders and/or terminate this Agreement subject tot he provisions of
Article xx (the Article referenced should be the article pertaining to
Cancellation and/or termination of this Agreement) Supplier reserves the
right, as a substitution for 1a) to 2a) above, to instruct Company to
return all MATERIAL that is affected by the problem for full refund,
payable by Supplier to Company within thirth (30) days after receipt of
returned material (with risk of loss or in-transit damage to be borne by
Supplier).
In the event that Supplier fails to complete and issue Corrective Action
Reports as required herein, Company may put Supplier on notice that
continued non-compliance for more than 30 days could result in
cancellation or postponement of orders and/or terminate this Agreement
subject to the provisions of Article xx (Note: Reference the Article
pertaining to termination/cancellation of this Agreement).
As part of a program of continuous improvement, Supplier agrees to
establish annually, improvement goals for a series of key quality
objectives. These goals should include, but are not limited to a) customer
return rates as specified herein, b) Quality Assurance product quality
audit defect rates c) final system test yields. Supplier agrees to track
these goals on a monthly basis, and to commit the resources necessary for
the attainment of these goals.
Supplier commits to provide to Company on a regular basis, quality
performance data in a format which may be specified by Company. This data
shall include, but is not limited to quality assurance results, and
process monitoring and test results.
<PAGE>
In addition to the provisions contained in this "Quality" clause, Supplier also
agrees to follow the attached Corrective and Preventive Action Roadmaps in
Attachment E.
EMERGENCY SERVICE - In addition to the material replacement provisions set forth
in the "WARRANTY" and "REPAIRS NOT COVERED UNDER WARRANTY" clauses, Supplier
agrees, in the event of an emergency out-of-service condition caused by material
furnished under this Agreement to ship replacement material within twenty-four
(24) hours of verbal notification by Company during the term of this Agreement.
In order to schedule shipment of replacement material, Company may call TBD.
This service will be available twenty-four (24) hours a day and seven days a
week.
For material under warranty, there will be no charge for replacement material
and transportation costs will be borne by Supplier. For material not under
warranty, charges for replacement material will be at the price set forth in
Supplier's then current agreement with Company for said material or if no such
agreement exists, at a price agreed to by Supplier and Company; transportation
costs will be borne by Company. If the parties fail to agree on a price for
material furnished pursuant to this clause, the price shall be a reasonably
competitive price for such material at the time for delivery.
If defective or nonconforming material under warranty is not returned to
Supplier by Company within sixty (60) days subsequent to Company's receipt of
replacement material under this clause, it is understood that Supplier shall
have the right to invoice Company at the price set forth in Supplier's then
current agreement with Company for said material or if no such agreement exists,
at a price agreed to by Supplier and Company.
- - Orders placed under this Agreement containing a notation that the material is
intended for use under Government contracts shall be subject to the then current
Government Provisions printed on the order or in attachments thereto.
- In the event Supplier is not installing the material, and if requested by
Company, Supplier agrees to make available at the installation site, without
charge, a field engineer to render installation and cutover assistance as
required by Company. At a cost to be mutually determined at the time such
assistance is requested by Company.
- - All persons furnished by Supplier shall be considered solely Supplier's
employees or agents, and Supplier shall be responsible for payment of all
unemployment, social security and other payroll taxes, including contributions
when required by law. Supplier agrees to indemnify and save harmless Company,
its affiliates, and its customers and their officers, directors, employees,
successors, and assigns (all hereinafter referred to in this clause as
"Company") from and against any losses, damages, claims, demands, suits,
liabilities, and expenses (including reasonable attorneys' fees) that arise out
of or result from: (1) injuries or death to persons or damage to property,
including theft, in any way arising out of or occasioned by, caused or alleged
to have been caused by or on account of the performance of the work or services
performed by Supplier or persons furnished by Supplier, (2) assertions under
Workers' Compensation or similar acts made by persons furnished by Supplier or
by any subcontractor, or by reason of any injuries to such persons for which
Company would be responsible under Workers' Compensation or similar acts if the
persons were employed by Company, (3) any failure on the part of Supplier to
satisfy all claims for labor, equipment, materials, and other obligations
relating directly or indirectly to the performance of the Work; or (4) any
failure by Supplier to perform Supplier's obligations under this clause or the
INSURANCE clause. Supplier agrees to defend Company, at Company's request,
against any such claim, demand, or suit. Company agrees to notify Supplier
within a reasonable time of any written claims or demands against Company for
which Supplier is responsible under this clause.
<PAGE>
- Supplier shall maintain and cause Supplier's subcontractors to maintain
during the term of this Agreement (1) Workers' Compensation insurance as
prescribed by the law of the state or nation in which the work is performed, (2)
employer's liability insurance with limits of at least $300,000 for each
occurrence; (3) comprehensive automobile liability insurance if the use of motor
vehicles is required, with limits of at least $1,000,000 combined single limit
for bodily injury and property damage for each occurrence, (4) Comprehensive
General Liability ("CGL") insurance, including Blanket Contractual Liability and
Broad Form Property damage, with limits of at least $1,000,000 combined single
limit for personal injury and property damage for each occurrence; and (5) if
the furnishing to Company (by sale or otherwise) of products or material is
involved, CGL insurance endorsed to include products liability and completed
operations coverage in the amount of $5,000,000 for each occurrence. All CGL
insurance shall designate American Telephone and Telegraph Company, its
affiliates and their officers, directors, and employees (all hereinafter
referred to in this clause as "Company") as an additional insured. All such
insurance must be primary and required to respond and pay prior to any other
available coverage.
Supplier agrees that Supplier, Supplier's insurer(s), and anyone claiming by,
through, under, or in Supplier's behalf shall have no claim, right of action, or
right of subrogation against Company and its customers based on any loss or
liability insured under the foregoing insurance. Supplier and Supplier's
subcontractors shall furnish prior to the start of work certificates or adequate
proof of the foregoing insurance including, if specifically requested by
Company, copies of the endorsements and insurance policies. Company shall be
notified in writing at least thirty (30) days prior to cancellation of or any
change in the policy.
- Upon Company's written request, "Insignia", including certain trademarks,
trade names, insignia, symbols, decorative designs, or packaging designs of
Company or Lucent Technologies Inc., hereinafter "Lucent Technologies Inc.", or
evidences of Company's, Company's Agent's or Lucent Technologies Inc. inspection
will be properly affixed by Supplier to the material furnished or its packaging.
Such Insignia will not be affixed, used, or otherwise displayed on the material
furnished or in connection therewith without written approval of Company. The
manner in which such Insignia will be affixed must be approved in writing by
Company in accordance with standards established by Lucent Technologies Inc.
Lucent Technologies Inc. and/or Company shall retain all right, title and
interest in any and all packaging designs, finished artwork, and separations
furnished to Supplier. This clause does not reduce or modify Supplier's
obligations under the IDENTIFICATION and USE OF INFORMATION clauses.
In addition, Supplier agrees to add any other identification which might be
requested by Company such as but not limited to distinctive marks conforming to
Company's Serialization Plan. Charges, if any, for such additional
identification marking shall be as agreed upon by Supplier and Company. This
clause does not reduce or modify Supplier's obligations under the clause
IDENTIFICATION on the reverse side of page one of this Agreement.
- In addition to any marking required in the product specification, Supplier
shall show the Comcode (9-digit number for the material) on all preliminary and
final packaging and packing slips. This shall be shown directly above the
identification marking in the same size print.
- Supplier, with Company's concurrence and without any obligation to Company to
continue such activity, may establish and maintain a stock of inspected and
approved material for future shipment against Company's orders applying against
this Agreement.
There shall be no obligation or commitment by Company to place orders or to
otherwise accept or compensate Supplier for material placed in such stocking
program or for the cost of such stocking program. Such stocking program shall be
established only after written authorization to Supplier by Company. The
addition of material to stock pursuant to the provisions of such stocking
program shall cease upon Company's withdrawal of such authorization.
- It is expressly understood and agreed that this Agreement neither grants to
Supplier an exclusive right or privilege to sell to Company any or all material
or services of the type described in this Agreement which Company may require,
nor requires the purchase of any material or services from Supplier by Company.
It is, therefore, understood that Company may contract with other manufacturers
and suppliers for the procurement of comparable material or services. In
addition, Company shall at its sole discretion, decide the extent to which
Company will market, advertise, promote, support, or otherwise assist in further
offerings of the material or services.
Supplier agrees that purchases by Company under this Agreement shall neither
restrict the right of Company to cease purchasing nor require Company to
continue any level of such purchases.
- - Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Supplier or Company shall be in writing
and shall be given or made by telegram tested telex, confirmed facsimile, or
similar communication or by certified or registered mail addressed to the
respective parties as follows:
<PAGE>
To Company: Lucent Technologies Inc.
Mr. James B. Phipps, Senior Procurement Specialist
5420 Millstream Road
Greensboro, NC 27420
To Supplier: Mr. Keith Schneck, President
AM Communications, Inc.
1900 AM Drive
Quakertown, PA 18951
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, or facsimile, or similar communication or when deposited,
postage prepaid in the U.S. mail.
The above addresses may be changed at any time by giving prior written notice as
above provided.
- If Company's invoices to Supplier fall due or if Supplier owes money or is
otherwise obligated to make payments to Company when invoices rendered by
Supplier become payable, Company may offset its invoices or the sums due or
obligated, making remittance to Supplier only for any balance due. Where the
balance is in Company's favor, Company shall so advise Supplier and Supplier
shall remit to Company the balance due. This offsetting of invoices or sums due
or obligated shall not affect the right of either party to question the
correctness of the invoices.
- Supplier agrees to furnish, at no charge, product documentation, and any
succeeding changes thereto, as requested by Company. Company may use, reproduce,
reformat, modify, and distribute any such product documentation. Company agrees
to reproduce Supplier's copyright notice contained on any documentation
reproduced without change by Company. For documentation which is reformatted or
modified by Company, Company shall have the right to place only Company's own
copyright notice on the reformatted or modified documentation. It is the intent
of the parties that Company's copyright notice shall be interpreted to protect
the underlying copyright rights of Supplier to the documentation to the extent
such underlying rights are owned by Supplier.
- Supplier agrees to submit to Company all advertising, sales promotion, press
releases, and other publicity matters relating to the material furnished or the
services performed by Supplier under this Agreement wherein Company's names or
marks are mentioned or language from which the connection of said names or marks
therewith may be inferred or implied; and Supplier further agrees not to publish
or use such advertising, sales promotion, press releases, or publicity matters
without Company's prior written approval. This does not reduce or modify
Supplier's obligations under the clause IDENTIFICATION on the reverse side of
page one of this Agreement.
- - When material furnished under this Agreement is subject to Part 68, Part 15 or
any part of the Federal Communications Commission's Rules and Regulations, as
may be amended from time to time, (hereinafter "FCC Rules"), Supplier warrants
that such material complies with the registration, certification,
type-acceptance and/or verification standards of the FCC Rules including, but
not limited to, all labeling, customer instruction requirements, and the
suppression of radiation to specified levels. Supplier shall also establish
periodic ongoing compliance retesting and follow a Quality Control program,
submitted to Company, to assure that material shipped complies with the
applicable FCC Rules. Supplier agrees to indemnify and save Company harmless
from any liability, claims, or demands (including the costs, expenses and
reasonable attorney's fees on account thereof) that may be made because of
Supplier's noncompliance with the applicable FCC Rules. Supplier agrees to
defend Company, at Company's request, against such liability, claim or demand.
In addition, should material which is subject to Part 15 of the FCC Rules,
during use generate harmful interference to radio communications, Supplier shall
provide to Company information relating to methods of suppressing such
interference and pay the cost of suppressing such interference or, at the option
of Company, accept return of the material and refund to Company the price paid
for the material less a reasonable amount for depreciation, if applicable.
<PAGE>
Nothing in this clause shall be deemed to diminish or otherwise limit Supplier's
obligations under the "WARRANTY" clause or any other clause of this Agreement.
- If Company rejects any or all of the material, Company may, in addition to
all its other rights and remedies at law or equity, exercise one or more of the
following remedies: (1) return rejected material for full credit at the price
charged plus transportation charges from Supplier's plant and return; or (2)
accept a conforming part of any shipment; or (3) consider this agreement
breached to the extent of the quantity rejected; or (4) have rejected material
replaced by Supplier at the purchase price stipulated in this Agreement.
- If any of the provisions of this Agreement shall be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate or render unenforceable
the entire agreement, but rather the entire agreement shall be construed as if
not containing the particular invalid or unenforceable provision or provisions,
and the rights and obligations of Supplier and Company shall be construed and
enforced accordingly.
- It is understood that visits by Supplier's representatives or Supplier's
subcontractor representatives to Company's premises for inspection, adjustment,
or other purposes in connection with material or equipment purchased under this
Agreement shall for all purposes be deemed "work" under this Agreement and shall
be at no charge to Company unless otherwise agreed in writing between the
parties.
- Company shall be entitled to ongoing technical support, including field
service and assistance, provided, however, that the availability or performance
of this technical support service shall not be construed as altering or
affecting Supplier's obligations as set forth in the "WARRANTY" clause or
elsewhere provided for in this Agreement.
Ongoing technical support via telephone will be at no charge. During the
"WARRANTY" period for material, Supplier's field service technical support
services shall be provided to Company without charge, including emergency
on-site twenty-four (24) hour technical assistance. Beyond the "WARRANTY"
period, charges, if any, for field service technical support, will be provided
at Supplier's standard rates unless otherwise agreed to in writing.
- Company may at any time terminate this Agreement by giving Supplier at least
sixty (60) days prior written notice. Company may also at any time terminate any
or all purchase orders placed by Company under this Agreement. Unless otherwise
specified in this Agreement, Company's liability to Supplier with respect to
such terminated purchase order or orders shall be limited to: (1) Supplier's
purchase price of all components for the material (not usable in Supplier's
other operations or salable to Supplier's other customers), plus (2) the actual
costs incurred by Supplier in procuring and manufacturing material (not usable
in Supplier's other operations or salable to Supplier's other customers) in
process at the date of the notice of termination; less (3) any salvage value
thereof. However, no such termination charges shall be payable if within sixty
(60) days after notice of termination material equivalent in kind to that being
terminated is ordered by Company from Supplier.
- - Supplier will provide a complete, defined and agreed to training curriculum,
on the installation, management, and maintenance of Suppliers product portfolio,
to the defined Company lead technical representatives. This training curriculum
will be comprised of a combination of classroom and lab sessions.
<PAGE>
The purpose of the classroom sessions will be to review Suppliers products and
their theory of operation. The lab sessions will be used to train all
appropriate Company technical specialist in the proper installation,
configuration, management, debugging, and maintenance techniques. All of this
will be customized and delivered within the context of the specific Company
network design and implementation.
Each Company Train-the-Trainer candidate will be provided a complete
documentation kit. This data kit will serve as an information reference source
in addition to a foundation for continuing the training efforts within Company.
It is important to realize that each Company Train-the-Trainer candidate, at the
completion of this educational session, will be thoroughly prepared to support
the Company training requirements. Refresher courses ill be made available to
Company representatives, in an effort to assist in growing the training
population and provide new product related information.
A detailed training curriculum will be developed, specific to the requirements
of Company. During the scheduling of the training session(s), Company will
provide to Supplier a primary contract that will assist in the orchestration of
the training program.
The Train-the-Trainer program as outlined herein can be conducted at Suppliers'
corporate facility, in Quakertown, or at a defined Company facility/location.
- Supplier hereby warrants to Company that, except as expressly stated
elsewhere in this Agreement, all material furnished by Supplier as described in
this Agreement is safe for its foreseeable use, is not defined as a hazardous or
toxic substance or material under applicable federal, state, or local law,
ordinance, rule, regulation or order (hereinafter collectively referred to as
"law" or "laws"), and presents no abnormal hazards to persons or the
environment. Supplier also warrants that it has no knowledge of any federal,
state, or local law that prohibits the disposal of the material as normal refuse
without special precautions except as expressly stated elsewhere in this
Agreement. Supplier also warrants that, where required by law, all material
furnished by Supplier is either on the EPA Chemical Inventory compiled under
Section 8(a) of the Toxic Substances Control Act, or is the subject of an
EPA-approved premanufacture notice under 40 CFR Part 720. Supplier further
warrants that all material furnished by Supplier complies with all use
restrictions, labeling requirements and all other health and safety requirements
imposed under federal, state, or local laws. Supplier further warrants that,
where required by law, it shall provide to Company, prior to delivery of the
material, a Material Safety Data Sheet which complies with the requirements of
the Occupational Safety and Health Act of 1970 and all rules and regulations
promulgated thereunder.
Supplier agrees to defend, indemnify and hold Company harmless for any expenses
(including, but not limited to, the cost of substitute material, less
accumulated depreciation) that Company may incur by reason of the recall or
prohibition against continued use or disposal of material furnished by Supplier
as described in this Agreement whether such recall or prohibition is directed by
Supplier or occurs under compulsion of law. Company agrees to cooperate with
Supplier to facilitate and minimize the expense of any recall or prohibition
against use or disposal of material directed by Supplier or under compulsion of
law.
<PAGE>
Supplier further agrees to defend, indemnify and hold Company harmless of and
from any claims, demands, suits, judgments, liabilities, costs and expenses
(including reasonable attorneys fees) which Company may incur under any
applicable federal, state, or local laws, and any and all amendments thereto,
including but not limited to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980; the Consumer Product Safety Act of 1982;
the Toxic Substance Control Act; the Resource Conservation and Recovery Act; the
Federal Insecticide, Fungicide, and Rodenticide Act; the Occupational Safety and
Health Act; the Federal Water Pollution Control Act; and the Atomic Energy Act;
and any and all amendments to all applicable federal, state, or local laws, by
reason of Company's acquisition, use, distribution or disposal of material
furnished by Supplier under this Agreement.
- - Supplier warrants that all packaging materials furnished under this Agreement
and all packaging associated with material furnished under this Agreement were
not manufactured using and do not contain chlorofluorocarbons. "Packaging" means
all bags, wrappings, boxes, cartons and any other packing materials used for
packaging. Supplier shall indemnify and hold Company harmless for any liability,
fine or penalty incurred by Company to any third party or governmental agency
arising out of Company's good faith reliance upon said warranty.
- Supplier warrants and certifies that all products, including packaging and
packaging components, provided to Company under this Agreement have been
accurately labeled, in accordance with the requirements of 40 CFR Part 82
entitled "Protection of Stratospheric Ozone, Subpart E - The Labeling of
Products Using Ozone Depleting Substances." Supplier agrees to indemnify, defend
and save harmless Company, its officers, directors and employees from and
against any losses, damages, claims, demands, suits, liabilities, fines,
penalties, and expenses (including reasonable attorneys' fees) that may be
sustained by reason of Supplier's non-compliance with such applicable law or the
terms of this warranty and certification.
- Supplier warrants to Company that no lead, cadmium, mercury or hexavalent
chromium have been intentionally added to any packaging or packaging component
(as defined under applicable laws) to be provided to Company under this
Agreement. Supplier further warrants to Company that the sum of the
concentration levels of lead, cadmium, mercury and hexavalent chromium in the
package or packaging component provided to Company under this Agreement does not
exceed 100 parts per million. Upon request, Supplier shall provide to Company
Certificates of Compliance certifying that the packaging and/or packaging
components provided under this Agreement are in compliance with the requirements
set forth above in this clause. Supplier shall indemnify and hold Company
harmless for any liability, fine or penalty incurred by Company to any third
party or governmental agency arising out of Company's good faith reliance upon
said warranties or any Certificates of Compliance.
- - If Supplier has knowledge that anything prevents or threatens to prevent the
timely performance of the Work under this Agreement, Supplier shall immediately
notify Company's Representative thereof and include all relevant information
concerning the delay or potential delay.
<PAGE>
THE WARRANTY CLAUSE CONTAINED ON THE BACK OF PAGE ONE IS REPLACED WITH THE
FOLLOWING:
- Supplier warrants to Company and Customers, as defined in this clause, that
material furnished will be new of merchantable quality, free from defects in
design, material, and workmanship and will conform to and perform in accordance
with the specifications, drawings, and samples set forth in this Agreement for a
period of five (5) years from the date of delivery to an end user customer
(hereinafter "Customer") or, for material installed by Company or its resellers,
for a period of five (5) years from the completion of installation. Supplier
warrants that at the time of delivery to Company such material shall be free of
any security interest or any other lien or any other encumbrance whatsoever.
Supplier also warrants to Company and Customers that services will be performed
in a first class, workmanlike manner. In addition, if material furnished
contains one or more manufacturers' warranties, Supplier hereby assigns such
warranties to Company and Customers. Material not meeting the warranties will
be, at Company's option, repaired, adjusted, or replaced by Supplier at no cost
to Company and Customers. All warranties shall survive inspection, acceptance,
and payment.
With respect to such material which Company wants repaired or replaced, it will,
at Company's option, either be returned to Supplier for repair or replacement,
at no cost to Company, with risk of in-transit loss and damage borne by Supplier
and freight paid by Supplier, or be repaired or replaced by Supplier on
Customer's site at no cost to Company. Unless otherwise agreed upon by Supplier
and Company, Supplier shall complete repairs and ship the repaired material
within 15 days of receipt of defective or nonconforming material, or at
Company's option, ship replacement material within 15 days after verbal
notification is given Supplier by Company. Supplier shall bear the risk of
in-transit loss and damage and shall prepay and bear the cost of freight for
shipments to Company or Customers of repaired or replaced material. If requested
by Company, Supplier shall begin on-site repairs within 3 days after verbal
notification is given Supplier by Company. If material returned to Supplier or
made available to Supplier on site for repair as provided for in this clause is
determined to be beyond repair, Supplier shall promptly so notify Company and,
unless otherwise agreed to in writing by Supplier and Company, ship replacement
material without charge within 15 days of such notification.
Replacement material shall be warranted as set forth above in this WARRANTY
clause. Any material which is repaired, modified, or otherwise serviced by
Supplier shall be warranted as provided in this WARRANTY clause for the
remainder of the warranty period or ninety (90) days after the material is
returned to a Customer, whichever is later (based upon the date repair,
modification, or other service is completed and accepted by Company).
<PAGE>
THE SUPPLIERS INFORMATION CLAUSE CONTAINED ON THE BACK OF PAGE ONE IS REPLACED
WITH THE FOLLOWING:
- Except for Product Proprietary Rights, Supplier shall not provide under, or
have provided in contemplation of this Agreement any idea, data, program,
technical, business or other intangible information, however conveyed, or any
document, print, tape, disc, semi-conductor memory or other
information-conveying tangible article, unless Supplier has the right to do so,
and Supplier shall not view any of the foregoing as confidential or proprietary.
If Supplier must furnish any such information with restrictions, it shall only
be furnished after negotiation and execution of a non-disclosure agreement
specifically identifying the information and setting forth Company's rights and
obligations with respect thereto.
WORK DONE BY OTHERS - If any part of the work done by Supplier under this
agreement is dependent upon work done by others, Supplier shall inspect and
promptly report to Company any defect that renders such other work unsuitable
for Supplier's proper performance. Supplier's silence shall constitute approval
of such other work as fit, proper, and suitable for Supplier's performance of
the work under this Agreement.
- If a dispute arises out of or relates to this Agreement, or its breach, and
the parties have not been successful in resolving such dispute through
negotiation, the parties agree to attempt to resolve the dispute through
mediation by submitting the dispute to a sole mediator selected by the parties
or, at any time at the option of a party, to mediation by the American
Arbitration Association ("AAA"). Each party shall bear its own expenses and an
equal share of the expenses of the mediator and the fees of the AAA. The
parties, their representatives, other participants and the mediator shall hold
the existence, content and result of the mediation in confidence. If such
dispute is not resolved by such mediation, the parties shall have the right to
resort to any remedies permitted by law. All defenses based on passage of time
shall be tolled pending the termination of the mediation. Nothing in this clause
shall be construed to preclude any party from seeking injunctive relief in order
to protect its rights pending mediation. A request by a party to a court for
such injunctive relief shall not be deemed a waiver of the obligation to
mediate.
- Supplier agrees to limit its acceptance of orders placed under this
Agreement to 1) C-COR Electronics and Company's Merrimack Valley Works.
- Company shall have the right to assign this Agreement and to assign its
rights and delegate its duties under this Agreement either in whole or in part
(an "Assignment"), including, but not limited to, software licenses and other
grants of intellectual property rights, at any time and without Supplier's
consent, to (i) any present or future affiliate (including any subsidiary or
affiliated entity thereof) of Company or (ii) any unaffiliated new entities that
may be formed by Company pursuant to a corporate reorganization, including any
subsidiary or affiliated entity thereof. Company shall give Supplier written
notice of any Assignment, including (i) the effective date of the Assignment
("Effective Date"), and (ii) the entity or entities receiving rights and/or
assuming obligations thereunder ("Entities"). Upon the Effective Date and to the
extent of the Assignment, Company shall be released and discharged from all
further duties under this Agreement as to materials, services, or intellectual
property rights transferred to assignee, ordered from or provided by Supplier
prior to, on or after the Effective Date and Supplier shall look only to the
assignee for performance of obligations related thereto. Notwithstanding that an
Assignment has been made, Company, at its sole option, shall continue to have
the right to purchase, lease, or license material or services under this
Agreement as if an Assignment had not been made. If this Agreement includes a
commitment to purchase a stated or determinable quantity of goods, services or
rights, or prices that vary based on the quantities purchased, the aggregate of
purchases by Company and the Entities under this Agreement will be included in
the quantity.
RIGHTS OF THE PARTIES TO THE PRODUCT PROPRIETARY RIGHTS
(A) Supplier hereby assigns transfers and conveys to Company all of the Product
Proprietary Rights. Supplier also agrees that without charge to the Company, and
its employees, consultants, representatives and agents it will sign all papers
and do all acts which may be necessary desirable or convenient to enable Company
at Company's expense to file and prosecute applications for patents or
copyrights on any thereof and to maintain patents and copyrights granted
thereon.
(B) Company hereby grants to Supplier and to purchasers of Supplier's products
an irrevocable non-exclusive, perpetual and fully paid license to utilize the
Product Proprietary Rights in any products from time to time developed,
manufactured, sold or distributed by Supplier; provided that at no time will
Supplier manufacture or sell the Product except to Company or as otherwise
permitted by Company.
<PAGE>
SUPPLIER PROPRIETARY RIGHTS
Supplier hereby grants to Company an irrevocable, non-exclusive, perpetual and
fully-paid license to utilize Supplier Proprietary Rights as necessary for the
manufacture sale, lease, distribution, and use (including by end-users) of
Products. The parties agree to negotiate in good faith, their terms and
conditions related to the use by Company of Supplier Proprietary Rights in uses
other for the manufacture, sale, lease, distribution, and use of Products.
Without limiting the foregoing, Company shall not transfer, convey, license or
otherwise permit the use of any of the Supplier Proprietary Rights by third
parties, except that Company shall have the right to license sub-license, as
applicable, such supplier rights to a third party solely as necessary in order
to permit such third party to manufacture Products for sale to the Company for
Company's internal use or the sale thereof by Company to third party end users.
- It is Company's policy that Minority and Women-Owned Business Enterprises
(MWBEs) as defined in Attachment C shall have the maximum practicable
opportunity to participate in the performance of contracts. Supplier agrees to
use its good faith efforts to award subcontractors to carry out this policy to
the fullest extent consistent with the efficient performance of this Agreement.
Supplier agrees to conduct a program which will enable MWBEs to be considered
fairly as subcontractors and suppliers under this Agreement. Supplier shall
submit to Company periodic reports of subcontracting with known MWBEs in the
form of Attachment C in such manner and at such time (not more than quarterly)
as Company's representative may prescribe. Such periodic report shall state
separately for Minority and Women-Owned Businesses the subcontracted work which
is attributable to Company. In instances where direct correlation cannot be
determined, such MWBE payments may be established by Supplier comparing
Company's payments to Supplier, in that period, to total payments to Supplier
from all of its customers, in that period, and then arriving at Company's
apportionment of such MWBE payments. Supplier further agrees to insert, in any
subcontract under this Agreement which may exceed $1,000.00, provisions which
conform substantially to this clause Utilization of Minority and Women-Owned
Business Enterprises. Nothing in this clause shall affect or diminish the
Supplier's obligations as set forth in the assignment and subcontracting
provisions or any other provision of this Agreement. If Supplier complies with
the provisions of this clause, that will be a factor Company will consider
favorably in making procurement decisions about future business with Supplier.
ACCEPTED: Date 19 LUCENT TECHNOLOGIES INC.
Supplier
By By
---------------------------- ----------------------------
Title Title
-------------------------- -------------------------
<PAGE>
ATTACHMENT A
CONTRACT NO.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
*Manufacturing AM Model# AT&T CLEI Code # AT&T Cost
Interval ComCode#
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
AT-MON-40-ZD12 107341307 (TBA) $300.00
- --------------------- -------------------------------------------------------------------------------------------------------
ELP-1 - Small general purpose transponder.
Cannot be used with HFC power node.
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
10 Weeks A.R.O. AT-MON-41-ZD12 107669798 SLCEJ5HDAA $300.00
- --------------------- -------------------------------------------------------------------------------------------------------
ELP-1 - Small general purpose transponder
S22
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
10 Weeks A.R.O. AT-MON-50-ZD12 407298033 SLCES6JDAA $180.00 on shipments made on or after
Broadband October 16, 1995
amplifier $150.00 on shipments made on or after
transponder January 1, 1997
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
10 Weeks A.R.O. AT-MON-80-ZD12 107584500 SACPGHBCAA $416.58 Initial 250 units only
EMP-1 - ONP-2000- Regular Prices
Strand mount optical 1-500 units $256.58
node transponder 501-1,000 units $214.56
1,001-2,500 units $189.78
2,500 and up $167.88
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
14 Weeks A.R.O. AT-MCU-00-00 407298090 SLMCHBOARA $2,000.00
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
14 Weeks A.R.O. AT-MRF-01-ZD12 407298108 SLMCJCOARA $1,500.00
MCR-Multichannel RF
receiver unit
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
4 Weeks A.R.O. AT-CBL-P3 407298082 $10.00
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
4 Weeks A.R.O. AT-CBL-P5 407298074 $10.00
P5 - Cable assembly
that is shipped with
an AT-MON-50-ZD12
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
AT-SYS-SW 407298124 $3,250.00
PC Software DOS
version 2.64
- --------------------- ---------------------- ------------- ------------------------ -----------------------------------------
</TABLE>
*Manufacturing Interval is dependent on Supplier receiving a six-month
requirements forecast from Company.
<PAGE>
ATTACHMENT B
TO CONTRACT __________
PAGE 3 OF 4 PAGES
STANDARD NATIONAL/ASSIGNMENT ORDER - Under this Agreement, a National/Assignment
Order will be issued. The National Assignment Order will be Supplier's
authorization to begin production and have material available for shipment as
specified, unless production or stock provisions are otherwise specified in this
Agreement. The National/Assignment Order will have a "ship to" and "bill to"
address in addition to the requested ship date. Upon receipt of the
National/Assignment Order, Supplier shall proceed with shipment to the Company's
Rocklin, CA Material Distribution Center (MDC) and render billing on separate
invoices to the address shown on the National/Assignment Order.
MARKING AND PACKAGING - All material furnished under this Agreement shall be
marked for identification purposes as set forth below in accordance with
Company's Packing Specification PKG-92706, Issue 8 dated March 25, 1993.
This specification outlines the packaging, packing, marking and palletizing
requirements for all purchased products for delivery to Company's Material
Distribution Center (MDC).
Packing
Purchased products not covered by specified instructions and/or specifications
shall be packaged and packed in suitable containers which will provide adequate
protection against damage during domestic shipment, handling and storage in
reasonably dry, unheated quarters.
All purchased products shall be packaged in accordance with good commercial
practice, complying with the Uniform Freight Classification (UFC) or the
National Freight Classification (NFC).
Method of closure shall be in accordance with the requirements of the current
issue of Rule 41 of the Uniform Freight Classification and Rule 222 of the
National Motor Freight Classification.
Individual shipping carton shall be limited to 60 pounds gross weight, except
when one (1) item of packed product exceeds this value. If the carton weight
exceeds 60 pounds, the carton is to be clearly marked "Overweight", "Heavy-Do
Not Handle Alone" or similar markings.
Supplier must warrant that all packaging, packing and marking material were not
manufactured using, and do not contain any HEAVY METALS, OZONE DEPLETING
SUBSTANCES (ODSs).
<PAGE>
Marking
Each unit or preliminary container shall be clearly marked on one end panel per
Company's specification Shipping & Receiving Bar Code Label Standard AT&T
801-001-105, except that the following information shall be shown in the format
as follows:
a. Company's Comcode Number
b. Description
c. Quantity
d. Date of Manufacture (if applicable)
Each shipping container shall be marked in accordance with Company specification
801-001-105 Shipping & Receiving Bar Code Label Standard. The appropriate
Company label profile shall be used.
When precautionary markings are required by Company, the Supplier and/or the
approved regulatory agency, all containers shall have such labels and/or
markings affixed.
All hazardous material will be packaged and transported in accordance with
appropriate Department of Transportation (DOT), Code of Federal Regulations
(CFR), Title 49, International Air Transport Association (IATA), National, State
and Local regulations.
All containers having delicate or fragile products shall be marked to indicate
the fragility by means of labels, stamps or stencils. The markings shall be
placed on not less than one side and one end of the container. Containers
pre-printed with "FRAGILE-HANDLE WITH CARE" and/or similar precautionary
markings will not require labels, stamps or stencils.
Any container packaged with a non-standard quantity, that container shall be
marked with either a label, or stamped/stenciled "NON-STANDARD QUANTITY."
(Non-Standard Quantity Containers are limited to one per order.)
Packing Slip
Each shipment must be accompanied by a packing slip that is highly visible on
the outside of the carton, in a packing slip envelope, i.e. "Packing Slip
Enclosed."
The packing slip shall contain the following information:
a. Purchase Order Number and Item Number(s)
b. Quantity Shipped
c. Company's Comcode Number (if applicable) and Description
d. Packing Slip Number
e. Evidence of GM&E-SLMC Audit (if applicable)
f. If not palletized, the total number of cartons in the shipment with
the sequence number of each carton (i.e., 1 of 5, 2 of 5, etc.)
g. Ship Date
h. UL (Underwriter's Laboratory) certification letter attached
(if applicable).
Source of Inspection Label shall be affixed to the Packing Slip.
Miscellaneous
Containers of any type that are too large or too heavy to be palletized, shall
be shipped in their own containers, crates, etc. When practical, these
containers shall be skidded to facilitate fork-truck handling.
<PAGE>
ATTACHMENT C
CONTRACT NO.
Lucent Technologies Inc. MWBE BUSINESS DEVELOPMENT
PROGRAM OVERVIEW
MWBE VISION - Minority and Women-owned Business Enterprises (MWBEs) are a
natural part of Lucent Technologies Inc.'s business environment that creates a
differential advantage and contributes significantly to our business success.
MWBE MISSION - Grow and expand Lucent Technologies Inc.'s global business by
focusing on Minority and Women-owned Business Enterprises (MWBEs) as a
value-added strategy that creates a competitive advantage.
History - In 1968, Lucent Technologies Inc. envisioned the future and saw a
changing world. Rapid technological changes and diverse cultures of the world
were creating new markets with a demand for new products and services. Business
was changing through globalization, new technologies and emerging markets.
An exciting new awareness grew out of this period and it became clear to Lucent
Technologies Inc. that we needed to tap new entrepreneurial spirit . . . to seek
out innovative minority and women businesses capable of helping us to understand
and service these new markets. With this goal in mind, Lucent Technologies Inc.
launched its Minority and Women's Business Enterprise (MWBE) Program. Twenty-six
years and thousands of business relationships later, the MWBE program represents
a strategic element in Lucent Technologies Inc.'s business process.
Definition of MWBEs - MWBE is the acronym for Minority and Women's Business
Enterprises. An MWBE is defined as a business which is owned, controlled and
operated by minority or women group members. MWBE ownership exists in a business
which is at least 51% owned by minority or women group members, or in the case
of a publicly held company, a firm which at least 51% of the stock is owned by
minority or women group members. MWBE companies must be located within the
United States, its territories or possessions; and the owners must be American
citizens. (In California only, legal immigrants with permanent resident status
in the United States are also eligible.)
Ethnic Groups Considered Minorities:
Native Americans, including American Indians, Eskimos, Aleuts, and native
Hawaiians
Asian Pacific Americans, which includes all persons having origins in Japan,
China, Vietnam, Korea, Samoa, Guam, the US Territory of the Pacific Islands
(Republic of Palau), the Northern Mariana Islands, Laos, Kampuchea (Cambodia),
Taiwan, Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the
Marshall Islands, the Federated States of Micronesia or all persons having
origin in the Philippine Islands
<PAGE>
Asian Indian Americans, which includes all persons having origins in India,
Pakistan, Bangladesh, Sri Lanka, Bhutan, or Nepal
African Americans, which means all persons having origin in any of the Black
racial groups
Hispanic Americans, which means all persons having origins in Mexico, Puerto
Rico, Cuba, Latin or South America, Portugal, or other Spanish culture origins
Unless the owner of a women-owned business is an ethnic minority, as described
above, her business is not a minority business. Non-minority women-owned
businesses are part of the MWBE program but are reported separately from
minority male- and minority female-owned businesses. A minority female-owned
business would not be counted in both categories (minority and women owned).
Definition of Second Tier Program - Proactive initiative by which Lucent
Technologies Inc.'s suppliers develop an effective MWBE program.
Definition of Second Tier Programs - Payments that our First Tier suppliers pay
to MWBEs.
Request of First Tier Suppliers - We recommend that Lucent Technologies Inc.
First Tier suppliers establish and track their Minority Business Enterprises
(MBE) and Women Business Enterprises (WBE) procurement goals. The status reports
are requested twice a year: October 31, 1995 (January - June reporting) and
February 1, 1996 (January - December reporting). The initial report should
include 1994 status data.
Inquiries should be directed to:
Lucent Technologies Inc.
Virginia Hardesty
P. O. Box 25000
Greensboro, NC 27420-5000
1-800-322-MWBE
Fax No.: (910) 279-4953
<PAGE>
LUCENT TECHNOLOGIES INC. MWBE SECOND TIER SOURCING PROGRAM
REPORTING FORM
Return to:
Lucent Technologies Inc.
Virginia Hardesty
Manager, MWBE Business Development
P. O. Box 25000
Greensboro, NC 27420-5000
Re: Minority and Women Business Enterprises (MWBE) Activity Report
The following is my semi-annual MWBE Business Development Report for the full
year 1994 and January thru June of 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
METRICS 1994 1995 Long Term
(Total Year) (Jan - June) Goal
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
I. Revenues From Lucent Technologies Inc. XXXXX
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
II. Lucent Technologies Inc. % of Total Revenues XXXXX
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
III. Total MBE Dollars
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
IV. Total MBE % of Total Procurement
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
V. Total WBE Dollars
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
VI. Total WBE % of Total Procurement
- ---------- ------------------------------------------------------- --------------------- ------------------ -------------
</TABLE>
Company Name Date
Name, Title Phone Number
<PAGE>
JOINT DEVELOPMENT AGREEMENT
This Joint Development Agreement (this "Agreement") is made and entered into
this 14th day of June, 1996 (the "Effective Date") by and between AM
Communications, Inc., a corporation having its principal place of business at
1900 AM Drive, Quakertown, Pennsylvania 18951-9004 ("AM") and
Scientific-Atlanta, Inc., a corporation having offices at 4261 Communications
Drive, Norcross, Georgia 30093 ("Scientific-Atlanta").
Recitals
AM has developed and manufactures status monitoring products, including
software, transponders and a master control unit.
Scientific-Atlanta has developed, manufactures and sells cable and telephone
transmission systems utilizing its own status monitoring products and has done
preliminary design investigation of (i) status monitoring products for use in
Scientific-Atlanta's Euro Amp/Node Program and (ii) next generation status
monitoring products, especially transponders.
Scientific-Atlanta wishes to develop with AM next generation status monitoring
products, especially transponders, and specific status monitoring products for
use in Scientific- Atlanta's Euro Amp/Node Program.
The parties believe that it is in their mutual best interests to combine their
development and engineering skills as part of a joint development program, which
is described in this Agreement, with the goal of producing components which each
party will contribute toward the design and development of the next generation
status monitoring products, the specific status monitoring products for use in
Scientific-Atlanta's Euro Amp/Node Program, and other products, as agreed to by
the parties.
Pursuant to this joint development program, (i) AM intends to manufacture and
sell AM Components (as hereinafter defined) and the Products (as hereinafter
defined) to Scientific-Atlanta, (ii) Scientific-Atlanta intends to manufacture
and sell S-A Components (as hereinafter defined) to AM and to sell Products (as
hereinafter defined). The parties also each intend to develop, market and sell
each Product which uses S-A Components and AM Components, in accordance with the
terms of this Agreement.
The parties intend for this Agreement to serve as the vehicle for future
development projects which may be proposed from time to time by either party and
which will be set forth in amendments to this Agreement.
In consideration of the foregoing and the mutual promises and commitments
contained herein, the parties agreed as follows:
1
<PAGE>
1. Definitions
1.1 "Exhibit A" means the sequentially numbered exhibits,
beginning with Exhibits A1 and A2 attached to this Agreement
or later added by amendment. Each numbered Exhibit A shall set
forth the AM Components, if any, S-A Components, if any, and
the resulting Product, if any.
1.2 "Exhibit B" means the sequentially numbered exhibits beginning
with Exhibits B1 and B2 attached to this Agreement and the
sequentially numbered exhibits later added by amendment. Each
numbered Exhibit B shall set forth the amount, if any, that
Scientific-Atlanta will pay to AM for AM's non-recurring
engineering expenses (and the percentage of such non-
recurring engineering expenses that such amount represents),
the schedule and the milestones, all of which are related to
the development of the Product described in the
correspondingly numbered Exhibit A.
1.3 "Development Program" means an engineering program under which
both AM and Scientific-Atlanta will contribute engineering
resources and materials necessary for the design and
development of AM Components, S-A Components and a Product,
all of which are described in Exhibit A. Under a Development
Program, the parties will ensure the interoperability of AM
Components and S-A Components as well as the operation of the
Product.
1.4 "AM Components" means those certain components of a Product
set forth in Exhibit A and provided solely by or at the
direction of AM, whether or not combined with such Product. AM
Components may be added, deleted or modified on Exhibit A from
time to time by mutual agreement of the parties. AM Components
for new Products which are added to this Agreement shall be
listed in new sequentially numbered exhibits comprising part
of Exhibit A.
1.5 "AM Technology" means the technical data, designs, concepts,
processes, formulae, know-how and information pertaining to
the design, development, manufacture, sale and use of AM
Components, including without limitation any patent or other
intellectual property rights related thereto.
1.6 "Non-Recurring Engineering Expense" means the direct
engineering labor cost associated with the development of new
product. Capital costs for capital items, such as equipment
used in the development, and any costs related to the
development of the base technology and existing products on
which the new product is based, shall not be included in the
definition of "Non-Recurring Engineering Expense."
2
<PAGE>
1.7 "Product" means the product listed in a numbered Exhibit A
utilizing the AM Components and S-A Components listed in such
exhibit and which shall be sold under the Scientific-Atlanta
label. New Products that are added to this Agreement shall be
listed in new sequentially numbered exhibits comprising part
of Exhibit A.
1.8 "Proprietary Information" means engineering design drawings
and data, product specifications, customer data, financial
data, marketing and sales data, technical data, including all
ideas and concepts embodied therein. "Proprietary Information"
further means any other information, including all ideas and
concepts embodied therein, which is disclosed during the term
of this Agreement, and which is either:
(a) disclosed in writing or other tangible form and
conspicuously designated as proprietary or
confidential at the time of delivery by means of a
permanent stamp or label bearing a term such as
"Proprietary," "Confidential" or equivalent term; or
(b) disclosed verbally or by visual inspection,
identified as proprietary or confidential prior to or
contemporaneously with disclosure, and identified in
a written summary delivered to the recipient of the
information within twenty (20) business days after
such disclosure.
"Proprietary Information" further includes trade secrets
provided which are conspicuously marked or otherwise
designated in accordance with the above paragraph (b) as
"Trade Secret" by the disclosing party. Proprietary
Information does not include any information which:
(a) is required to be disclosed by an order of a court or
governmental body (provided however that the
receiving party shall first have given notice to the
disclosing party and shall have allowed the
disclosing party to make a reasonable effort to
obtain a protective order or other confidential
treatment for the information);
(b) is or has been generally available to the public by
any means, through no fault of the receiving party,
its employees or consultants, and without breach of
this Agreement;
(c) is already in the possession of the receiving party
without restriction and prior to any disclosure
hereunder, as evidenced by appropriate documentation;
(d) is developed independently by employees or
contractors of the receiving party without benefit
from the Proprietary Information disclosed hereunder;
3
<PAGE>
(e) is or has been lawfully disclosed to the receiving
party by a third party without an obligation of
confidentially upon the receiving party;
(f) is required to be disclosed pursuant to protective
order issued by a court or arbitrator having
jurisdiction to enforce rights under this Agreement;
or
(g) for which the applicable period of confidentiality
set forth in Section 6.1 has expired.
1.9 "S-A Components" means those certain components of a Product
set forth in a numbered Exhibit A and provided solely by or at
the direction of Scientific-Atlanta, whether or not combined
with such Product. S-A Components may be added, deleted or
modified from time to time by mutual agreement of the parties.
S-A Components for new Products which are added to this
Agreement shall be listed in new sequentially numbered
exhibits comprising part of Exhibit A.
1.10 "S-A Technology" means the technical data, designs, concepts,
processes, formulae, know-how and information pertaining to
the design, development, manufacture, sale and use of S-A
Components, including without limitation any patent or other
intellectual property rights related thereto.
2. Development Program
2.1 General. The parties shall undertake a Development Program to
develop S-A Components, AM Components and a resulting Product
according to the schedule and milestones set forth in Exhibit
B hereto, as may be amended, modified or supplemented by the
Technical Committee (defined below).
2.2 Technical Committee. The parties shall establish and maintain
a technical committee (the "Technical Committee") which will
oversee all Development Programs under this Agreement. Each
party shall appoint one representative to the Technical
Committee who shall have technical expertise in areas related
to the Development Programs and who is responsible for such
party's technical management of each Development Program. Each
representative may appoint one additional person to serve on
the Technical Committee and may also designate a surrogate for
himself. On a bi-weekly basis, the Technical Committee shall
be responsible for reviewing and revising the Development
Program. In addition, the Technical Committee shall provide a
mechanism for the exchange of information and review of
activities and, if desirable, shall add, delete or modify, AM
Components, S-A Components, the Product set forth in Exhibit
A, and the schedules and milestones set forth in Exhibit B.
Without limitation, some of
4
<PAGE>
the other specific activities of the Technical Committee shall
be (i) to monitor progress on each particular Development
Program contemplated herein and (ii) to review and resolve
engineering design disputes as well as intellectual property
ownership disagreements. The Technical Committee shall assume
any other responsibilities that are mutually agreed to by the
parties.
2.3 Executive Committee. The parties shall establish and maintain
an executive committee (the "Executive Committee") which will
oversee the Technical Committee and all other aspects of the
mutual relationship contemplated herein. Each party shall
appoint two members of senior level management who are not
directly involved in the Development Programs as their
representatives to the Executive Committee. Each Executive
Committee member may designate a surrogate. On a quarterly
basis at mutually agreed locations, the Executive Committee
shall be responsible for reviewing the work of the Technical
Committee and shall provide a mechanism for the exchange of
information and review of sales and marketing activities.
Members of the Technical Committee may be invited by any
member of the Executive Committee to attend an Executive
Committee meeting. Without limitation, some of the other
specific activities of the Executive Committee shall be (i) to
review the overall progress on of each particular Development
Program contemplated herein and (ii) to review and resolve
disagreements or disputes including engineering design
disputes and intellectual property ownership disagreements
that are not resolved by the Technical Committee. In the event
that the Executive Committee is unable to resolve a dispute,
it shall be handled under the dispute provisions in Article 9
of this Agreement. The Executive Committee shall assume any
other responsibilities which are mutually agreed to by the
parties.
2.4 Product Planning. Subject to obligations of confidentiality
and restrictions on use of information (including Proprietary
Information) set forth herein or in a separate writing,
nothing herein shall prohibit either party from conducting
independent research, design and development of components or
products for incorporating such components.
5
<PAGE>
3. Manufacture, Supply and Sale of Products and Components
3.1 Scientific-Atlanta Design and Supply Obligation.
Scientific-Atlanta agrees to design, manufacture and supply
S-A Components as reasonably necessary and required for the
successful completion of a Development Program. After
successful development of S-A Components and a Product under a
Development Program and during the term of this Agreement,
Scientific-Atlanta agrees to sell such S-A Components to AM at
a commercially reasonable price.
3.2 AM Design and Supply Obligation. AM agrees to design,
manufacture and supply AM Components as reasonably necessary
and required for the successful completion of a Development
Program. After successful development of AM Components and a
Product under a Development Program and during the term of
this Agreement, AM agrees to sell such AM Components to
Scientific-Atlanta at a commercially reasonable price.
3.3 Scientific-Atlanta License to Manufacture AM Components. In
consideration of the development activities of
Scientific-Atlanta, for each Product and related AM Component
developed under this Agreement, AM grants to
Scientific-Atlanta a non-transferable, non-exclusive,
irrevocable license to manufacture the AM Components and
related Product. Scientific- Atlanta agrees not to exercise
its right to manufacture AM Components until:
(a) Termination of this Agreement by Scientific- Atlanta
pursuant to Section 7.2; or
(b) AM ceases the direct manufacture of such AM
Components; or
(c) AM is unable to fulfill its supply obligations to
Scientific-Atlanta in a timely manner; or
(d) AM ceases to operate as a going concern; or
(e) the quality of the AM Components does not meet
mutually agreed-to quality levels; or
(f) the AM Components are not competitively priced.
In the event Scientific-Atlanta exercises its rights to
manufacture AM Components, AM shall provide to
Scientific-Atlanta all know-how, design and manufacturing
materials, in agreed upon formats, including specifications,
design drawings, bills of materials, manufacturing drawings
and files, and software and related documentation, needed to
successfully manufacture
6
<PAGE>
such AM Components and related Product ("AM Manufacturing
Technology"). If Scientific-Atlanta exercises its rights to
manufacture, AM shall also provide to Scientific-Atlanta any
corrections, amendments or revisions to the AM Manufacturing
Technology.
3.4 AM License to Manufacture S-A Components. In consideration of
the development activities of AM, for each Product and related
S-A Components developed under this Agreement,
Scientific-Atlanta grants to AM a non-transferable
non-exclusive, irrevocable license to manufacture the S-A
Components and related Product. AM agrees not to exercise its
right to manufacture S-A Components until:
(a) Termination of this Agreement by AM pursuant
to section 7.2; or
(b) Scientific-Atlanta ceases the direct manufacture of
such S-A Components; or
(c) Scientific-Atlanta is unable to fulfill is supply
obligations in a timely manner; or
(d) Scientific-Atlanta ceases to operate as a going
concern; or
(e) the quality of the S-A Components does not meet
mutually agreed to quality levels; or
(f) the S-A Components are not competitively priced.
In the event that AM exercises its rights to manufacture S-A
Components, Scientific-Atlanta shall provide to AM all
know-how, design and manufacturing materials, in agreed upon
formats, including specifications, design drawings, bills of
material, manufacturing drawings and files, and software and
related documentation, needed to successfully manufacture such
S-A Components and related Product ("S-A Manufacturing
Technology"). If AM exercises its rights to manufacture,
Scientific-Atlanta shall also provide to AM any corrections,
amendments or revisions to the S-A Manufacturing Technology.
3.5 Manufacture of Product. AM grants to Scientific-Atlanta a
non-transferable, non-exclusive, irrevocable license to
manufacture Product incorporating S-A Components and AM
Components which are purchased from AM or manufactured by
Scientific-Atlanta under its license from AM.
Scientific-Atlanta grants to AM a non-transferable,
non-exclusive, irrevocable license to manufacture Product
incorporating AM Components and S-A
7
<PAGE>
Components which are purchased from Scientific-Atlanta or
manufactured by AM under its license from Scientific-Atlanta.
3.6 Scientific-Atlanta Purchase Obligation. Upon the successful
and mutually agreed upon conclusion of a Development Program,
except as otherwise provided in Section 3.3,
Scientific-Atlanta agrees during the term of this Agreement to
purchase AM Components exclusively from AM.
3.7 AM Purchase Obligation. Upon the successful and mutually
agreed upon conclusion of a Development Program, except as
otherwise provided in Section 3.4, AM agrees during the term
of this Agreement to purchase S-A Components exclusively from
Scientific-Atlanta only for use in Product manufactured by AM.
3.8 Sales and Distribution Rights. Upon the successful and
mutually agreed upon conclusion of a Development Program, each
party grants to the other the following rights:
(a) AM grants to Scientific-Atlanta a worldwide,
exclusive, non-transferable, irrevocable right and
license to purchase, sell and distribute AM
Components for incorporation in or maintenance of
Product sold by Scientific-Atlanta.
(b) AM grants to Scientific-Atlanta a worldwide,
non-exclusive, non-transferable, irrevocable right
and license to manufacture, use and sell Product
incorporating purchased AM Components, without
further accounting to AM for Product manufactured,
used or sold.
(c) Scientific-Atlanta grants to AM a worldwide,
non-transferable, irrevocable right and license to
manufacture, use and sell Product incorporating S-A
Components, with such right and license limited as
follows:
(1) If Scientific-Atlanta paid one hundred
percent (100%) of AM's non-recurring
engineering expenses related to the
development of a Product (as set forth in
Exhibit B), AM shall not, for a one (1) year
period beginning on the date AM commences
manufacture of a Product in form to be sold
to an end-user without modification, sell or
distribute such Product (except to
Scientific-Atlanta), and Scientific-Atlanta
shall have the exclusive right during such
period to sell and distribute such Product.
8
<PAGE>
(2) As to Product of the type described in
paragraph (1) above, after such one (1) year
period, AM shall have the non-exclusive
right to sell and distribute such Product
only through its own direct sales force,
provided that AM pays Scientific- Atlanta a
royalty or commission on each unit of
Product sold by AM equal to twenty percent
(20%) of AM's actual sales price for the
Product;
(3) As to Product not of the type described in
paragraph (1) above, AM shall pay
Scientific-Atlanta a royalty or commission
on each unit of such Product sold by AM as
follows:
(i) ten percent (10%) of AM's actual
sales price for the Product, if
Scientific-Atlanta paid for no
percentage of AM's non-recurring
engineering expense related to the
development of such Product, as
specified in Exhibit B; and
(ii) a percentage of AM's actual sales
price for the Product, determined by
the linear relationship between (i)
the percentage of AM's non-recurring
engineering expenses related to the
development of such Product that
Scientific-Atlanta paid, pursuant to
Exhibit B, which will range from
zero percent (0%) to one hundred
percent (100%), and (ii) the royalty
or commission percentage range of
ten percent (10%) to twenty percent
(20%). (For example, if
Scientific-Atlanta paid AM fifty
percent (50%) of the non-recurring
engineering expenses incurred by AM
related to the development of a
Product, as specified in Exhibit B,
then AM would pay Scientific-Atlanta
a royalty or commission equal to
fifteen percent (15%) of AM's actual
sales price for the Product; if
Scientific-Atlanta paid twenty-five
percent (25%), then AM would pay a
royalty or commission of twelve and
one-half percent (12.5%) of AM's
actual sales price for the Product;
etc.)
All commissions or royalties incurred under this Section 3.8
shall be due and payable within forty-five (45) days after the
end of the calendar quarter in which such commissions or
royalties arose.
3.9 Terms of Sale. All sales of S-A Components by
Scientific-Atlanta to AM shall be governed by
Scientific-Atlanta's standard terms and conditions of sale.
Pricing, delivery and other critical terms shall be negotiated
in good faith by the parties. All sales of AM Components or
Product by AM to
9
<PAGE>
Scientific-Atlanta shall be governed by the terms and
conditions of the Distributor Agreement and Manufacturing
License dated April __, 1996, between the parties or any
subsequent distributor agreement in effect at the time of
sale.
4. Intellectual Property Rights
4.1 Scientific-Atlanta Ownership. AM agrees that
Scientific-Atlanta or its licensors shall own all right, title
and interest in the S-A Technology, S-A Components, and in all
patents, trademarks, trade names, inventions, copyrights,
know-how, mask work rights and trade secrets and all other
intellectual property rights in and to the S-A Technology and
S-A Components.
4.2 AM Ownership. Scientific-Atlanta agrees that AM or its
licensors shall own all right, title and interest in the AM
Technology and AM Components, and in all patents, trademarks,
trade names, inventions, know-how, mask work rights and trade
secrets and all other intellectual property rights to the AM
Technology and AM Components.
4.3 Product Ownership. Scientific-Atlanta and AM agree that all
rights in the Product, exclusive of each party's respective
rights in S-A Components and AM Components, shall be owned
jointly between the parties without right of accounting.
Should one party, however, wish to sell, transfer or otherwise
dispose of its rights in the Product to a third party, it
shall first offer such rights to the other party on
substantially the same terms as offered to such third party.
The other party shall have thirty (30) days to accept such
terms ("Acceptance Period"). After expiration of the
Acceptance Period, the selling party may again offer its
rights in the Product to a third party on substantially the
same terms. Any material change in the terms offered to a
third party shall re-initiate the obligation to offer the
rights to the other party and the other party's Acceptance
Period.
4.4 Intellectual Property Indemnification. The supplying party
agrees to indemnify, defend and hold harmless the other party
from and against any and all losses, damages, liabilities,
expenses (including attorney's fees, experts' fees and court
costs), claims, demands, suits, causes of actions, judgments,
assessments, or deficiencies and charges arising out of a
claim that the AM Components or S-A Components (depending on
who the supplying party is), as supplied, infringe the
intellectual property rights of a third party (except
infringement occurring as a direct result of incorporating
features, operations or algorithms which are specifically
required by the other party), provided that the supplying
party is notified promptly in writing of any allegations of
such infringement and given full cooperation, information, and
10
<PAGE>
authority to settle such claims and to defend or control the
defense of any suit based upon such claims. In no event shall
the supplying party's liability under this section exceed the
purchase price paid by the other party for cost of the
infringing equipment.
4.5 Remedy. In the event that the AM Component or S-A Component
becomes the subject of a claim of infringement, or is held to
infringe, the supplying party, at its option and expense, may
procure for the other party the right to continue using such
Component; or modify or replace such Component with an
acceptable non-infringing alternative; or recover the AM
Component or the S-A Component, as appropriate, and refund the
purchase price less depreciation.
4.6 Entire Liability. This section sets forth the entire liability
of the supplying party to the other party with respect to
infringement of intellectual property.
5. General Indemnities
5.1 Indemnification by AM. Except as to infringement of
intellectual property rights which is covered in Article 4, AM
shall be solely responsible for, and shall indemnify and hold
Scientific-Atlanta free and harmless from, any and all claims,
damages or lawsuits (including Scientific-Atlanta's reasonable
attorneys' fees) arising out of the negligence, gross
negligence or willful misconduct of AM, its employees or its
agents, while performing under this Agreement. All financial
obligations associated with AM's business are the sole
responsibility of AM. All sales and other agreements between
AM and its customers are AM's exclusive responsibility and
shall have no effect on AM's obligations under this Agreement.
5.2 Indemnification by Scientific-Atlanta. Except as to
infringement of intellectual property rights which is covered
in Article 4, Scientific-Atlanta shall be solely responsible
for, and shall indemnify and hold AM free and harmless from,
any and all claims, damages or lawsuits (including AM's
reasonable attorneys' fees) arising out of the negligence,
gross negligence or willful misconduct of Scientific-Atlanta,
its employees or its agents, while performing under this
Agreement. All financial obligations associated with
Scientific-Atlanta's business are the sole responsibility of
Scientific-Atlanta. All sales and other agreements between
Scientific-Atlanta and its customers are Scientific-Atlanta's
exclusive responsibility and shall have no effect on
Scientific-Atlanta's obligations under this Agreement.
11
<PAGE>
6. Proprietary Information
6.1 Obligation. AM and Scientific-Atlanta agree that any
Proprietary Information disclosed by the disclosing party
shall be maintained in trust and confidence by the receiving
party (including its officers, directors, employees, agents
contractors, successors and assigns) for a period of five (5)
years from the termination or expiration of this Agreement,
with such Proprietary Information being treated with at least
the same degree of care as the receiving party treats its own
Proprietary Information, but in no case less than a reasonable
degree of care. After the five (5) year period, the
obligations of the receiving party with respect to the other
party's Proprietary Information shall be limited to those
created by or available under applicable existing law,
including, but not limited to, patent and copyright laws,
provided further that the obligations of confidentiality shall
remain for Trade Secrets for so long as such remains a Trade
Secret. Any Proprietary Information disclosed by the
disclosing party shall be used by the receiving party solely
for the purpose of carrying out the purpose and intent of this
Agreement and may not be disclosed, distributed or
disseminated by the receiving party to any person other than
to its employees, or its subcontractors and consultants whose
knowledge of such Proprietary Information is necessary to
achieve purposes related to the subject matter of this
Agreement and who have agreed, in writing, to be bound by the
terms of this section. The party receiving Proprietary
Information under this Agreement will not:
(a) use or permit the use of the Proprietary Information
disclosed hereunder for any purpose not contemplated
by this Agreement without the prior written approval
of the disclosing party;
(b) duplicate, copy, reverse engineer, compile or
disassemble any Proprietary Information or the media
in which it is embodied, without the disclosing
party's prior written consent: and
(c) use or transmit, directly or indirectly, any
Proprietary Information, except that which is
incorporated into a Component or Product, or any
portion or product thereof, outside the United States
without the disclosing party's prior written consent
and such governmental or other approvals as may be
required by law.
6.2 Agreement Terms. The terms and conditions of this Agreement
shall be deemed to be Proprietary Information, provided,
however, that the duty of confidentiality with respect to such
shall end on the termination or expiration of this Agreement.
12
<PAGE>
6.3 Enforcement. Each party shall exert all reasonable efforts,
including, but not limited to, the execution of
confidentiality or non-disclosure agreements with employees
and consultants to enforce compliance with the provisions of
this Section 6 by its employees, consultants, and any third
party to whom it provided access to Confidential Information
of the other party.
6.4 Remedies. If either party breaches any of its obligations
under this Section 6, the other party shall be entitled to
equitable relief to protect its interest therein, including
but not limited to injunctive relief, as well as money
damages.
7. Term and Termination
7.1 Term. This Agreement shall commence on the Effective Date and
shall continue in full force and effect for a period of three
(3) years, unless earlier terminated pursuant to the following
provisions.
7.2 Termination for Default. If either party defaults in the
performance of any material provision of this Agreement, the
non-defaulting party may give written notice to the defaulting
party that if the default is not cured within sixty (60) days,
the Agreement will be terminated. If the non-defaulting party
gives such notice and the default is not cured during the
sixty (60) day period, then the Agreement shall automatically
terminate at the end of that sixty (60) day period.
7.3 Material Defaults. A default in the performance of a material
provision under this Agreement includes but is not limited to:
(a) failure of a party to provide the engineering
resources needed for a Development Program;
(b) failure of a party to protect the confidentiality of
Proprietary Information;
(c) failure of a party to provide intellectual property
indemnification as provided in Article 4 of this
Agreement; and
(d) a party's commencement of legal action in violation
of the dispute resolution provisions in Article 9 of
this Agreement.
7.4 Effect of Termination for Material Default. Upon termination
of this Agreement as a result of a material default of either
party, the defaulting party shall become obligated, in
exchange for a reasonable negotiated royalty, to grant the
non-defaulting party a non-exclusive, non-transferable,
13
<PAGE>
perpetual license to make, use, and sell (i) the AM Components
or S-A Components, as appropriate, which were developed by the
defaulting party, and (ii) the related Product.
7.5 Survival. The obligations of both AM and Scientific-Atlanta
under this Agreement, which by their nature would continue
beyond the termination, cancellation or expiration of this
Agreement shall survive termination, cancellation or
expiration of this Agreement.
8. Limitation of Liability
8.1 Limitation. NEITHER AM NOR SCIENTIFIC-ATLANTA SHALL UNDER ANY
CIRCUMSTANCES BE LIABLE TO THE OTHER FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT
NOT LIMITED TO, LOSS OF PROFITS, REVENUE, OR BUSINESS)
RESULTING FROM OR IN ANY WAY RELATED TO THIS AGREEMENT, OR THE
TERMINATION OF THIS AGREEMENT, OR ARISING OUT OF OR ALLEGED TO
HAVE ARISEN OUT OF A BREACH OF THIS AGREEMENT. THIS LIMITATION
APPLIES REGARDLESS OF WHETHER SUCH DAMAGES ARE SOUGHT BASED ON
THEORIES OF CONTRACT OR TORT OR ANY OTHER LEGAL THEORY. THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OR
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
8.2 Limitation Amount. IN NO EVENT WILL EITHER PARTY BE LIABLE TO
THE OTHER UNDER THIS AGREEMENT, REGARDLESS OF THE FORM OF
CLAIM OR ACTION, IN AN AMOUNT THAT EXCEEDS, IN THE AGGREGATE,
FIVE HUNDRED THOUSAND DOLLARS ($500,000.00).
9. Disputes
9.1 Arbitration. The parties will attempt to resolve in good faith
any Dispute which arises in connection with this Agreement by
negotiation. As used herein, "Dispute" shall include any claim
or controversy arising out of this Agreement or the breach,
termination or validity thereof involving either of the
parties. If the parties cannot resolve any Dispute through
negotiation, the parties agree and consent to resolve the
Dispute solely by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association ("AAA") at the offices of the AAA in Atlanta,
Georgia. The arbitrators shall be empowered to resolve all
Disputes, whether in Agreement or in tort, and to award any
remedies authorized by this Agreement and any applicable
statute or common law. All arbitration proceedings, including
all evidence and statements, shall be confidential and shall
not be used or disclosed for any other purpose. Each party
shall pay its
14
<PAGE>
own attorneys' fees and expenses; all other expenses of
arbitration shall be equally divided between the parties,
provided, however, the arbitrators shall have the authority to
assess any of the foregoing costs against any party acting in
bad faith. The award of the arbitrators shall be final and
binding and is the sole and exclusive remedy of the parties
regarding any Disputes hereunder except that nothing contained
in this Agreement shall prohibit either party from seeking
injunctive relief or equitable remedies in a court of
competent jurisdiction or pursuing other equitable remedies. A
judgment on the award may be entered in any court having
jurisdiction thereof and each party consents to such
jurisdiction. The award shall earn interest from the date of
the award until satisfied in full at the United States prime
interest rate as reported in The Wall Street Journal on the
business day immediately preceding the date of the award.
Should either party bring any legal action against the other
with respect to any claim required to be arbitrated under this
Agreement by any method other than arbitration, the other
party shall be entitled to recover from such party all
damages, costs, expenses and attorneys' fees incurred as a
result of such action.
10. General Provisions
10.1 Relationship of the Parties. It is expressly understood that
AM and Scientific-Atlanta intend by this Agreement to
establish the relationship of independent contractors, and do
not intend to undertake the relationship of principal and
agent or to create a joint venture or partnership between them
or their respective successors in interests. Neither AM nor
Scientific-Atlanta shall have any authority to create or
assume, in the name or on behalf of the other party, any
obligation, expressed or implied, nor to act or purport to act
as the agent or the legally empowered representative of the
other party hereto for any purpose whatsoever.
10.2 Assignment. Neither party may assign this Agreement or any
rights or obligations hereunder, by operation of law or
otherwise, and any such attempted assignment shall be void.
10.3 Applicable Law. This Agreement shall be interpreted, construed
and governed by the laws of the state of Georgia, exclusive of
choice of laws.
10.4 Entire Agreement. This Agreement, including all Exhibits
hereto, represents the entire understanding and agreement
between the parties hereto with respect to the subject matter
hereof, supersedes all prior negotiations and agreements and
can be modified, amended, supplemented or changed only by an
agreement in writing which makes specific reference to this
Agreement and which is signed by both Scientific-Atlanta and
AM. The parties have
15
<PAGE>
executed a Distributor Agreement and Manufacturing License,
dated May __, 1996, which is independent of this Agreement.
10.5 Severability. If any provision of this Agreement is declared
or found to be illegal, unenforceable or void, the parties
shall negotiate in good faith to agree upon a substitute
provision that is legal and enforceable and is as nearly as
possible consistent with the intentions underlying the
original provision. If the remainder of this Agreement is not
materially affected by such declaration or finding and is
capable of substantial performance, then the remainder shall
be enforced to the extent permitted by law.
10.6 Waiver. No delay or omission by either party to exercise any
right or power shall impair any such right or power or be
construed to be a waiver thereof. A waiver by any party of any
of the covenants, conditions or Agreements to be performed by
the other or any breach thereof shall not be construed to be a
waiver of any succeeding breach thereof or of any other
covenant, condition or Agreement herein contained. No change,
waiver or discharge hereof shall be valid unless in writing
and signed by an authorized representative of the party
against which such change, waiver, or discharge is sought to
be enforced.
10.7 Notices. Any notice required or permitted to be made under
this Agreement shall be in writing and shall be deemed to have
been duly given to the other party on the earlier of (i)
actual receipt, irrespective of whether sent by post, telex,
facsimile transmission, overnight (or expedited) courier
service or any other method, or (ii) on the sixth day after
mailing by registered or certified mail from the country in
which the notice originated, return receipt requested and
postage prepaid, provided such notice is directed or addressed
to the appropriate address or facsimile number set forth
below:
For Scientific-Atlanta:
SCIENTIFIC-ATLANTA, INC.
Broadband Communications Group
4261 Communications Drive
Norcross, Georgia 30093
Attn: Perry Tanner, Distribution Division
16
<PAGE>
For AM:
AM COMMUNICATIONS, INC.
1900 AM Drive
Quakertown, Pennsylvania 18951-9004
Attn: Keith Schneck, President
Either party may change the address, the facsimile number or
the person designated in the "Attention" line by notice to the
other party, which notice complies with this section.
10.8 Excusable Delays. Neither AM nor Scientific-Atlanta shall be
liable for any delay or non-performance hereunder, resulting
from: acts of God; fires; casualty; severe weather conditions;
strikes; war; riots; civil disorder; earthquakes; lockouts;
insurrections; energy shortages; any law, order, proclamation,
regulation, ordinance, demand or requirement of any
governmental agency; freight embargoes; custom delays at the
port of shipment or destination; or any other condition or
occurrence whatsoever beyond the reasonable control of such
party. If the performance of this Agreement is delayed,
prevented, restricted or interfered with by reason of any such
event, (a) the party whose performance is delayed, prevented,
restricted or interfered with shall give prompt written notice
to the other party of the event and shall be excused from
performance to the extent delayed or prevented; provided,
however, that the party whose performance is prevented or
delayed shall take reasonable steps to avoid or remove such
causes of nonperformance and shall continue performance
whenever and to the extent such causes are removed; and (b) if
it appears that a time for delivery or performance pursuant to
this Agreement will be extended for more than thirty (30)
days, the party receiving notice under clause (a) above shall
have the right to terminate, by written notice to the other
party, any portion of this Agreement or of a Purchase Order
covering the delayed performance and the obligations and
liabilities of the affected parties with respect to such
portion of the Purchase Order shall thereupon lapse and
terminate, except to the extent such obligations or rights are
intended to survive pursuant to this Agreement. Additionally,
if it appears that deliveries of Products under this Agreement
are reasonably likely to be delayed or disrupted for a period
of more than one-hundred twenty (120) days, Scientific-Atlanta
will have the right to terminate this Agreement.
10.9 Records. AM shall maintain all books and records related to
its obligations hereunder for at least five (5) years after
the termination of this Agreement. Scientific-Atlanta shall
have the right to inspect and audit such records at any time
upon reasonable notice to AM.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed
as of the date first written above.
SCIENTIFIC-ATLANTA, INC.
By:
-----------------------------
Title:
-----------------------------
AM COMMUNICATIONS, INC.
By:
-----------------------------
Title:
-----------------------------
18
<PAGE>
Exhibit A1
AM Components
FlexStat Transponder Module w/S-A / AM Protocols for SAII
OmniMCU II (ACU) w/S-A Protocol
OmniVU Software w/ S-A Private labeling
Craft Interface software
Scientific-Atlanta Components
Mechanical Transponder Enclosures
Transponder Cabling Interfaces
Piece-part components
Product
Next Generation /SA IITransponder
<PAGE>
Exhibit A2
AM Components
Euro Amp/Node Low Cost Transponders with S-A protocol
Euro Amp/Node Full Featured Transponders
OmniMCU II (ACU) w/ SA Protocol
OmniVU Software w/SA Protocol
OmniVU Software with S-A private labeling
Scientific-Atlanta Components
None
Product
Status Monitoring Products for use in Euro Amp/Node Program
<PAGE>
Exhibit B1
Amount and Percentage of Non-Recurring Engineering Expense Paid by
Scientific-Atlanta, Schedules, and Milestones Related to Exhibit A1
Amount and Percentage of Non-Recurring Engineering Expense Paid by Scientific-
Atlanta Related to Exhibit A1
100% amount as designed in Exhibit B2
Schedules Related to Exhibit A1
SA II prototype will be available August 30, 1996 OmniMCU II (ACU) will be
available August 30, 1996 OmniVU Software v1.0 is available now.
Milestones Related to Exhibit A1
Flexstat prototype will be available December 30, 1996 OmniMCU II (ACU) will be
available August 30, 1996 OmniVU Software v1.0 is available now. Craft interface
availability to be decided.
<PAGE>
Exhibit B2
Amount and Percentage of Non-Recurring Engineering Expense Paid by
Scientific-Atlanta, Schedules, and Milestones Related to Exhibit A2
Amount and Percentage of Non-Recurring Engineering Expense Paid by Scientific-
Atlanta Related to Exhibit A2
$200,000. Percentage of NRE paid by S-A is 100%
Schedules Related to Exhibit A2
Prototype delivery of full featured Euro/Amp/Node transponder - June 30, 1996
Prototype delivery of low cost Euro Amp/Node transponder - July 30, 1996
Production of full featured EuroAmp/Node transponder - August 30, 1996
Production delivery of low cost EuroAmp/Node transponder - September 30, 1996
Production delivery of OmniMCU II (ACU) - August 30, 1996 OmniVU Software v1.0
is available now.
Milestones Related to Exhibit A2
Prototype delivery of full featured EuroAmp/Node transponder - June 30, 1996
Prototype delivery of low cost Euro/Amp Node transponder - July 30, 1996
Production of full featured EuroAmp/Node transponder - August 30, 1996
Production delivery of low cost EuroAmp/Node transponder - September 30, 1996
Production delivery of OmniMCU II (ACU) - August 30, 1996 OmniVU Software v1.0
is available now.
<PAGE>
CONFIDENTIAL/LIMITED DISCLOSURE
DISTRIBUTOR AGREEMENT
AND
MANUFACTURING LICENSE
("Contract")
Dated as of June 14, 1996
BY AND BETWEEN:
AM COMMUNICATIONS, INC.
1900 AM Drive
Quakertown, Pennsylvania 18951-9004
("AM")
AND
SCIENTIFIC-ATLANTA, INC.
Broadband Communications Group
4261 Communications Drive
Norcross, Georgia 30093
("Scientific-Atlanta")
WHEREAS, Scientific-Atlanta desires to purchase from AM, and AM desires
to sell to Scientific-Atlanta, certain Products (as defined below); and
WHEREAS, AM is willing to grant Scientific-Atlanta the right to
manufacture certain Products under certain conditions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, Scientific-Atlanta and AM agree as follows:
1. DEFINITIONS.
1.1 "Defect" means any damage to a Product, any malfunction or error in
a Product or any deviation from the Specifications for a Product.
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a. "Critical Defects" means Defects which might reasonably be
expected to endanger life or be a hazard to health, including but not limited to
Defects which might give an electrical shock, or Defects which might create a
fire hazard.
b. "Class I Defects" means Defects which cause a Product to be
functionally inoperative, or unable to meet its Specifications in all respects.
1.2 "Developmental Products" means (i) any products which may be
developed for Scientific-Atlanta by AM under separate agreement and added to
Exhibit A and (ii) any additional products or models of products not yet made
available for commercial sale, which products must be made available to
Scientific-Atlanta by AM and included in Exhibit A when made available by AM to
other customers.
1.3 "Products" mean (i) all equipment and software used for status
monitoring currently made available for commercial sale by AM, including without
limitation the products set forth on Exhibit A, but excluding the products set
forth on Exhibit B, (ii) any additional status monitoring products or models of
products made available for commercial sale by or through AM, provided such
products were not developed by AM for another purchaser at the expense of such
other purchaser and AM is contractually prohibited from selling such products to
purchasers such as Scientific-Atlanta, and (iii) any design documentation or end
user manuals provided with a Product. Developmental Products may become
"Products" when made available by AM to Scientific-Atlanta or any other
customers and will then become Products under Exhibit A. The three (3) primary
products which AM will initially sell to Scientific-Atlanta as "Products" are
(i) OmniVu software; (ii) Master Control Unit ("MCU"); and (iii) Transponders.
1.4 "Initial Units" means the units of Products contemplated to be
ordered and purchased by Scientific-Atlanta during the initial twelve (12)
months of this Contract. S-A has set forth on Exhibit A the number of units of
each Product which it estimates it may purchase during the first twelve (12)
months of the Term of this Contract.
1.5 "Non-Recurring Engineering Expense" means the direct engineering
labor cost associated with the development of new product. Capital costs for
capital items, such as equipment used in the development, and any costs related
to the development of the base technology and existing products on which the new
product is based, shall not be included in the definition of "NonRecurring
Engineering Expense."
1.6 "Price" or "Pricing" shall have the meaning set forth in
Section 6.1
1.7 "Proprietary Information" means any information or data fixed in a
tangible medium and furnished by one party to the other under this Contract or
relating to the Products and conspicuously marked as the confidential or
proprietary information of the disclosing party or, if provided orally, is
referred to in a written memorandum within twenty (20) days after such oral
disclosure and is stated to be confidential or proprietary at the time the
information is provided.
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1.8 "Purchase Order" shall have the meaning set forth in Sections 5.1
and 5.2.
1.9 "SA Customer" means any person or entity that acquires or has
acquired from Scientific-Atlanta any units of Product purchased by
Scientific-Atlanta under this Contract and, if such person or entity is a
distributor or other interim purchaser, the ultimate purchaser of such units of
Products.
1.10 "Software" means (i) any Product which is primarily a computer
program and is not incorporated into the circuitry of a Product, including but
not limited to the OmniVu software and the AM Access software ("Software
Product") and (ii) any computer program which is incorporated into the circuitry
of a Product, such as microcode or nonvolatile memory ("Firmware"). As used in
this Contract, Software includes both Software Products and Firmware unless one
or both are specifically designated. Software Product shall be delivered by AM
to Scientific-Atlanta on a golden master diskette unless another media type is
specified by Scientific-Atlanta.
1.11 "Specifications" means the design, functional, component
performance, system performance, compatibility and operational characteristics,
form, fit, visual look and features of the Products as set forth in Exhibit B to
this Contract.
1.12 "Term of this Contract" shall have the meaning set forth in
Section 18.1.
2. SCOPE OF CONTRACT.
This Contract is intended to establish the terms and conditions under
which Scientific-Atlanta will act as a distributor for the Products of AM and
the Prices and terms and conditions under which Scientific-Atlanta will purchase
and manufacture Products for its own use or for distribution.
3. SCIENTIFIC-ATLANTA AS DISTRIBUTOR.
3.1 Products. Except as provided in Section 3.2, Scientific-Atlanta
shall have the nonexclusive right, during the Term of this Contract to
distribute the Products listed in Exhibit A worldwide.
3.2 Exclusive Distributor. For a period of one (1) year commencing on
the first date of manufacture of a Product jointly developed by
Scientific-Atlanta and AM for which Scientific-Atlanta paid one hundred percent
(100%) of AM's Non-Recurring Engineering Expense related to the development of
such Product, Scientific-Atlanta shall be the exclusive worldwide distributor
for any such Products, and AM shall not have the right to sell such Products to
any person or entity other than Scientific-Atlanta. AM shall have the right to
appoint other distributors for Products not jointly developed with
Scientific-Atlanta in accordance with the preceding sentence.
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3.3 Direct Sales of Certain Products by AM. Except for the time period
described in Section 3.2 for certain Products, AM retains the right to sell all
Products to any end-users, wherever located; provided, however, that AM shall
pay the following royalties or commissions to Scientific-Atlanta in the
following situations: (a) for Products jointly developed by Scientific-Atlanta
and AM, in accordance with the commission or royalty provisions of the joint
development agreement between the parties related to the development of such
Products; (b) for transponder Products developed by AM, which Products operate
on or with products or items sold by Scientific-Atlanta, a commission equal to
ten percent (10%) of the amount AM invoices its customers for such transponder
Products; and (c) for MCU (or ACU) Products or Software Products sold by AM for
use by the end-user with equipment sold by Scientific-Atlanta, which equipment
has a digital address imbedded in the firmware of such equipment and which
equipment does not require a transponder due to such imbedded digital address, a
commission equal to ten percent (10%) of the amount AM invoices its customers
for such MCU (or ACU) Products and Software Products. As to items (b) and (c)
above, such commission will be paid to reimburse Scientific-Atlanta for its
marketing expenses related to promoting such Product(s) to its customers, and
such commission shall be due and payable within forty-five (45) days after the
end of each calendar quarter.
4. PURCHASE OF PRODUCTS.
4.1 Sale of Products. Upon the placement by Scientific-Atlanta of
Purchase Orders in accordance with this Contract (including Article 5 hereof),
AM shall sell the Products in the quantities and at the times set forth in the
Purchase Orders issued by Scientific-Atlanta.
4.2 Scientific-Atlanta Name. Unless otherwise requested by
Scientific-Atlanta, any and all Products purchased under this Contract, and all
installation, service, support and operating manuals provided to
Scientific-Atlanta or SA Customers in conjunction with the Products, shall be
privately labeled with the name "Scientific-Atlanta" and/or such logos or other
names as requested by Scientific-Atlanta, other than to the extent to which
units of Products to be delivered in the initial three calendar months of this
Contract cannot be labeled as such. Scientific-Atlanta shall have the right to
modify such appearance specification upon reasonable advance notice and its
agreement to reimburse AM for its additional reasonable out-of-pocket costs
relating to such modification. Any Product or portion thereof bearing the
Scientific-Atlanta name, color (that is specified as part of the private
labeling specification) or logo which is not purchased by Scientific-Atlanta
under this Contract shall not be sold by AM, unless the Scientific-Atlanta name,
color (that is specified as part of the private labeling specification) and logo
are fully deleted, obliterated or masked from such Product or portion thereof.
If the Scientific-Atlanta name or logo cannot be fully deleted, obliterated or
masked from any portion of the Product, such Product units shall be destroyed by
AM.
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5. PURCHASE ORDERS; FORECASTING
5.1 Purchase Orders. Scientific-Atlanta will order Products by
submitting Purchase Orders to AM. Purchase Orders shall contain: a reference to
this Contract; the identification of the Products being purchased; quantity to
be purchased; the requested shipping destination and shipping date; and any
other special information required by this Contract or by the circumstances of
the Purchase Order. Scientific-Atlanta shall be entitled to defer or cancel
Purchase Orders, upon written notice to AM, up to thirty (30) days prior to the
scheduled delivery date, provided, however, Scientific-Atlanta shall use its
reasonable efforts to notify AM of such deferral or cancellation as soon as
Scientific-Atlanta becomes aware that such deferral or cancellation may be
necessary. In the event of such deferral or cancellation of an order,
Scientific-Atlanta shall reimburse AM for the cost of any work-in-progress
related to such order, provided, however, AM shall deduct any amounts paid by
Scientific-Atlanta as reimbursement from the Price of Products later ordered by
Scientific-Atlanta , which Products would use such work-in-progress. Upon
fifteen (15) days' notice prior to the then-scheduled delivery date,
Scientific-Atlanta shall be entitled to change the shipping destination set
forth in such Purchase Order or to split such Purchase Order into more than one
shipping destination. AM shall accept each such Purchase Order, and shall be
obligated to deliver on the applicable delivery date the number of units of
Products set forth in the Purchase Order, as long as the delivery date for the
units of Products set forth is a minimum of sixty (60) days following the date
of the Purchase Order, unless the parties agree on a later delivery date because
of parts shortages.
5.2 Rejection of Purchase Orders. AM shall be entitled, but shall not
be required, to reject a Purchase Order, within ten (10) days of receipt, if:
(i) it requests delivery in fewer than sixty (60) days ("Non-Conforming Purchase
Order"). If AM does not reject a Non-Conforming Purchase Order within ten (10)
days of the date of the applicable Purchase Orders, AM shall be deemed to have
accepted such Non-Conforming Purchase Order. If Scientific-Atlanta places
Purchase Orders with shorter lead times, AM shall use its best efforts to accept
such Purchase Orders in accordance with the stated delivery date. AM shall
acknowledge in writing the receipt of each Purchase Order from
Scientific-Atlanta.
5.3 Terms and Conditions. The terms and conditions of this Contract
shall be deemed incorporated into and made a part of each Purchase Order and any
amendment thereto issued to AM under this Contract. Any terms and conditions
appearing in any Purchase Order or in any acknowledgment or acceptance of a
Purchase Order, that are inconsistent with, different from, or in addition to,
the terms and conditions of this Contract shall be void and of no effect.
5.4. Twelve Month Rolling Forecast. Within sixty (60) days after the
execution of this Contract, Scientific-Atlanta shall provide to AM a twelve
month forecast of its anticipated purchases of Products from AM, broken down on
a monthly basis. Scientific-Atlanta shall update such twelve month forecast each
month thereafter until the expiration or termination of this Contract. Such
forecasts shall not be binding on Scientific-Atlanta.
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6. PRICE AND PAYMENT.
6.1 Price. Prices for the Products ("Price") are as set forth in
Exhibit A to this Contract, but shall automatically adjust at any time during
this Contract pursuant to the terms of Sections 6.4 and 6.5. In addition, AM
shall allow Scientific-Atlanta to participate in the discount plans offered to
other purchasers who resell the Products. Unless otherwise agreed in writing,
all Prices are F.O.B. AM's factory and include any duties or other fees payable
with respect to the importation of the units of the Products or components into
the United States. During the Term of this Contract, prices will be subject to
downward adjustment at each twelve (12) month anniversary of the date of this
Contract; at each twelve (12) month anniversary, AM and Scientific-Atlanta shall
negotiate the Price for each Product, taking into account competitive prices for
similar products; provided, however, if the parties do not agree on a Price for
a Product, the Price for such Product shall be the amount that AM must charge
for such Product to derive a forty percent (40%) gross margin on the sale of
such Product to Scientific-Atlanta, using AM's standard costs of parts, labor,
etc., related to the manufacture of such Product to determine AM's gross margin
on such Product. If at any time during the Term of this Contract
Scientific-Atlanta is not able to effectively compete with its competitors due
to its resale price for Products, AM agrees to meet with Scientific-Atlanta
about the factors causing its inability to compete and agrees to decrease the
Price to the extent appropriate to enable Scientific-Atlanta to effectively
compete on sales of Products.
6.2 Shipping and Other Charges. Prices include all costs for packaging
and crating of Products for domestic shipment but do not include any shipping,
taxes or duties related to shipment to the destination specified by
Scientific-Atlanta. Such shipping, taxes and duties will be prepaid by AM and
then invoiced to Scientific-Atlanta.
6.3 Payment Terms. Payment for Products other than Software shall be
due within forty-five (45) days of the date of the later of delivery of Product
by AM to Scientific-Atlanta or receipt of the invoice, which invoice shall not
be dated prior to the date of shipment. (Scientific-Atlanta will be deemed to
have accepted the Products if it has not notified AM of any problem with the
Products within forty-five (45) days after delivery of such Products to
Scientific-Atlanta.) Payment for Software Products sold by Scientific-Atlanta to
its customers shall be due forty-five (45) days after the end of the calendar
quarter in which such Software Products were sold by Scientific-Atlanta.
Scientific-Atlanta shall maintain records of any fees due on any systems
sublicensed or distributed by or through Scientific-Atlanta, its sublicensees or
distributors. AM shall have the right, during Scientific-Atlanta's normal
business hours, to audit on an annual basis, at AM's expense, such records using
an independent auditor. To the extent that AM grants credits to
Scientific-Atlanta in connection with joint development efforts or otherwise,
Scientific-Atlanta shall be entitled to deduct such credits from any invoices in
accordance with the terms of any credits so granted by AM. For instance,
Scientific-Atlanta has agreed to pay AM One Hundred Twenty-Five Thousand Dollars
($125,000) of Non-Recurring Engineering Expense in connection with two (2)
products to be jointly developed by Scientific-Atlanta and AM under a joint
development agreement between the parties, and, pursuant to Section 21.2,
Scientific-Atlanta has agreed to pay AM Seventy- Five Thousand Dollars ($75,000)
for modifications by AM of certain Software, and as a result of
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these agreements by Scientific-Atlanta to pay a total of Two Hundred Thousand
Dollars ($200,000) at specified milestones, AM has agreed to provide
Scientific-Atlanta with a credit of One Hundred Thousand Dollars ($100,000) to
be used by Scientific-Atlanta at a rate of no more than ten percent (10%) per
month over the twelve (12) month period commencing on the date of this Contract.
6.4 Cooperation on Cost Reduction. Scientific-Atlanta and AM will work
together and separately to determine areas in which the parties can help
effectuate cost reductions in the Products. Any information provided pursuant to
this Section shall be treated as Proprietary Information. If AM initiates an
idea for a cost reduction, twenty-five percent (25%) of the cost reduction per
Product will be passed on to Scientific-Atlanta through a reduction in the
Price. If Scientific-Atlanta initiates an idea for a cost reduction,
seventy-five percent (75%) of the cost reduction per Product will be passed on
to Scientific-Atlanta through a reduction in the Price. If it is unclear which
party initiated a cost reduction idea, fifty percent (50%) of the cost reduction
per Product will be passed on to Scientific-Atlanta through a reduction in the
Price. In determining the amount of the cost reduction, expenses related to
implementation of the change shall be taken into consideration.
6.5 Most Favored Customer. The Price and the terms and conditions for
Products provided to Scientific-Atlanta under this Contract shall be at prices
and on terms and conditions at least as favorable as provided by AM to any other
customer for similar quantities. If, at any time during the Term of this
Contract, AM's selling price (taking into account discounts, rebates and similar
deduction or refunds) as quoted or invoiced to any person or entity on a per
unit of Product basis, is lower than the Price, then thereafter the Price shall
be reduced to such lower price for all units of the applicable Products
delivered to Scientific-Atlanta under this Contract.
7. DELIVERY.
7.1 Shipment.
a. AM shall deliver the Products to those locations identified
in the Purchase Orders and shall ship such Products in accordance with and on a
date to ensure compliance with the delivery dates specified in the terms of each
Purchase Order. Delivery shall occur upon receipt of ordered Products by
Scientific-Atlanta or SA Customer. Unless Scientific-Atlanta requests shipment
by a designated carrier, AM shall arrange for shipping of the Products and
related insurance and freight charges and insurance charges will be prepaid by
AM.
b. AM shall not be entitled to make partial shipments of units
of Products covered by any Purchase Order without the prior written consent of
Scientific-Atlanta.
7.2 Late Delivery.
c. If AM determines that it is reasonably likely that it will
not deliver all or any portion of the units of Products covered by a Purchase
Order at the times designated therein, AM will immediately advise
Scientific-Atlanta. If the affected Purchase Order calls for delivery to an SA
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Customer, or if Scientific-Atlanta advises AM that the units covered by
the affected Purchase Order were being delivered to Scientific-Atlanta for
committed delivery or for consolidation with other items for delivery to any SA
Customer, upon AM's failure to deliver by the designated delivery date all of
the units of Products covered by the Purchase Order, AM shall pay
Scientific-Atlanta an amount equal to the additional cost incurred or credit
required to be issued by Scientific-Atlanta as a result of AM's late delivery,
up to a maximum of twenty-five percent (25%) of the Price of the Products on the
Purchase Order ("Late Delivery Payment"). If the affected Purchase Order was for
delivery to Scientific-Atlanta for the purposes of stocking inventory, the Late
Delivery Payment provided in this Section 7.2 will not be payable for the first
fifteen days of delay in shipment and will thereafter be payable at the rate of
two percent (2%) of the Price for each complete five (5) day increment of delay
in shipment, with a maximum amount of twenty percent (20%) of the Price. These
Late Delivery Payments shall apply to Purchase Orders issued and accepted in
accordance with the Purchase Order of Article 5, and for which payments in
accordance with Section 6.6, if any, have been made. This provision shall not
apply in the event of a late delivery of the first order for MCUs placed by
Scientific-Atlanta; Section 11.6 shall govern in that situation.
d. AM agrees that it will not ship any units of Products to
any other customer (other than a customer with a contractual right in effect as
of the execution and delivery of this Contract to require AM to sell such units
at such time), if, as a consequence of shipments of such units in the applicable
calendar month, shipments of Products to Scientific-Atlanta or any SA Customer
under this Contract will be delayed.
7.3 Testing of Products. Each unit of Products delivered to
Scientific-Atlanta under this Contract shall be subject to acceptance quality
level ("AQL") testing in accordance with this Section 7.3 to determine whether
Defects are present in the Products. AM will provide Scientific-Atlanta with a
list of test equipment, standard test procedures and control charts used by AM
for AQL testing, and such list and procedures shall be applied to Products
delivered under this Contract and shall, upon the reasonable request of
Scientific-Atlanta, be modified. AM shall replace each Product that fails the
AQL test. A complete record of all tests performed shall be kept by AM for a
reasonable period and shall be made available to Scientific-Atlanta (or SA
Customers) upon request. A representative of Scientific-Atlanta (or any SA
Customer) shall be entitled, at its expense, to witness the AQL tests carried
out by AM. In addition, Scientific-Atlanta and any SA Customer shall be
entitled, but shall not be required, to perform its own AQL testing of delivered
Products and will advise AM of any units of Products requiring replacement as a
result of such AQL testing. Except with respect to units of Products which are
rejected by Scientific-Atlanta or any SA Customer, Products shall be deemed to
be accepted as of the earlier of (i) passage of AQL testing by Scientific-
Atlanta or the SA Customer or (ii) thirty (30) days after receipt at the
delivery destination.
8. TITLE AND ASSUMPTION OF RISK.
8.1 Transfer on Shipment. AM shall convey good title, free from any
claim or encumbrance, to all Products sold and delivered by AM under this
Contract. Title to the Products shall pass at the time of shipment by AM as
described in Section 7.1. Any loss or damage to
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Products occurring prior to passage of title shall be at AM's risk. Any loss or
damage to Products occurring after passage of title shall be at
Scientific-Atlanta's risk.
9. WARRANTIES & MAINTENANCE FROM AM.
9.1 Warranties. AM hereby represents and warrants to Scientific-Atlanta
that:
a. All Products are new, shall conform in all respects to the
Specifications, and be free from defects in design, materials and workmanship;
and
b. All Products shall function under ordinary use in
conformance with their Specifications.
c. All Products shall bear date codes and shall bear bar
codes.
d. The Transponder Products sold by AM to Scientific-Atlanta
will function properly with the MCU Products sold by AM.
e. The MCU Products sold by AM to Scientific-Atlanta will
function properly with the transponders manufactured or sold by
Scientific-Atlanta in the past, present or future.
f. AM has the right to grant to Scientific-Atlanta licenses
for any Software that is supplied by AM to Scientific-Atlanta under this
Contract.
g. All Software, including the OmniVu Software, licensed by AM
to Scientific-Atlanta under this Contract will function properly with the
transponders manufactured or sold by Scientific-Atlanta in the past, present or
future.
h. No impediment exists to AM entering into this Contract, and
AM has not made any agreement with any third party which will interfere with
AM's performance under this Contract.
i. Prior to delivery to Scientific-Atlanta, all Software,
including the OmniVu Software, will be extensively tested by AM and shall
perform all functions successfully in their intended environment in accordance
with the Specifications.
j. To the best of AM's knowledge, information and belief,
there are no threatened or pending infringement actions against AM relating to
the Products and there are no infringements of any third party patent,
copyright, trade secret, trademark or other third party proprietary rights by AM
relating to the Products.
k. Software delivered to Scientific-Atlanta under this
Contract will not contain any security or timing mechanism that would in any
manner affect the authorized use of such
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Software or other software, or any code that would permit unauthorized entry or
modification of the Software or other software.
l. All design documentation and user documentation for
Products (including Software Products) will be complete and accurate as of the
date of final acceptance.
9.2 Warranty Period. The warranties set forth above shall apply on the
effective date of this Contract and, as to each Product, exclusive of Software
Products, delivered, for the period beginning on the date of delivery and ending
three (3) years thereafter if delivered to an SA Customer or ending three and
one-half (3 1/2) years after the date of delivery of Product if delivered to
Scientific-Atlanta (such period, as extended, if applicable, being referred to
herein as the "Warranty Period"). For Software Products, the warranties set
forth above shall apply on the effective date of this Contract and, as to each
Software Product delivered, for the period beginning on the date of Delivery and
ending one (1) year thereafter if delivered to an SA Customer or ending one and
one-half (1 1/2) years after the date of delivery of such Software Product if
delivered to Scientific-Atlanta (such period, as extended, if applicable, being
referred to herein as the "Software Product Warranty Period"). AM shall offer an
optional extended warranty for two additional one year periods for the prices
set forth in Exhibit A.
9.3 Warranty Replacement or Repair. Within the Warranty Period and for
thirty days thereafter, Scientific-Atlanta and SA Customers shall have the right
to return to AM Products (including Firmware in the Products) not conforming to
the above warranties and to require that AM, at its expense, repair such
Products or replace them with new, conforming Products, within fifteen (15) days
of receipt by AM of such returned Products. For Software Products during the
Software Product Warranty Period, if the Software Product, in any material
respect, fails to so conform at any time, AM shall, at no charge, correct the
problem and provide corrected Software Product to Scientific-Atlanta.
a. Procedures; Shipping; No Coverage. Upon request of
Scientific-Atlanta or SA's Customer, AM's authorized service personnel will
provide a return material authorization number which shall accompany any
returned Products. AM shall pay all transportation costs for the return of the
Products to AM and to Scientific-Atlanta or SA's Customer. AM shall repair or
replace any Products not conforming to the warranties provided herein within
four weeks of receipt. In the event any Product which does not comply with this
warranty is returned for repair more than two (2) times based on similar reasons
relating to functionality or useability, AM shall immediately provide
Scientific-Atlanta or the SA Customer with a new, conforming replacement
Product. If Product returned for repair is not covered by the terms of the
warranty provided hereunder, the cost of repair and shipping expenses shall be
reimbursed by Scientific-Atlanta or the SA Customer at AM's prevailing service
prices.
b. Exclusions. The foregoing warranties and remedies are for
Scientific-Atlanta's and SA Customers' benefit and may only be transferred in
connection with the sale or other transfer of the Products to another person or
entity or the permitted assignment of this Contract. The
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warranties under this section do not apply to products damaged or rendered
unserviceable by: (1) misuse, theft, vandalism, fire, water or other peril or
(2) improper installation or unauthorized alteration of the Products.
c. Initial Evaluation. Scientific-Atlanta shall bear initial
responsibility for determining if an alleged defect is a Critical Defect or a
Class I Defect. If Scientific-Atlanta determines that a defect appears to be a
Critical Defect or Class I Defect, Scientific-Atlanta will immediately notify AM
and AM will immediately ship a spare unit to Scientific-Atlanta or to the SA
Customer, as applicable, and the SA Customer (or Scientific-Atlanta) will return
the defective unit to AM for repair or replacement.
d. Reports. Upon the reasonable request of AM,
Scientific-Atlanta will provide AM with reports as to reported warranty
problems. AM will provide Scientific-Atlanta on a quarterly basis, but not more
often than monthly, with data on repairs and replacements performed by AM on
Products purchased under this Contract and, to the extent relating to
functionality or useability, on Products purchased by other persons or entities.
AM shall give Scientific-Atlanta reasonable access to any databases containing
such data.
e. Field Support. Scientific-Atlanta will provide telephone
support with standard troubleshooting procedures in an attempt to fix any
alleged problem or answer any technical questions concerning the Product to SA
Customers. Scientific-Atlanta will document any telephone calls concerning
defects. As provided in Exhibit E, AM will, at its expense, provide Scientific-
Atlanta's personnel with procedures and training so that Scientific-Atlanta's
personnel will be able to perform this customer support. AM will resolve
problems that Scientific-Atlanta cannot resolve with telephone support.
9.4 Repetitive Warranty Problems. If at any time during the initial
twelve (12) months of this Contract, the aggregate number of Products
(aggregating all Products regardless of model or type) experiencing Critical
Defects or Class I Defects exceeds (a) one percent (1%) of the Initial Units for
any reason or (b) one percent (1%) of the Initial Units as a result of the same
or a substantially similar cause, Scientific-Atlanta shall be entitled to
terminate this Contract.
9.5 Disclaimer. THE WARRANTIES REFERRED TO HEREIN SHALL BE IN LIEU OF
ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND AM
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
9.6 Out of Warranty Repairs. AM shall provide Scientific-Atlanta with
all schematics, parts lists, price lists, maintenance and repair manuals, and
other documentation reasonably necessary for Scientific-Atlanta to conduct
out-of-warranty repair of Products purchased by it or by SA Customers, together
with, at Scientific-Atlanta's request and at cost, any special tooling or
fixtures necessary for such repairs (and any drawings thereof needed for such
repairs). This information shall be treated as Proprietary Information.
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9.7 Software Product Maintenance. Subsequent to the expiration of the
Software Product Warranty Period (or any extension thereto), AM shall provide
Scientific-Atlanta with maintenance for each of the Software Products for each
twelve (12) month period thereafter (the "Maintenance Periods") for a fee of ten
percent (10%) of AM's license fee as set forth in Section 21.1 for such Software
Products. During each Maintenance Period, AM shall provide to Scientific-
Atlanta for each Software Product:
a. all error corrections, enhancements, upgrades and new
releases which are issued by AM during such Maintenance Period;
b. engineering support, as needed by Scientific-Atlanta or an
SA Customer;
c. one hundred (100) hours of training;
d. telephone support by at least two (2) designated technical
contacts that Scientific-Atlanta may call between the hours of 8:00 a.m. and
8:00 p.m. (Central Time), Monday through Friday and between the hours of 8:00
a.m. and 3:00 p.m. (Central Time) on Saturday and Sunday;
e. reasonable access by Scientific-Atlanta (via remote
telecommunications) to AM's problem reports;
f. routine maintenance on a problem-severity basis, with
"Severity 1" problems being of the highest importance and "Severity 4" problems
being of the lowest importance. Scientific-Atlanta and AM will jointly determine
the severity of each problem. AM will resolve problems of differing severity
levels as follows:
Severity 1: A problem preventing effective use of
the Product or Software Product. An acknowledgment will be provided by AM within
two (2) hours and a bypass or temporary fix will be provided on a best-effort
basis within 24 hours.
Severity 2: A problem significantly affecting the
productive use of the Product or Software Product with a bypass or other
resolution to be provided by AM on a best-effort basis within three (3)business
days.
Severity 3: A problem which has minor or no impact
on normal operation, but could in some situations cause a problem with
resolution by AM in the next release of the Software Product or in ninety (90)
days, whichever occurs first.
Severity 4: An irritant in nature. No error
correction is deemed necessary with resolution by AM in the next release.
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10. WARRANTY SERVICE COMMITMENT.
AM understands the high level of service commitment which
Scientific-Atlanta has to its customers. During the Term of this Contract, or
for the extent of the Warranty Period and any extension thereof for Products
provided under this Contract, if more than three percent (3%) of the Products
returned to AM for warranty replacement or repair in any month are not delivered
to Scientific-Atlanta or the Scientific-Atlanta Customer within the time frame
provided in section 9.3, such a month shall be considered a "Month of Deficient
Warranty Service." If more than five percent (5%) of the Products returned for
warranty replacement or repair experiences a recurrence of the same or similar
problem within ninety (90) days, or after the second occurrence of a Month of
Deficient Warranty Service, Scientific-Atlanta, at its option, may require that
Scientific-Atlanta assume warranty maintenance responsibility for the Products.
If Scientific-Atlanta makes such a requirement, AM shall assist
Scientific-Atlanta in establishing a service facility to permit the transfer of
such responsibilities.
11. CHANGES TO PRODUCTS.
11.1 Information Regarding Changes. AM shall provide advance notice to
Scientific-Atlanta of any proposed material change in the Specifications of the
Products as early as possible. AM shall make no Material Change in the
Specifications for Products without the prior written consent of
Scientific-Atlanta. AM shall have the right to make substitutions, modifications
and improvements to the Products which do not involve a Material Change in the
Specifications, provided such substitutions, modifications or improvements do
not alter the form, fit or function, or adversely affect the Specifications, of
the Products, and further provided that any such substitutions, modifications or
improvements shall not modify the Price for such substituted, modified or
improved products without the prior written approval of Scientific-Atlanta.
"Material Change in the Specifications" shall include:
(i) any change that alters the performance of the Products;
(ii) any change in the form, fit, features or functionality of
the Products;
(iii) any change that results in an increased cost to
Scientific-Atlanta in implementation or which renders obsolete Software Products
or products, components, parts or Firmware used in connection with the Products,
including those products, components, parts or software manufactured by
Scientific-Atlanta.
11.2 Enhancements and Modifications. Scientific-Atlanta shall have the
right, but not the obligation, to accept in Products any enhancements and
modifications proposed by AM to the Products.
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11.3 New Products. Scientific-Atlanta shall also have the right to
purchase Scientific-Atlanta private label versions of any new products or new
models of products which AM develops (or which AM jointly develops with
Scientific-Atlanta) during the Term of this Contract on the same terms as
provided herein for existing Products.
11.4 Proposals for Enhancements. Scientific-Atlanta may issue to AM
written proposals for enhancements and modifications to Products from time to
time. AM will respond to such proposals within thirty (30) days and will
implement such enhancements and modifications to the Products privately labeled
for Scientific-Atlanta if commercially reasonable. AM agrees that, at
Scientific-Atlanta's request under this section, it will modify its transponder
Products, thereby creating new Products, which will work with the equipment
manufactured or sold by Scientific-Atlanta or Scientific-Atlanta's competitors.
In each instance of such enhancement or modification, Scientific-Atlanta and AM
will agree upon a schedule for developing and testing such enhanced or modified
Products and will agree about whether Scientific-Atlanta should bear any of the
cost of implementing such enhancement or modification.
11.5 Software Changes. For Software, AM shall also provide to
Scientific-Atlanta any changes, modifications, or upgrades at least two (2)
weeks prior to any general release of such changes, modifications, or upgrades.
All such changes, modifications or upgrades shall be backward compatible with
prior Software supplied by AM to Scientific-Atlanta.
11.6 Development of Higher Capacity MCU Product. AM agrees to develop
and sell to Scientific-Atlanta under this Contract an MCU of higher capacity
which will be capable of working with 10,000 transponder Products and which will
be referred to as an "ACU" and which otherwise shall be functionally equivalent
in form, fit, function, speed and performance with the current ACU. AM agrees to
have such new ACU product in production by no later than the date which is six
(6) months after the date on which Scientific-Atlanta places a Purchase Order
for such an ACU. AM agrees to reimburse Scientific-Atlanta for any and all late
delivery fees or penalties which Scientific-Atlanta incurs with an SA Customer
as a result of AM's late delivery of any ACU Product ordered by
Scientific-Atlanta on its first Purchase Order for ACU Products; provided,
however, such total late penalties or fees shall not exceed one hundred percent
(100%) of the total Price for such late delivered ACUs.
12. SALES AND SERVICE TRAINING.
AM will provide training to Scientific-Atlanta in accordance with
Exhibit E to this Contract.
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13. INDEMNIFICATION.
Subject to the provisions of Article 16 hereof, AM shall indemnify and
hold harmless Scientific-Atlanta and its directors, officers, partners,
employees, agents, subsidiaries, affiliates, and assignees, or any of them and
any SA Customer and it directors, officers, partners, employees, agents,
subsidiaries, affiliates, and assignees, from and against any losses, damages,
liabilities, expenses, costs, claims, suits, demands, actions, causes of action,
proceedings, judgments, assessments, deficiencies and charges on account of
physical damage to tangible property and personal injuries, including death, to
all persons, arising from any willful misconduct or negligence of AM in the
performance (or nonperformance) of this Contract.
14. CONFIDENTIALITY.
14.1 Proprietary Information. AM and Scientific-Atlanta agree that any
Proprietary Information disclosed by the disclosing party to the receiving party
shall be maintained in trust and confidence by the recipient for a period of
five (5) years from the date of disclosure with at least the same degree of care
as the recipient treats its own Proprietary Information, but in no case less
than reasonable care. After such five (5) year period, the obligations of the
receiving party shall be those imposed by applicable law, including patent,
trademark and copyright law. Any Proprietary Information disclosed by the
disclosing party shall be used by the recipient solely for the purposes of
carrying out the purpose and intent of this Contract and may not be disclosed by
the recipient to anyone other than to its employees or agents or consultants
rendering services related to the subject matter of this Contract who have
agreed, in writing, to hold such Proprietary Information in trust and confidence
and who need to use such Proprietary Information for the purposes of this
Contract. The terms and conditions of this Contract shall be deemed to be
Proprietary Information.
14.2 Permitted Disclosure. The obligations of Section 14.1 shall not
apply to:
(i) disclosures pursuant to an order or judgment of any court
or governmental body provided that the disclosing party shall give reasonable
notice of such order or judgment to the other party prior to making such
disclosure;
(ii) disclosures pursuant to any law, rule or regulation,
provided that the disclosing party: has received a written opinion of its
counsel that such disclosure is required; has given reasonable notice to the
other party in advance of such disclosure; and seeks confidential treatment of
such information from the entity to which the disclosure is made;
(iii) Proprietary Information which is or becomes generally
available to the public through any means other than a breach by the receiving
party of its obligations under this Contract;
(iv) Proprietary Information which is disclosed to the
receiving party without an obligation of confidentiality by a third party who
has the right to make such disclosure;
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(v) Proprietary Information which is developed independently
by the receiving party without use of the Proprietary Information or was in
possession of the receiving party without obligations of confidentiality prior
to receipt under this Contract; or
(vi) Proprietary Information which is required to be disclosed
to enforce rights under this Contract.
15. PROPRIETARY RIGHTS INDEMNIFICATION.
15.1 Indemnification. AM shall pay all costs and damages finally
awarded in any suit against Scientific-Atlanta (or against any SA Customer, as
applicable) to the extent based upon a claim that the Products furnished under
this Contract infringe the intellectual property rights of a third party.
15.2 Procedures. In the event of any allegation of infringement of the
type described in Section 15.1 hereof or a claim or suit based thereon (the
"Allegation"), Scientific-Atlanta (or, as applicable, an SA Customer) shall
promptly notify AM of such Allegation in writing. If Scientific-Atlanta has the
right to assign the right to defend and/or settle any Allegation pursuant to
Scientific-Atlanta's contract with the applicable SA Customer,
Scientific-Atlanta shall offer AM the right to defend and/or settle the
applicable Allegation and AM shall promptly commence efforts to settle or to
defend against such Allegation. Scientific-Atlanta (or, as applicable, the SA
Customer) shall reasonably cooperate with AM, at the expense of AM, in such
settlement or defense; provided, however, if Scientific-Atlanta is required to
defend, AM shall pay all costs, including attorney's fees, incurred by
Scientific-Atlanta in the defense of such Allegation.
15.3 Injunction. In the event that the use of Products delivered under
this Contract is enjoined, AM shall, at its option, do one or more of the
following:
(i) procure the right to continue using the infringing
Product, at no cost to the Scientific-Atlanta (or, as applicable, SA Customer);
or
(ii) replace the item with a non-infringing Product (or modify
the item so it is non-infringing), provided the replacement or modified Product
is in compliance with the Specifications in all material respects.
If AM is unable to accomplish (i) or (ii) above within ninety (90) days
after issuance of such injunction, Scientific-Atlanta may, at its option,
require AM to refund the entire purchase price paid by Scientific-Atlanta (or,
as applicable, SA Customer) for the infringing items as well as other products
acquired from AM or Scientific-Atlanta that have been rendered unusable by
Scientific-Atlanta (or, as applicable, an SA Customer) for any related purpose
as a result of such injunction by virtue of their integration with units of
Products, including but not limited to other Products acquired under this
Contract.
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15.4 Modifications. Notwithstanding any other provision of this
Article, AM shall have no liability for any infringement arising from (a) use of
otherwise non-infringing Products in combination with other items, unless AM
sold, made or recommended them all as a combination, or the specific combination
is necessary for the use of the Products in the normal course of events or (b)
modification of items after delivery, unless (i) AM made or specifically
recommended the modification, (ii) the modification constitutes normal repair or
replacement in accordance with AM's repair procedures or the modification is the
result of the implementation of AM-provided options and enhancements for the
Products.
16. LIMITATION OF LIABILITY.
AM shall not be liable to Scientific-Atlanta, and Scientific-Atlanta
shall not be liable to AM, for any amounts representing their loss of profits,
loss of business, or their indirect, special, exemplary, consequential or
punitive damages, arising from the performance or nonperformance of this
Contract or any acts or omissions associated therewith or related to the use of
any items or services furnished hereunder, whether the basis of the liability is
breach of contract, tort (including negligence and strict liability), statutes
or any other legal theory.
17. EXCUSABLE DELAYS.
Neither AM nor Scientific-Atlanta shall be liable for any delay or
non-performance hereunder, resulting from: acts of God; fires; casualty; severe
weather conditions; strikes; war; riots; civil disorder; earthquakes; lockouts;
insurrections; energy shortages; any law, order, proclamation, regulation,
ordinance, demand or requirement of any governmental agency; freight embargoes;
custom delays at the port of shipment or destination; or any other condition or
occurrence whatsoever beyond the reasonable control of such party. If the
performance of this Contract is delayed, prevented, restricted or interfered
with by reason of any such event, (a) the party whose performance is delayed,
prevented, restricted or interfered with shall give prompt written notice to the
other party of the event and shall be excused from performance to the extent
delayed or prevented; provided, however, that the party whose performance is
prevented or delayed shall take reasonable steps to avoid or remove such causes
of nonperformance and shall continue performance whenever and to the extent such
causes are removed; and (b) if it appears that a time for delivery or
performance pursuant to this Contract will be extended for more than thirty (30)
days, the party receiving notice under clause (a) above shall have the right to
terminate, by written notice to the other party, any portion of this Contract or
of a Purchase Order covering the delayed performance and the obligations and
liabilities of the affected parties with respect to such portion of the Purchase
Order shall thereupon lapse and terminate, except to the extent such obligations
or rights are intended to survive pursuant to this Contract. Additionally, if it
appears that deliveries of Products under this Contract are reasonably likely to
be delayed or disrupted for a period of more than one-hundred twenty (120) days,
Scientific-Atlanta will have the right to terminate this Contract.
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18. TERM AND TERMINATION.
18.1 Term. The Term of this Contract commences on the date first
written above (the "Effective Date") and shall continue for three (3) years
following the Effective Date of the Contract.
18.2 Termination of Purchase Order. By written notice to AM,
Scientific-Atlanta may terminate a Purchase Order issued by it, in whole or in
part and without any liability to AM for items not yet delivered, effective upon
such written notice, in the event, other than because of an Excusable Delay
pursuant to Section 17, AM fails to make delivery of the Products set forth in
such Purchase Order within thirty (30) calendar days after the specified time
for delivery (or such longer period as Scientific-Atlanta may authorize in
writing).
18.3 Termination of Contract. This Contract may be terminated upon any
of the following events, in addition to the rights set forth above, upon written
notice:
a. By either Scientific-Atlanta or AM in the event that the
other party makes an assignment for the benefit of creditors (other than a
security interest filed in the ordinary course);
b. By either Scientific-Atlanta or AM in the event that the
other party becomes insolvent, or voluntary or involuntary proceedings are
instituted by or against such other party under any bankruptcy or insolvency
laws and such proceedings are not terminated within ninety (90) days, or a
receiver is appointed for such other party;
c. By Scientific-Atlanta in the event that AM fails to perform
any material provision of this Contract and does not cure such failure within a
period of sixty (60) days after receipt of written notice from
Scientific-Atlanta specifying such failure and stating its intention to
terminate this Contract if such failure is not cured;
d. By AM in the event that Scientific-Atlanta fails to perform
any material provision of this Contract, does not cure such failure within a
period of sixty (60) days after receipt of written notice from AM specifying
such failure and stating its intention to terminate this Contract if such
failure is not cured; or
e. By Scientific-Atlanta in the event that delivery of
Products by AM, which Products were for the benefit of an SA Customer, is
delayed by more than sixty (60) days, excluding delays resulting from a force
majeure event.
18.4 Effect of Termination. In the event of any termination of this
Contract all licenses or sublicenses granted by Scientific-Atlanta to SA
Customers prior to such termination and all licenses which Scientific Atlanta is
obligated to grant under any offers outstanding as of the date of termination,
shall remain in effect. In addition Scientific-Atlanta shall have the right to
continue to maintain and update all Software licensed to SA Customers.
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18.5 Cumulative Rights. The rights and remedies provided in this
Article are not exhaustive and, subject to the limitations set forth in this
Contract, are in addition to any other rights and remedies available under this
Contract or by operation of law.
18.6 Survival of Provisions. The obligations of both AM and
Scientific-Atlanta under this Contract, which by their nature would continue
beyond the termination, cancellation or expiration of this Contract shall
survive termination, cancellation or expiration of this Contract.
19. NOTICES.
19.1 Written Notification. Any notice(s) required or permitted to be
given or made by a part under this Contract shall be in writing to the other
party at the address of such party as set out at the head of this Contract, with
a copy for Scientific-Atlanta to the Office of the General Counsel, at One
Technology Parkway South, Norcross, Georgia 30092-2967. Whenever one party is
required or permitted to give written notice to the other pursuant to this
Contract, such notice(s) shall be deemed to be duly given on the earliest of (i)
actual receipt, irrespective of whether sent by post, telex, cable, facsimile
transmission (followed by mailing of a hard copy), overnight courier or other
method, or (ii) on the sixth (6th) day after mailing by registered or certified
airmail from the country in which the notice originated, return receipt
requested and postage prepaid.
19.2 Change of Address. A party may from time to time change its
address for notification purposes and or the parties to be notified by giving
the other party written notice of the new address and/or parties and the date
upon which the change will become effective.
20. COORDINATION OF MEDIA RELEASES.
All media releases or public announcements by AM or Scientific-Atlanta
which identify AM or Scientific-Atlanta in the context of this Contract shall be
coordinated with and approved in writing by AM and Scientific-Atlanta prior to
the release thereof; provided, however, that nothing in this Article shall be
construed to limit the right of either party to issue such disclosures that are
reasonably believed by that party to be required by law.
21. LICENSES.
21.1 Software License. AM hereby grants to Scientific-Atlanta an
irrevocable, worldwide, non-exclusive, royalty bearing, license including the
right to sublicense (the "License") to make, use, copy, modify (including making
translations), maintain, and distribute through its normal channels of
distribution all Software. Scientific-Atlanta may sublicense any Software under
the terms and conditions of a written agreement that substantially conforms to
its standard software license, a copy of which is attached as Exhibit D.
Scientific-Atlanta shall be provided by AM under this license with the current
version of all Software and shall be provided at no additional cost with all
upgrades, modifications, improvements and error corrections for such Software.
The license fees for Software Products set forth in Exhibit A shall be paid to
AM by Scientific-Atlanta pursuant to
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the terms of Section 6.3 and shall cover all Software used in such system;
provided, however, that Scientific-Atlanta shall not be obligated to pay any
license fee for Software installed on a system for sales and demonstration
purposes only.
21.2 Modifications / Translations of Software.
a. Scientific-Atlanta agrees to pay AM a fee of Seventy-Five
Thousand Dollars ($75,000) for AM's cost of modifying the OmniVu Software to
work with all transponders manufactured or sold by Scientific-Atlanta in the
past or the present. This fee shall be paid by Scientific-Atlanta as follows,
provided the specified activity has occurred:
Activity Percentage of Fee
Approval by Scientific-Atlanta of specification for 50%
modified OmniVu Software proposed by AM, which
specification shall be delivered by AM to Scientific-Atlanta
within thirty (30) days after the date of this Contract
Delivery to Scientific-Atlanta of the beta version of 25%
modified OmniVu Software
Acceptance by Scientific-Atlanta of final version of 25%
modified OmniVu Software
Scientific-Atlanta will either accept or reject the final version of modified
OmniVu Software within two weeks of its receipt of the same from AM. AM agrees
to credit Scientific-Atlanta with Thirty- Seven Thousand Five Hundred Dollars
($37,500) of the fee described above, which Scientific-Atlanta shall be
entitled to use on invoices from AM at the rate of ten percent (10%) of such sum
per month, with the entire credit being used by Scientific-Atlanta by no later
than twelve (12) months after the date of this Contract.
b. Scientific-Atlanta may request that AM provide a foreign
language translation of any of the Software provided by AM, subject to agreement
on a development schedule and the payment of a mutually agreed upon fee.
Notwithstanding the foregoing sentence, should (i) Scientific-Atlanta request it
or (ii) the parties be unable to agree upon a fee, AM shall license and provide
to Scientific-Atlanta for its internal use all source code and design
documentation for the Software necessary for Scientific-Atlanta translate the
Software provided by AM into a foreign language and to support the translation
so developed. AM shall also provide Scientific-Atlanta with any development
tools or test suites that are needed for a translation and which are not
available on commercially reasonable terms from third parties. Any translation
shall be subject to the license given in Section 21.1 of this Contract.
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21.3 Documentation License. AM hereby grants to Scientific-Atlanta an
irrevocable, worldwide, non-exclusive, paid-up license including the right to
sublicense to make, use, copy, modify (including making translations), and
distribute through its normal channels of distribution any user manuals or
design documentation (collectively "Documentation") provided for any Software
provided by AM. Scientific-Atlanta shall be provided by AM under this license
with the current version of all Documentation for all Software Products, and be
provided at no additional cost with all upgrades, improvements and error
corrections of the appropriate Documentation. All Documentation shall be
provided to Scientific-Atlanta in electronic form.
21.4 Use of OmniVu APIs. AM grants to Scientific-Atlanta and each SA
Customer a royalty-free, nonexclusive license, with the right to sublicense, to
use the OmniVu Application Program Interfaces ("APIs") for the development by or
for Scientific-Atlanta or its sublicensees of application software that will
interoperate with AM's Access software. To the extent that such application
software incorporate portions of the OmniVu APIs such use in such application
software shall be included within the license granted to Scientific-Atlanta in
Section 21.1 of this Contract.
21.5 Reserve Manufacturing License. In recognition of the agreements of
Scientific-Atlanta contained in this Contract, AM hereby grants
Scientific-Atlanta an irrevocable worldwide, non-exclusive, paid-up license
including the right to sublicense (the "Reserve License") to make, use, and sell
Products. Scientific-Atlanta agrees to use such license only in accordance with
the provisions of this Article. Scientific-Atlanta agrees that it shall not
exercise any rights under this Reserve License until the occurrence of a Release
Condition set forth in Section 21.7. Scientific-Atlanta shall pay AM a
reasonable per unit royalty for the Products it manufactures and sells under
this Reserve License. If the parties cannot agree on a reasonable royalty within
sixty (60) days after the Release Condition occurs, the disagreement shall be
resolved in accordance with Section 22.10 hereof.
21.6 Escrow of Licensed Material. AM agrees to place in escrow for the
benefit of Scientific-Atlanta all drawings, parts lists, Software (including
object code, source code, and source code listings, design documentation, and
proprietary test tools) manufacturing specifications, designs, schematics and
vendor lists regarding the Products, and other information, to enable
Scientific-Atlanta to make, use, modify, service, maintain and sell such
Products, and to update such information as required during the Term of this
Contract. The escrow agreement shall be in form and substance reasonably
satisfactory to AM and Scientific-Atlanta, which agreement shall provide for the
release of information to Scientific-Atlanta upon the occurrence of a "Release
Condition" as defined below. The fees charged by the escrow agent for the
initiation and maintenance of the escrow shall be paid one-half (1/2) by AM and
one-half (1/2) by Scientific-Atlanta.
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21.7 Release Condition. A Release Condition shall be deemed to have
occurred on the earliest date any of the following occurs:
(a) notification by Scientific-Atlanta to AM of its intention to
terminate this Contract pursuant to Section 18.3.a. or b.;
(b) termination of this Contract by Scientific-Atlanta pursuant to
Section 18.3.c.;
(c) only as to the particular Product ordered, as of the time
Scientific-Atlanta terminates, pursuant to Section 18.2, the
third Purchase Order relating to such a particular Product;
(d) the date on which AM ceases to operate as a going concern;
(e) the date on which AM decides to cease producing any of the
Products;
(f) on or after the date specified in Section 22.2, which date is
the date by which AM is obligated to have obtained ISO 9001
certification;
(g) only as to the late-delivered Product or Products, termination
of this Contract by Scientific-Atlanta pursuant to Section
18.3.e.: or
(h) upon a determination by AM not to extend the term of this
Contract beyond its initial three (3) year term;
provided that Scientific-Atlanta has given, in connection with any of the
foregoing events described in subparagraphs (a) through (h), notice to AM of its
intention to treat such a date as the occurrence of an Release Condition for the
purposes of this Article 21. If AM in good faith disputes whether a Release
Condition claimed by Scientific-Atlanta has occurred, AM may refer such Dispute
to arbitration pursuant to Section 22.10, and Scientific-Atlanta shall not be
entitled to obtain the Licensed Material from escrow pursuant to Section 21.6
until the arbitration is concluded.
21.8 Integration License. AM acknowledges that the Products being
purchased under this Contract may be sold in conjunction with other items and
will need to be integrated with such items and other Products. In order to
ensure that all items and Products are interoperable, AM hereby grants
Scientific-Atlanta a worldwide, nonexclusive, paid-up license to use AM's
intellectual property as may be necessary to enable the integration of hardware
and software being provided by or on behalf of Scientific-Atlanta to any SA
Customer with such Products. AM also agrees that it will provide to
Scientific-Atlanta information and assistance as may be necessary, including
interface specifications, to enable Scientific-Atlanta to cause the Products to
be interoperable with the items and Products being provided by or on behalf of
Scientific-Atlanta to any SA Customer. AM also agrees to provide backward
compatibility at its expense for Scientific-Atlanta products currently installed
or committed to be installed. Nothing in this Contract shall be construed as
granting
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Scientific-Atlanta a license to enable Scientific-Atlanta to develop and sell
monitors which will operate with MCU Products and Transponder Products sold by
AM to Scientific-Atlanta under this Contract.
21.9 Other Licenses; Retention of Ownership. AM grants a license under
any patents, copyrights, trademarks and trade secrets or other intellectual
property it may have relating to the Products (including Software) supplied by
AM solely to the extent necessary for Scientific-Atlanta to enjoy its rights
under the licenses granted it by AM. No other rights or licenses are granted to
Scientific-Atlanta other than those set forth in this Contract. Nothing in this
Agreement shall be construed as (i) transferring to Scientific-Atlanta ownership
of AM's patents, copyrights, trademarks, trade secrets or other intellectual
property related to the Products, or (ii) prohibiting AM from developing
products which may operate with Scientific-Atlanta-manufactured products and
software, provided, however, Scientific-Atlanta retains the right to enforce all
of its intellectual property rights against AM.
21.10 Indemnification Applicable. The indemnification provisions of
this Contract shall apply to any Products manufactured under any of these
licenses.
22. MISCELLANEOUS.
22.1 Exportation of Products. AM acknowledges that Scientific-Atlanta
(itself or through an SA Customer) intends to offer the Products for sale to SA
Customers worldwide. AM represents and warrants that all Products have been (or
will be within sixty (60) days after execution of this Contract) tested for
compliance with EU requirements for such Products, and such Products shall bear
the appropriate CE Marking to evidence such compliance with EU requirements. AM
represents and warrants that Exhibit C lists the export licenses required from
the United States Department of Commerce and Department of Defense and other
regulatory authorities for each country. Scientific-Atlanta agrees that it will
not export any Products without first obtaining any and all necessary approvals
from the United States Department of Commerce and Department of Defense or other
regulatory authorities. AM agrees that it will cooperate with Scientific-Atlanta
in obtaining any such approvals and will advise Scientific-Atlanta from time to
time of any countries with respect to which AM is advised that different or
additional export approvals are required.
22.2 Quality Audit. Within thirty (30) days after the execution of this
Contract, AM shall permit Scientific-Atlanta to commence a Quality Audit of AM's
operations. Within ninety (90) days after the conclusion of the Quality Audit,
AM shall prepare a plan to correct deficiencies, if any, identified by the
Quality Audit. Upon concurrence in the plan by Scientific-Atlanta, AM shall
commence implementation of the plan. AM warrants that it will be certified for
ISO 9001 within twelve (12) months after the date on which Scientific-Atlanta
completes the above-described Quality Audit.
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22.3 Subsequent Orders for Spare Parts. In the event AM elects to
discontinue manufacturing any of the Products and any type of Products included
in the Products, AM shall provide to Scientific-Atlanta one-hundred eighty (180)
days notice before such event occurs and will thereafter, for a period of seven
(7) years from the date of such notice, make available for purchase by
Scientific-Atlanta (or by any SA Customer) any and all spare parts for Products
necessary for the maintenance of the Products at prices mutually agreed upon
between AM and Scientific-Atlanta at the time of notification of discontinuance.
22.4 Promotion of Industry Protocols. Scientific-Atlanta and AM agree
to work together, with each party's expending equivalent time and resources, (i)
to promote standard protocols for communications between elements and element
managers, and (ii) to promote an industry standard management information base
based upon an industry protocol for communication between element managers and a
higher level network management system.
22.5 Binding Effect. This Contract shall be binding on and inure to the
benefit of the parties and their respective successors and assigns, but no party
shall have the power to assign this Contract or any rights or obligations
hereunder or under any Purchase Order without the prior written consent of the
other party provided that SA Customers shall be entitled to the rights contained
herein with respect to warranties and indemnification.
22.6 Severability. If any provision of this Contract is declared or
found to be illegal, unenforceable or void, the parties shall negotiate in good
faith to agree upon a substitute provision that is legal and enforceable and is
as nearly as possible consistent with the intentions underlying the original
provision. If the remainder of this Contract is not materially affected by such
declaration or finding and is capable of substantial performance, then the
remainder shall be enforced to the extent permitted by law.
22.7 Waiver. No delay or omission by either party to exercise any right
or power shall impair any such right or power or be construed to be a waiver
thereof. A waiver by any party of any of the covenants, conditions or contracts
to be performed by the other or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant, condition or
contract herein contained. No change, waiver or discharge hereof shall be valid
unless in writing and signed by an authorized representative of the party
against which such change, waiver, or discharge is sought to be enforced.
22.8 Relationships of the Parties. It is expressly understood that AM
and Scientific-Atlanta intend by this Contract to establish the relationship of
independent contractors, and do not intend to undertake the relationship of
principal and agent or to create a joint venture or partnership between them or
their respective successors in interests. Neither AM nor Scientific-Atlanta
shall have any authority to create or assume, in the name or on behalf of the
other party, any obligation, expressed or implied, nor to act or purport to act
as the agent or the legally empowered representative of the other party hereto
for any purpose whatsoever.
- 24 -
<PAGE>
22.9 Applicable Law. This Contract shall be interpreted, construed and
governed by the laws of the state of Georgia, exclusive of choice of laws.
22.10 Arbitration. The parties will attempt to resolve in good faith
any Dispute which arises in connection with this Contract by negotiation. As
used herein, "Dispute" shall include any claim or controversy arising out of
this Contract or the breach, termination or validity thereof involving either of
the parties. If the parties cannot resolve any Dispute through negotiation, the
parties agree and consent to resolve the Dispute solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") at the offices of the AAA in Washington, D.C. The
arbitrators shall be empowered to resolve all Disputes, whether in contract or
in tort, and to award any remedies authorized by this Contract and any
applicable statute or common law. All arbitration proceedings, including all
evidence and statements, shall be confidential and shall not be used or
disclosed for any other purpose. Each party shall pay its own attorneys' fees
and expenses; all other expenses of arbitration shall be equally divided between
the parties, provided, however, the arbitrators shall have the authority to
assess any of the foregoing costs against any party acting in bad faith. The
award of the arbitrators shall be final and binding and is the sole and
exclusive remedy of the parties regarding any Disputes hereunder except that
nothing contained in this Contract shall prohibit either party from seeking
injunctive relief or equitable remedies in a court of competent jurisdiction or
pursuing other equitable remedies. A judgment on the award may be entered in any
court having jurisdiction thereof and each party consents to such jurisdiction.
The award shall earn interest from the date of the award until satisfied in full
at the United States prime interest rate as reported in The Wall Street Journal
on the business day immediately preceding the date of the award. Should either
party bring any legal action against the other with respect to any claim
required to be arbitrated under this Contract by any method other than
arbitration, the other party shall be entitled to recover from such party all
damages, costs, expenses and attorneys' fees incurred as a result of such
action.
22.11 Records. AM shall maintain all books and records related to its
obligations hereunder for at least five (5) years after the termination of this
Contract. Scientific-Atlanta shall have the right to inspect and audit such
records at any time upon reasonable notice to AM.
22.12 Entire Contract. This Contract, including all Exhibits hereto,
represents the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof, supersedes all prior negotiations and
agreements and can be modified, amended, supplemented or changed only by an
agreement in writing which makes specific reference to this Contract and which
is signed by both Scientific-Atlanta and AM. The parties will be executing one
or more joint development agreements which will be independent of this Contract.
SA: 15153-1
- 25 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed as of the date first hereinabove written.
SCIENTIFIC-ATLANTA, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
AM COMMUNICATIONS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
- 26 -
<PAGE>
EXHIBIT A
Products; Prices; Initial Units; Extended Warranty Prices
HARDWARE PRODUCTS
<TABLE>
<CAPTION>
Cost of 1st Yr. of Cost of 2nd Yr. of
Item Product Price Extended Warranty Extended Warranty Initial Units
- ---- ------- ----- ------------------ ------------------ -------------
<S> <C> <C> <C> <C> <C>
1. MCU-1 $3,000.00 2% of Price 2% of Price
2. MCU-2 $4,000.00 2% of Price 2% of Price
3. 9015 EOL $950.00 2% of Price 2% of Price
4. 9016 EOL $1,400.00 2% of Price 2% of Price
5. 9013 EOL $150.00 2% of Price 2% of Price
6. 9020 $2,500.00 2% of Price 2% of Price
7. 9021 $3,500.00 2% of Price 2% of Price
8. 8101 Single $5,100.00 2% of Price 2% of Price
Protocol
9. 8101 Dual $5,900.00 2% of Price 2% of Price
Protocol
10. 9031 $1,200.00 2% of Price 2% of Price
11. 9040 $1,200.00 2% of Price 2% of Price
12. 9070 $75.00 2% of Price 2% of Price
13. TMC-8010 $1,125.00 2% of Price 2% of Price
14. TMC-8015 $1,425.00 2% of Price 2% of Price
15. TMC-8015- $1,725.00 2% of Price 2% of Price
LS
16. TMC-8011 $1,225.00 2% of Price 2% of Price
17. 8040 $300.00 2% of Price 2% of Price
18. 8041 $340.00 2% of Price 2% of Price
19. LS-1 $275.00 2% of Price 2% of Price
20. RTS-1 $160.00 2% of Price 2% of Price
21. 8061 $360.00 2% of Price 2% of Price
22. 8063 $360.00 2% of Price 2% of Price
23. Fiber Nodes Contact AM 2% of Price 2% of Price
</TABLE>
<PAGE>
AGREED PRICING FOR NEW PRODUCTS UNDER DEVELOPMENT
<TABLE>
<CAPTION>
Cost of 1st Yr. of Cost of 2nd Yr. of
Item Product Price Extended Warranty Extended Warranty Initial Units
- ---- ------- ----- ------------------ ------------------ -------------
<S> <C> <C> <C> <C> <C>
1. Full Featured $163.08 2% of Price 2% of Price
Transponder
2. Low Cost $111.52 2% of Price 2% of Price
Transponder
</TABLE>
SOFTWARE PRODUCTS
<TABLE>
<CAPTION>
Cost of 1st Yr. of Cost of 2nd Yr. of
Item Product Price Extended Warranty Extended Warranty Initial Units
- ---- ------- ----- ------------------ ------------------ -------------
<S> <C> <C> <C> <C> <C>
1. Life-Line V2.1 $4,000.00 Not Applicable Not Applicable
2. OmniVU Single User 2% of Price 2% of Price
0-50 $2,765.00
51-100 $4,250.00
101-250 $6,737.00
251-500 $10,000.00
501-1000 $14,000.00
1001-3000 $28,125.00
3001-10000 $70,000.00
3. OmniVU Multi User 2% of Price 2% of Price
0-50 $8,500.00
51-100 $10,625.00
101-250 $14,000.00
251-500 $18,000.00
501-1000 $31,875.00
1001-3000 $80,000.00
3001-10000 $100,000.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cost of 1st Yr. of Cost of 2nd Yr. of
Item Product Price Extended Warranty Extended Warranty Initial Units
- ---- ------- ----- ------------------ ------------------ -------------
<S> <C> <C> <C> <C> <C>
4. Additional OmniVU $4,000.00 2% of Price 2% of Price
Seats
5. Additional AM $4,000.00 2% of Price 2% of Price
Access Seats
6. AM Net $5,000.00 2% of Price 2% of Price
7. FACTS MGR $4,000.00 2% of Price 2% of Price
8. FACTS MGR & $5,000.00 2% of Price 2% of Price
Source
9. OSU-F $1,000.00 2% of Price 2% of Price
10. OSU-S $500.00 2% 2%
11. On-Site Support $1,000.00 N/A N/A
per day +
expenses
</TABLE>
<PAGE>
EXHIBIT B
Excluded Products
Optical Node - G.I SX series 1
Optical Node - G.I BTA series
RF Amplifier - G.I BTA series
RF Amplifier - G.I BTD series
LaserLink II Light Shelf - Lucent
Amplifier Monitor - Lucent
- --------
1This model sold by GI. May be sold by AM with permission from GI only.
Unit is manufactured by AM and uses LANguard protocol.
<PAGE>
EXHIBIT C
Export Clearances
Countries For Which Clearances are Required:
1. Japan
2. China
3. Taiwan
4. Thailand
5. Korea
6. Italy
7. Germany
8. Australia
9. England
10. Belgium
11. Canada
12. South America
13. India
Countries For Which Clearances Have Been Obtained:
1. Japan
2. China
3. Taiwan
4. Thailand
5. Korea
6. Italy
7. Germany
8. Australia
9. England
10. Belgium
11. Canada
12. South America
13. India
Countries For Which Clearances Have Been Denied:
1. None
<PAGE>
EXHIBIT D
FORM OF SCIENTIFIC-ATLANTA
END USER SOFTWARE LICENSE AGREEMENT
FOR USE WITH DESIGNATED PRODUCTS
Customer:
Address:
Scientific-Atlanta, Inc. ("S-A") by its acceptance agrees to grant to Customer,
and Customer accepts on the following terms and conditions, a license to the
identified Licensed Software for use only with the Designated Products set out
below.
- ------------------------------------------------------------------------------
Designated Products | Licensed Software
- ------------------------------------------------------------------------------
|
|
- ------------------------------------------------------------------------------
|
|
|
- ------------------------------------------------------------------------------
1. LICENSE GRANT
1.1 "Licensed Software" means a computer program, including any
modifications, updates or additions which may be supplied by S-A to
Customer, in object code or executable form in any medium, such as
magnetic tape, disks, or optical media; and related materials such as
flow charts, logic diagrams, manuals, and other documentation which are
provided to Customer by S-A with or for use in Designated Products.
Licensed Software may reside within Designated Products at the time of
delivery to Customer in which case identification of such Products
shall also constitute identification of the corresponding software; or
it may be provided separately for installation on Designated Products.
1.2 Subject to the payment of fees elsewhere specified and these terms and
conditions, S-A grants to Customer, subject to the limitations herein,
a personal, nonexclusive, non-transferable license to use Licensed
Software in and for the Designated Products and not otherwise. This
license may be assigned to any bona fide successor in interest to
Designated Products who first agrees in writing to be bound by the
terms of this Agreement. Should the Licensed Software include a unique
implementation of a security algorithm, Customer shall have the
exclusive right to use such unique Customer security algorithm
implementation in and for use with the Designated Products and not
otherwise.
1.3 Customer may make one (1) copy of Licensed Software (but not including
read-only memories or similar devices) for archival purposes only and
shall reproduce and attach all copyright and proprietary notices.
Customer shall not otherwise copy or allow to be copied Licensed
Software except to install Licensed Software on the Designated
Products. Customer agrees that S-A shall have the right to have an
independent accounting firm conduct an audit at Customer's premises
during normal business hours to verify the number of copies of Licensed
Software in use by Customer.
1.4 Customer shall not make any modifications to Licensed Software or
remove any proprietary notices of S-A or third parties found in or on
the Licensed Software. Customer agrees not to reverse engineer,
decompile, or reverse assemble Licensed Software except to the extent
that such prohibition may be unenforceable under applicable law.
1.5 Licensed Software is and shall remain the exclusive property of S-A. No
license other than that specifically stated herein is granted to
Customer, and Customer shall have no right to sublicense Licensed
Software nor any right under any patent, trademark, copyright, trade
secret or other intellectual property of S-A other than that granted by
this Agreement.
<PAGE>
2. PROTECTION AND SECURITY
2.1 Customer agrees not to disclose, release, or make available in any form
any portion of Licensed Software to any person other than Customer's
own employees or contractors. Customer represents that its employees
and contractors having access to Licensed Software are or shall be
party to written agreements acknowledging a duty to protect Customer's
confidential materials, including the Licensed Software.
2.2 Customer shall keep Licensed Software (including archival copies, if
any), in a secure environment and shall take all steps reasonably
necessary to protect Licensed Software or any part thereof from
unauthorized disclosure or release. Customer may not export or reexport
the Licensed Software in any form except in compliance with all
applicable laws and regulations.
2.3 Customer expressly agrees that a breach of this Agreement will cause
irreparable harm to S-A and that S-A shall have the right to obtain
injunctive relief against any unauthorized use, disclosure, copying or
transfer of any part of Licensed Software. Licensed Software may
contain software from third parties who are intended to be third party
beneficiaries of this Agreement.
3. WARRANTY AND LIABILITY
3.1 S-A warrants that Licensed Software, as provided, shall conform to the
published specifications of S-A. During the first one (1) year after
the date of delivery of Licensed Software, S-A shall use reasonable
commercial efforts to correct errors detected in Licensed Software
after receiving notification of such errors from Customer. This
paragraph sets forth the entire obligation of S-A with respect to
Licensed Software and in no event shall S-A be liable to Customer for
loss of profit, indirect, special, or consequential damages arising out
of its provision of the Licensed Software to Customer under tort,
contract, or any other legal theory. In no event shall S-A be liable to
Customer for any damages, however based, in excess of ten thousand
United States dollars (US$10,000.00).
3.2 S-A MAKES NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH RESPECT
TO ANY PRODUCTS OR SERVICES PROVIDED UNDER THIS AGREEMENT INCLUDING BUT
NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. S-A DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED
IN Licensed Software WILL MEET THE CUSTOMER'S REQUIREMENTS, OR THAT THE
OPERATION OF Licensed Software WILL BE UNINTERRUPTED OR ERROR-FREE. S-A
MAKES NO WARRANTY OF NON-INFRINGEMENT, EXPRESS OR IMPLIED. ANY THIRD
PARTY SOFTWARE SUPPLIED WITH OR INCORPORATED IN Licensed Software IS
PROVIDED "AS-IS" WITHOUT WARRANTIES OF ANY KIND. IF ANY ADDITIONAL
WARRANTIES ARE SUPPLIED BY A THIRD PARTY, SUCH WARRANTIES WILL BE
OFFERED DIRECTLY BY SUCH THIRD PARTY TO Customer.
<PAGE>
3.3 Customer acknowledges its responsibility to use all reasonable methods
to prove out and thoroughly test the operation of and output from
Licensed Software prior to its use in Customer's operations.
3.4 Unless otherwise provided in a separate writing, and subject only to
the warranty of this Section 9, 23.4, S-A is under no obligation to
provide Customer with any modifications, updates, additions or
revisions to Licensed Software, nor to maintain Licensed Software in
any manner.
3.5 In the event that any modifications are made to Licensed Software, any
and all warranty and other obligations of S-A shall immediately cease
with respect to such software.
4. INDEMNIFICATION
4.1 S-A shall pay all costs and damages finally awarded against Customer or
its employees to the extent based upon a claim that Licensed Software,
as supplied, infringes the intellectual property right of a third party
(except infringement occurring as a direct result of incorporating
features, operations or algorithms which are specifically required by
Customer), provided that S-A is notified promptly in writing of any
allegation of such infringement and given full cooperation,
information, and authority to settle such claim and to defend or
control the defense of any suit based upon such claim.
4.2 In the event that Licensed Software is likely to or does become the
subject of a claim of infringement, or is held to infringe, S-A shall,
at its option and expense, procure for Customer the right to continue
using Licensed Software; or, modify Licensed Software to make it
non-infringing but functionally equivalent; or, substitute other
software of similar capabilities; or, remove Licensed Software and
refund the license fee less depreciation. This section 23.4 sets forth
the entire liability of S-A to Customer with respect to infringement.
5. TERM AND TERMINATION
This Agreement shall continue indefinitely unless terminated by one of
the parties. This Agreement may be terminated by Customer upon thirty
(30) days' notice to S-A and by S-A upon breach of any term of this
Agreement, which breach
<PAGE>
is not cured within thirty (30) days after notice by S-A, or should
Customer be adjudged a bankrupt or become a party to a similar
proceeding for the benefit of its creditors. Immediately after such
termination, Customer will deliver to S-A Licensed Software and any and
all copies and modifications thereof (except copies which reside within
the Designated Products and which shall be erased) and will, if
requested, provide S-A with its written certification that it has
retained no copies.
6. TAXES
Except for taxes based on S-A's income, S-A shall not be responsible
for any federal, state or local taxes based upon Customer's purchase,
possession or use of Licensed Software or upon any charges payable or
services performed hereunder.
7. APPLICABLE LAW, INTEGRATION AND MODIFICATION
7.1 This Agreement shall be construed and enforced in accordance with the
laws of the State of Georgia, United States of America, not including
any conflicts of laws provisions thereof. The UN Convention on
Contracts for the Sale of Goods shall not apply.
7.2 This Agreement comprises the full and final understanding between S-A
and Customer, and merges and supersedes any and all other agreements,
understandings or representations, written or oral, with respect to the
subject matter hereof. It may not be modified except by a writing
signed by authorized representatives of both S-A and Customer, and
referring specifically to this Agreement.
7.3 Any attempt by Customer to assign this Agreement shall be void unless
the assignment is incidental to the sale of the Designated Products.
7.4 Waiver by any party of the breach of a provision of this Agreement by
the other party shall not be construed as a continuing waiver of such
provision or waiver of any other breach of any other provision of this
Agreement.
AGREED: ACCEPTED AND APPROVED:
CUSTOMER
- ----------------------------------- -----------------------------------
By By
- ----------------------------------- -----------------------------------
Printed Name Printed Name
- ----------------------------------- -----------------------------------
Title Title
- ----------------------------------- -----------------------------------
Date Date
<PAGE>
EXHIBIT E
Description of Sales Train ng
Training Support
AM will provide a complete, defined and agreed-to training curriculum, on the
installation, management and maintenance of AM's product portfolio, to S-A's
designated lead technical representatives. This training curriculum will be
comprised of a combination of classroom and lab sessions.
The purpose of the classroom sessions will be to review AM's products and their
theory of operation. The lab sessions will be used to train all appropriate S-A
technical specialists in the proper installation, configuration, management,
debugging, and maintenance techniques. All of this will be customized and
delivered within the context of the specific S-A network design and
implementation.
Each Train-the-Trainer candidate will be provided a complete documentation kit.
This data kit will serve as an information reference source in addition to the
foundation for continuing the training efforts within S-A. Each S-A
Train-the-Trainer candidate, at the completion of this educational session, will
be thoroughly prepared to support the S-A training requirements. Refresher
courses will be made available to S-A representatives, in an effort to assist in
growing the training population and provide new product related information.
A detailed training curriculum will be developed, specific to the requirements
of S-A. During the scheduling of the training session(s), S-A will provide to AM
a primary contract that will assist in the orchestration of the training
program.
The Train-the-Trainer program, as outlined herein, can be conducted at AM's
corporate facility in Quakertown, Pennsylvania, or at a designated S-A
facility/location.
AM will conduct quarterly product training sessions, at a designated S-A
facility.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered
into as of June 17, 1996 by and between AM COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and SCIENTIFIC-ATLANTA, INC., a Georgia corporation
("Investor").
RECITAL
WHEREAS, this Agreement is entered into pursuant to the terms of
that certain Warrant to Purchase Common Stock of even date herewith between the
Company and the Investor (the "Warrant," as herein defined).
The parties hereto hereby agree as follows:
1. Definitions. Unless the context otherwise requires, the terms
defined in this Section 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. Any capitalized term not defined herein shall
have the meaning ascribed to it in the Warrant.
"Agreement" shall mean this Agreement.
"Board" shall mean the Board of Directors of the Company.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $0.10 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.8 of the Warrant)
received by or distributed to the holders of Common Stock of the Company in the
circumstances contemplated by Section 4.8 of the Warrant.
1
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Holder" of any Security shall mean the record or beneficial owner
of such Security. Until the exercise of a Warrant and the issuance of Warrant
Stock thereupon, a Holder of a Warrant shall be treated as the Holder of the
Restricted Stock underlying the Warrant.
"Holders of a Majority of the Restricted Stock" shall mean the
Person or Persons who are the Holders of more than 50% of the Restricted Stock.
"Holder of Registrable Securities" shall mean the Holder of
Registrable Securities.
"Investor" shall have the meaning assigned to it in the
introductory paragraph of this Agreement.
"Person" shall include any natural person, corporation, trust,
association, company, partnership, joint venture and other entity and any
government, governmental agency, instrumentality or political subdivision.
"Register, "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement or document.
"Registrable Securities" means (i) Warrants, (ii) shares of the
Warrant Stock, and (iii) any Common Stock of the Company issued in respect of
the Common Stock referred to in clause (ii) above, including upon any stock
split, stock dividend, recapitalization, merger or consolidation or
reorganization, or similar event, but excluding, in all cases, however, any
securities as to which the registration rights in question have terminated
pursuant to Section 2.4 hereof.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with Section 2.1, including, without
limitation, all registration, filing and National Association of Securities
Dealers, Inc. fees, all listing fees, all fees and expenses of complying with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), all word processing, duplicating
and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters required by or
incident to such performance and compliance, any fees and disbursements of
underwriters (including, without limitation, fees and expenses of counsel to the
underwriters) customarily paid by issuers or sellers of securities and the
reasonable fees and expenses of one counsel to the selling Holders (selected by
2
<PAGE>
Holders representing more than 50% of the Registrable Securities covered by such
registration).
"Restricted Stock" shall mean (a) the Warrant Stock, whether owned
by the Investor or not, and (b) any securities issued or issuable with respect
to such Common Stock by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger or consolidation or
reorganization; provided, however, that shares of Common Stock shall only be
treated as Restricted Stock if and so long as they have not been (i) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (ii) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect to such Common Stock are removed upon the consummation of such sale
and the seller and purchaser of such Common Stock receive an opinion of counsel
for the Company, which shall be in form and content reasonably satisfactory to
the seller and buyer and their respective counsel, to the effect that such
Common Stock in the hands of the purchaser is freely transferable without
restriction or registration under the Securities Act in any public or private
transaction.
"Securities" shall mean the Warrants and the Warrant Stock.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities, and,
except as included in Registration Expenses, all fees and disbursements of
counsel for any Holder.
"Warrant" shall mean that certain Warrant of even date herewith
issued to Investor by the Company giving Investor the right to purchase
1,500,000 shares of Common Stock, and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical to terms and conditions and date, except another
number of shares of Common Stock for which they may be exercised.
"Warrant Stock" shall mean the shares of Common Stock purchased by
the holders of the Warrant upon the exercise thereof.
2. Registration Rights.
2.1 Registration.
(a) Incidental Registration:
(i) Right to Include Registrable
Securities. If at any time or from time to time after the second
anniversary of the Vesting Date (as defined in the Warrant), the
Company shall determine to register its Common Stock for its own
account, other than a registration relating solely to employee
3
<PAGE>
benefit plans or a registration relating solely to a transaction
covered by Rule 145 of the Securities Act, or a registration on
any other registration form which does not permit secondary sales
or does not include substantially the same information as would be
required to be included in a registration statement covering the
sale of Registrable Securities, the Company will:
(A) promptly give to each
Holder of Registrable Securities written notice
thereof; and
(B) include in such
registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting
involved therein, if so requested pursuant to Section
2.1(a)(ii) below, all the Registrable Securities
specified in a written request or requests, made within
twenty (20) days after receipt of such written notice
from the Company, by any Holder(s) of Registrable
Securities, except as set forth in Section 2.1(c)
below.
(ii) Underwriting. If the registration
of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise
the Holders of Registrable Securities as a part of the written
notice given pursuant to Section 2.1(a)(i)(A). If requested by
any Holder of Registrable Securities, the Company will arrange
for such underwriters to include all the Registrable Securities
to be offered and sold by such Holder among the securities of the
Company to be distributed by such underwriters. Such Holders of
Registrable Securities shall, upon the request of the Company,
appoint a representative of such Holders. The Holders of
Registrable Securities to be distributed by such underwriters or
their representative shall be parties to the underwriting
agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such Holders of Registrable
Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such
Holders of Registrable Securities. Any such Holder of Registrable
Securities or its representative shall not be required to make
any representations or warranties to or agreements with the
Company or the underwriters other than representations,
warranties or agreements regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method of
distribution or any other required by law.
4
<PAGE>
(b) Demand Registrations.
(i) If the Company shall receive at any
time or time to time after the second anniversary of Vesting Date
(as defined in the Warrant), a written request from the Holders
of a Majority of Restricted Stock that the Company file a
registration statement under the Act covering the registration of
at least a majority of the Registrable Securities ("Initiating
Holders'), then the Company shall, within ten (10) days of the
receipt thereof, give written notice of such request to all other
Holders of Registerable Securities. The Company shall effect as
soon as practicable, and in any event shall use its best efforts
to effect within 60 days of the receipt of such request of the
Initiating Holders, the registration under the Securities Act of
all Registrable Securities which the Holders of Registerable
Securities requested to be registered. In the event Holders other
than the Initiating Holders ("Joining Holders") intend to
participate in the registration under this subsection, they shall
so advise the Company within 20 days of receipt of said notice of
the Company and shall include in their said notice the number of
Registrable Securities they desire to register.
The Company shall not be required to
undertake more than two (2) such demand registrations in the
aggregate and no more than one (1) such demand registration
during any consecutive fifteen (15) month period.
(ii) If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a
part of their request made pursuant to this Section 2.1(b)(i) and
the Company shall include such information in the written notice
referred to in Section 2.1(b)(i). The underwriter will be
selected by Holders of a Majority of Restricted Stock and shall
be reasonably acceptable to the Company. In such event, the right
of any Joining Holder to include his Registrable Securities in
such registration shall be conditioned upon such Joining Holder's
participation in such underwriting and the inclusion of such
Joining Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Joining Holder) to the extent
provided herein.
(iii) Notwithstanding the foregoing, if
the Company shall furnish to Holders within ten days of receipt
of a request as set forth in Section 2.1(b)(i) requesting a
registration statement pursuant to this Section 2.1(b), a
certificate signed by the chief executive officer of the Company
stating that a letter of intent with an underwriter relating to
the public sale of the Company's shares of Common Stock has been
signed, then, subject to Section 2.1(a), the Company shall have
the right to defer taking action with respect to such request for
a period of not more than 6 months after receipt of the request
of the Initiating Holders.
5
<PAGE>
(c) Priority. If the managing underwriter of any
underwritten offering covering an Incidental Registration shall inform
the Company by letter of its belief that the number of Registrable
Securities requested to be included in such registration would
materially and adversely affect such offering, then the Company shall be
required to include in the offering only that number of such securities
as the managing underwriters believe will not jeopardize the success of
the offering. The Company shall advise all Holders of Registrable
Securities proposed to be included in such registration of any such
restrictions, and the number of shares of securities that may be
included in the registration and underwriting shall be allocated first
to all securities proposed by the Company to be sold for its own
account, and second among all such Holders of Registrable Securities and
the holders of all other securities of the Company requested to be
included in such registration pro rata among such Holders and other
holders, in proportion to the respective number of shares of securities
held by such Holders and other holders at the time of filing the
registration statement.
2.2 Expenses of Registration. All Registration Expenses
incurred in connection with any registration pursuant to Section 2.1 shall be
borne by the Company. Each Holder of Registrable Securities shall bear all
Selling Expenses with respect to any shares sold by such Holder pursuant to any
registration pursuant to Section 2.1.
2.3 Registration Procedures. In the case of each
registration effected by the Company pursuant to this Agreement, the Company
will keep each Holder of Registrable Securities advised in writing as to the
initiation of such registration and as to the completion thereof. At its expense
the Company will:
(a) Keep such registration effective for a
period of one hundred twenty (120) days or until the Holder(s) of
Registrable Securities have completed the distribution described in the
registration statement relating thereto, whichever first occurs;
(b) Prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement;
(c) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders of Registrable Securities, provided that the
Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such jurisdiction;
(d) Use its best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other
6
<PAGE>
federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company and counsel to the
seller or sellers thereof to consummate the disposition of such
Registrable Securities in accordance with their intended method of
disposition;
(e) Furnish to each seller of Registrable
Securities covered by such registration statement such number of
conformed copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits), and such
number of prospectuses and other documents incident thereto as a Holder
of Registrable Securities from time to time may reasonably request;
(f) Prepare and file promptly with the
Commission, and promptly notify such Holders of the filing of, such
amendments or supplements to such registration statement or prospectus
as may be necessary to correct any statements or omissions if, at the
time when a prospectus relating to such securities is required to be
delivered under the Securities Act, any event has occurred as the result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and
(g) At the request of any Holder of Registrable
Securities covered by such registration statement which involves an
underwritten public offering, furnish to such Holder at the closing
provided for in the underwriting agreement, (i) an opinion dated such
date of the counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to the Holder or Holders
making such request, covering such matters as are customarily the
subject of opinions of issuer's counsel provided to underwriters in
underwritten public offerings, and (ii) letters dated each of the
effective date of the registration statement and such closing date, from
the Company's independent certified public accountants dealing with such
matters as the underwriters may request.
2.4 Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the Holders of
Registrable Securities registered under such registration statement, their
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and give each of them such access to
its books and records, such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such Holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.5 Termination of Registration Rights. The registration
rights granted pursuant to this Agreement shall terminate as to each Holder of
Registrable Securities at such time as all Registrable Securities held by such
holder can be sold
7
<PAGE>
(without compliance with the registration requirements of the Securities Act)
within a given consecutive ninety (90) day period pursuant to Rule 144 issued
under the Securities Act so long as Rule 144 remains available to Holder during
such ninety (90) day period, in any case supported by a written opinion of legal
counsel for the Company which shall be reasonably satisfactory in form and
substance to legal counsel for such purchaser. Notwithstanding anything herein
to the contrary, all registration rights granted hereunder shall terminate as to
any Registrable Securities which are sold in a public sale.
2.6 Indemnification.
(a) By the Company. The Company will indemnify
each Holder of Registrable Securities, each of its officers and
directors and partners, each legal counsel and independent accountant of
each Holder of Registrable Securities, with respect to which
registration has been effected pursuant to this Agreement, and each
underwriter (as defined in the Securities Act), if any, for such Holder
of Registrable Securities and each person who controls such Holder of
Registrable Securities or any such underwriter within the meaning of the
Securities Act, against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), to which they may become
subject under the Securities Act or under applicable state securities
laws or otherwise arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
registration statement, prospectus (including any preliminary
prospectus) or any amendments or supplements thereto incident to any
such registration, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, or any violation by the Company of
any rule or regulation promulgated under the Securities Act applicable
to the Company and relating to action or inaction required of the
Company in connection with any such registration, and will reimburse
each such Holder of Registrable Securities, each of its officers and
directors, and each person controlling such Holder of Registrable
Securities, each such underwriter and each person who controls any
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action; provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by
an instrument duly executed by such Holder, underwriter or controlling
person and stated to be specifically for use therein; and provided,
further, that the indemnity agreement contained herein shall not apply
to amounts paid in settlement of any such claim, loss, damage, liability
or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, partner, agent or affiliate or controlling Person and shall
survive the transfer of such securities by such seller.
8
<PAGE>
(b) By the Holders. Each Holder of Registrable
Securities will, if Registrable Securities held by such Holder of
Registrable Securities are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company,
each of its directors and officers, each legal counsel and independent
accountant of the Company, each underwriter (within the meaning of the
Securities Act), if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act, and each other
such Holder of Registrable Securities, each of its officers and
directors and each person controlling such Holder of Registrable
Securities, against all claims, losses, damages and liabilities, (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any such registration statement or prospectus (including any preliminary
prospectus), or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading and will reimburse the Company, such Holders of
Registrable Securities, such directors, officers, persons, underwriters
or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement
or prospectus in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by
such Holder of Registrable Securities and stated to be specifically for
use therein; provided, however, that the indemnity agreement contained
herein shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if such settlement is effected without
the consent of the Holder of Registrable Securities, which consent shall
not be unreasonably withheld; and provided, further, that obligations of
such Holders of Registrable Securities hereunder shall be limited to an
amount equal to the proceeds received by each such Holder of Registrable
Securities for the Registrable Securities sold as contemplated herein.
(c) Notice. Each party entitled to
indemnification under this Section 2.6 (the "Indemnified Party") shall
give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom; provided, however, that (i) counsel
for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense; (ii) the
failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this
Agreement, except to the extent that the Indemnifying Party's rights are
prejudiced thereby; and (iii) 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
legal defenses available to it and/or other Indemnified Parties which
are
9
<PAGE>
different from or additional to those available to the Indemnifying
Party, the Indemnified Party shall have the right to select separate
counsel (in which case the Indemnifying Party shall not have the right
to direct the defense of such action on behalf of the Indemnified
Party). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation.
(d) Contribution. If the indemnification
provided for in this Section 2.6 shall for any reason be held by a court
to be unavailable to an Indemnified Party under paragraph (a) or (b)
hereof in respect of any loss, claim, damage or liability, or any action
in respect thereof, then, in lieu of the amount paid or payable under
paragraph (a) or (b) hereof, the Indemnified Party and the Indemnifying
Party under paragraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative
fault of the Company and the prospective sellers of Registrable
Securities covered by the registration statement which resulted in such
loss, claim, damage or liability, or action in respect thereof, with
respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations or (ii) if the allocation
provided by paragraph (i) above is not permitted by applicable law, in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering
of the securities covered by such registration statement. 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. Such
prospective sellers' obligations to contribute as provided in this
paragraph (d) are several in proportion to the relative value of their
respective Registrable Securities covered by such registration statement
and not joint. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or
claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
(e) Indemnification Payments. The
indemnification and contribution required by this Section 2.6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
2.7 Information by Holder. The Holders of Registrable
Securities including Registrable Securities in any registration shall furnish to
the Company such information regarding such Holders of Registrable Securities
and the distribution proposed by such Holders of Registrable Securities as the
Company may reasonably request in writing and as shall be required in connection
with any registration referred to in this Agreement. The obligations of a Holder
of Registrable Securities under this
10
<PAGE>
Section 2.7 shall be a condition precedent to such Holder's participation in a
registration effected pursuant to this Agreement.
2.8 Transfer of Registration Rights. The rights to cause
the Company to register securities granted the parties hereto under Section 2.1
of this Agreement may be assigned to a transferee or assignee of the underlying
Registrable Securities, provided that the Company is given written notice at the
time of or within a reasonable time after said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned and provided
further that the transferee or assignee of such rights assumes the obligations
herein provided.
2.9 "Market Stand-off" Agreement. Any party hereto, if
requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, shall, upon written notice from the Company, not
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by such party, and not being sold in a registration
described in Section 2.1, for a period of up to 180 days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided that all officers and directors of the Company enter into similar
restrictions. The Company may impose stop-transfer instructions with respect to
the shares (or securities) subject to the foregoing restriction until the end of
said period.
2.10 Reporting Requirements Under the Exchange Act. So
long as it is legally required to do so, and subject to Holders' rights pursuant
to Section 2.1(b), the Company agrees to register, or maintain registration of,
its Common Stock under Section 12 of the Exchange Act and agrees to keep
effective such registration and to file timely such information, documents and
reports as the Commission may require or prescribe under Section 13 of the
Exchange Act. The Company acknowledges and agrees that the purpose of the
requirements contained in this Section 2.11 is to enable any such Holder to
comply with the current public information requirement contained in paragraph
(c) of Rule 144 under the Securities Act should such Holder ever wish to dispose
of any of the securities of the Company acquired by it without registration
under the Securities Act in reliance upon Rule 144 (or any other similar
exemptive provision).
3. Miscellaneous.
3.1 Waivers and Amendments. With the written consent of
the Holders of a Majority of the Restricted Stock, the obligations of the
Company and the rights of the Holders of the Securities under this Agreement may
be waived (either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its Board,
may enter into a supplementary agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of any supplemental agreement or modifying in any manner the
rights and obligations
11
<PAGE>
hereunder of the Holders of the Securities and the Company; provided, however,
that no such waiver or supplemental agreement shall reduce the aforesaid
proportion of Restricted Stock, the Holders of which are required to consent to
any waiver or supplemental agreement, without the consent of the Holders of all
of the Restricted Stock. Upon the effectuation of each such waiver, consent or
agreement of amendment or modification, the Company shall promptly give written
notice thereof to the Holders of the Restricted Stock who have not previously
consented thereto in writing. Neither this Agreement, nor any provision hereof,
may be amended, waived, discharged or terminated orally or by course of dealing,
but only by a statement in writing signed by the party against which enforcement
of the change, waiver, discharge or termination is sought, except to the extent
provided in this Section 3.1. Specifically, but without limiting the generality
of the foregoing, the failure of the Investor at any time or times to require
performance of any provision hereof by the Company shall in no manner affect the
right of any Investor at a later time to enforce the same. No waiver by any
party of the breach of any term or provision contained in this Agreement, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
3.2 Effect of Waiver or Amendment. Investor acknowledges
that by operation of Section 3.1 hereof the Holders of a Majority of the
Restricted Stock will, subject to the limitations contained in such Section 3.1,
have the right and power to diminish or eliminate certain rights of Investor
under this Agreement.
3.3 Rights of Holders Inter Se. Each Holder of Securities
shall have the absolute right to exercise or refrain from exercising any right
or rights which such Holder may have by reason of this Agreement or any
Security, including, without limitation, the right to consent to the waiver of
any obligation of the Company under this Agreement and to enter into an
agreement with the Company for the purpose of modifying this Agreement or any
agreement effecting any such modification, and such Holder shall not incur any
liability to any other Holder or Holders of Securities with respect to
exercising or refraining from exercising any such right or rights.
3.4 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first class postage prepaid, registered or certified mail,
(a) If to any Holder of any of the Securities,
addressed to such Holder at its address shown on the signature page
hereto, or at such other address as such Holder may specify by written
notice to the Company, or
(b) If to the Company at its principal executive
offices or at such other address as the Company may specify by written
notice to the Investor,
and each such notice, request, consent and other communication shall for all
purposes of the Agreement be treated as being effective or having been given
when delivered,
12
<PAGE>
if delivered personally, or, if sent by mail, at the earlier of its actual
receipt or three (3) days after the same has been deposited in a regularly
maintained receptacle for the deposit of United States mail, addressed and
postage prepaid as aforesaid.
3.5 Severability. Should any one or more of the provisions
of this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
3.6 Parties in Interest. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and permitted assigns of the parties
hereto.
3.7 Headings. The headings of the Sections and paragraphs
of this Agreement have been inserted for convenience of reference only and do
not constitute a part of this Agreement.
3.8 Choice of Law. It is the intention of the parties that
the internal substantive laws, and not the laws of conflicts, of Delaware should
govern the enforceability and validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the parties.
3.9 Attorneys' Fees
(a) In any action or proceeding brought to
enforce any provision of this Agreement by holders of Registrable
Securities, or where any provision hereof is validly asserted as a
defense by holders of Registrable Securities, such holders, if
successful, shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
(b) In any action or proceeding brought to
enforce Section 2.6(b) or (d) by the Company, or where Section 2.6(b) or
(d) is validly asserted as a defense by the Company, the Company, if
successful, shall be entitled to recover reasonable attorney's fees in
addition to any other available remedy.
3.10 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
AM COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
Title:
1900 AM Drive
Quakertown, Pennsylvania
SCIENTIFIC-ATLANTA, INC.
By:
-----------------------------------
Name:
Title:
One Technology Park
Norcross, Georgia 30092
14
<PAGE>
===============================================================================
WARRANT
To Purchase Common Stock of
AM COMMUNICATIONS, INC.
Issued to
SCIENTIFIC-ATLANTA, INC.
June 17, 1996
Warrant No. 1
1,500,000 Shares
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS................................................... 1
1.1 "Additional Shares of Common Stock................... 1
1.2 "Appraised Value..................................... 1
1.3 "Block of Shares..................................... 2
1.4 "Book Value.......................................... 2
1.5 "Business Day........................................ 2
1.6 "Closing Date........................................ 2
1.7 "Commission.......................................... 2
1.8 "Common Stock........................................ 2
1.9 "Convertible Securities.............................. 2
1.10 "Current Market Price................................ 3
1.11 "Current Warrant Price............................... 3
1.12 "Exchange Act........................................ 3
1.13 "Exercise Period..................................... 3
1.14 "Expiration Date..................................... 3
1.15 "Fully Diluted Outstanding........................... 3
1.16 "GAAP................................................ 4
1.17 "Holder.............................................. 4
1.18 "Majority Holders.................................... 4
1.19 "NASD................................................ 4
1.20 "Other Property...................................... 4
1.21 "Outstanding......................................... 4
1.22 "Person.............................................. 4
1.23 "Preferred Stock..................................... 4
1.24 "Registration Rights Agreement....................... 4
1.25 "Restricted Common Stock............................. 4
1.26 "Scientific-Atlanta.................................. 4
1.27 "Securities Act...................................... 4
1.28 "Transfer............................................ 5
1.29 "Transfer Notice..................................... 5
1.30 "Vesting Date........................................ 5
1.31 "Warrants............................................ 5
1.32 "Warrant Price....................................... 5
1.33 "Warrant Stock....................................... 5
2. EXERCISE OF WARRANT........................................... 5
2.1 Exercise Period...................................... 5
2.2 Manner of Exercise................................... 6
2.3 Payment.............................................. 6
2.4 Payment of Taxes..................................... 6
2.5 Fractional Shares.................................... 7
2.6 Continued Validity................................... 7
- i -
<PAGE>
3. TRANSFER, DIVISION AND COMBINATION............................ 7
3.1 Transfer............................................. 7
3.2 Division and Combination............................. 8
3.3 Expenses............................................. 8
3.4 Maintenance of Books................................. 8
4. ADJUSTMENTS................................................... 8
4.1 Stock Dividends, Subdivisions and Combinations....... 8
4.2 Certain Other Distributions.......................... 9
4.3 Issuance of Additional Shares of Common Stock........ 9
4.4 Issuance of Warrants or Other Rights................. 11
4.5 Issuance of Convertible Securities................... 11
4.6 Superseding Adjustment............................... 12
4.7 Other Provisions Applicable to Adjustments under
this Section..................................... 13
4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets........... 15
4.9 Other Action Affecting Common Stock.................. 16
4.10 Allocation Among Blocks of Shares.................... 16
4.11 Certain Limitations.................................. 16
5. NOTICES TO WARRANT HOLDERS.................................... 16
5.1 Notice of Adjustments................................ 16
5.2 Notice of Corporate Action........................... 17
6. NO IMPAIRMENT................................................. 18
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY..................................................... 18
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS............ 19
9. RESTRICTIONS ON TRANSFERABILITY............................... 19
9.1 Restrictive Legend................................... 19
9.2 Notice of Proposed Transfers......................... 20
9.3 Registration Rights Agreement........................ 20
9.4 Termination of Restrictions.......................... 20
9.5 Listing on Securities Exchange....................... 21
10. SUPPLYING INFORMATION......................................... 21
11. LOSS OR MUTILATION............................................ 21
12. OFFICE OF THE COMPANY......................................... 22
- ii -
<PAGE>
13. FINANCIAL AND BUSINESS INFORMATION............................ 22
13.1 Quarterly Information................................ 22
13.2 Annual Information................................... 22
13.3 Filings.............................................. 22
14. APPRAISAL..................................................... 23
15. LIMITATION OF LIABILITY....................................... 23
16. MISCELLANEOUS................................................. 23
16.1 Nonwaiver and Expenses............................... 23
16.2 Notice Generally..................................... 23
16.3 Indemnification...................................... 24
16.4 Remedies............................................. 24
16.5 Successors and Assigns............................... 25
16.6 Amendment............................................ 25
16.7 Severability......................................... 25
16.8 Headings............................................. 25
16.9 Governing Law........................................ 25
- iii -
<PAGE>
EXHIBITS
Exhibit A - Subscription Form...........................................27
Exhibit B - Assignment Form.............................................28
- iv -
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
No. of Shares of Common Stock: 1,500,000 Warrant No. 1
===============================================================================
WARRANT
To Purchase Common Stock of
AM COMMUNICATIONS, INC.
===============================================================================
THIS IS TO CERTIFY THAT SCIENTIFIC-ATLANTA, INC., a Georgia corporation,
or registered assigns, for and in consideration of its paying the Company (as
hereinafter defined) $300,000, is entitled to purchase from AM COMMUNICATIONS,
INC., a Delaware corporation ("the Company"), an aggregate number of 1,500,000
shares of Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, including fractional parts, at a purchase
price of $1.00 per share, all on the terms and conditions and in accordance with
the following hereinafter set forth:
<TABLE>
<CAPTION>
Number of Shares Vesting Date Expiration Date
of Common Stock for Block for Block
---------------- ------------ ---------------
<S> <C> <C> <C>
Block 1 500,000 July 1, 1997 July 1, 2002
Block 2 500,000 July 1, 1998 July 1, 2003
Block 3 500,000 July 1, 1999 July 1, 2004
</TABLE>
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
1.1 "Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
- 1 -
<PAGE>
1.2 "Appraised Value" shall mean, in respect of any share of Common
Stock on any date herein specified, the fair saleable value of such share of
Common Stock (determined without giving effect to the discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or due to
the fact that the Company may have no class of equity registered under the
Exchange Act) as of the last day of the most recent fiscal month to end within
60 days prior to such date specified, based on the value of the Company, as
determined by an investment banking firm selected in accordance with the terms
of Section 15, divided by the number of Fully Diluted Outstanding shares of
Common Stock.
1.3 "Block of Shares" shall mean a number of shares of Common Stock
equal to one-third of the total shares of Common Stock for which this Warrant
can be exercised in the aggregate, each Block of Shares being initially 500,000
shares of Common Stock; there being three Blocks of Shares hereunder, with the
Vesting Date and Expiration Date for each such Block of Shares being as set
forth above in the initial paragraph granting this Warrant.
1.4 "Book Value" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number of
Fully Diluted Outstanding shares of Common Stock as determined in accordance
with GAAP by Deloitte & Touche LLP or any other firm of independent certified
public accountants of recognized national standing selected by the Company and
reasonably acceptable to the Majority Holders.
1.5 "Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the State of
Georgia.
1.6 "Closing Date" shall mean the date of the original issuance of this
Warrant.
1.7 "Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other federal
securities laws.
1.8 "Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $0.10 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation (as defined in Section 4.8) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.8.
1.9 "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of
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additional consideration in cash or property, for Additional Shares of Common
Stock, either immediately or upon the occurrence of a specified date or a
specified event.
1.10 "Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, the higher of (a) the Book Value per
share of Common Stock at such date, and (b) the Appraised Value per share of
Common Stock as at such date, or if there shall then be a public market for the
Common Stock, the higher of (x) the Book Value per share of Common Stock at such
date, and (y) the average of the daily market prices for 30 consecutive Business
Days commencing 45 days before such date. The daily market price for each such
Business Day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, (ii)
if no sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange, (iii) if the Common Stock is not then listed or admitted to
trading on any stock exchange, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
National Association of Securities Dealers Automatic Quotation System or the
National Quotation Bureau, Inc.; provided, however, that if neither such
corporation at the time is engaged in the business of reporting such prices,
then such prices shall be as furnished by any similar firm then engaged in such
business or, if there is no such firm, as furnished by any member of the NASD
selected mutually by the Majority Holders and the Company or, if they cannot
agree upon such selection, then as selected by two such members of the NASD, one
of which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
1.11 "Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
1.13 "Exercise Period" shall mean, with respect to each Block of Shares
hereunder, the period during which this Warrant is exercisable pursuant to
Section 2.1.
1.14 "Expiration Date" shall mean, with respect to each Block of Shares
hereunder, except as otherwise provided in Section 2.1(b) hereof, the following
dates:
Expiration
Date for Such Block
Block 1 July 1, 2002
Block 2 July 1, 2003
Block 3 July 1, 2004
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1.15 "Fully Diluted Outstanding" shall mean, when used with reference
to Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant and other options or
warrants to purchase, or securities convertible into, shares of Common Stock
outstanding on such date which would be deemed outstanding in accordance with
GAAP for purposes of determining Book Value or net income per share.
1.16 "GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
1.17 "Holder" shall mean the Person in whose name the Warrant set forth
herein is registered on the books of the Company maintained for such purpose.
1.18 "Majority Holders" shall mean the holders of Warrants exercisable
for in excess of 50% of the aggregate number of shares of Common Stock then
purchasable upon exercise of all Warrants, whether or not then exercisable.
1.19 "NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
1.20 "Other Property" shall have the meaning set forth in Section 4.8.
1.21 "Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
1.22 "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
1.23 "Preferred Stock" shall have the meaning set forth in Section 2.1.
1.24 "Registration Rights Agreement" shall have the meaning set forth
in Section 9.
1.25 "Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
1.26 "Scientific-Atlanta" shall mean Scientific-Atlanta, Inc., a
Georgia corporation.
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1.27 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.28 "Transfer" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
1.29 "Transfer Notice" shall have the meaning set forth in Section 9.2.
1.30 "Vesting Date" shall mean, with respect to each Block of Shares
hereunder, except as otherwise provided in Section 2.1(b) hereof, the following
dates:
Vesting Date for
Such Block
Block 1 July 1, 1997
Block 2 July 1, 1998
Block 3 July 1, 1999
1.31 "Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
1.32 "Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
1.33 "Warrant Stock" shall mean the shares of Common Stock purchased by
the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1 Exercise Period.
(a) On and after the Vesting Date for each Block of Shares
hereunder and until 5:00 P.M., Eastern time, on the Expiration Date for
such Block of Shares, Holder may exercise this Warrant, on any Business
Day, for all or any part of the number of shares of Common Stock
purchasable under this Warrant with respect to such Block of Shares.
(b) In addition, in the event that the Distribution Agreement
and Manufacturing License between the Company and Scientific-Atlanta
dated June 14, 1996
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is terminated on or before the Vesting Date, then, with respect to any
Block of Shares: (i) any Block of Shares not previously vested shall be
deemed vested, and shall be vested, on the day before such date of
termination and (ii) the Expiration Date for such Block of Shares shall
be the 180th day (or the next succeeding business day if such 180th day
is not a business day) after such date of termination.
2.2 Manner of Exercise. In order to exercise this Warrant, whether in
whole or in part, and with respect to any portion of any Block of Shares, Holder
shall deliver to the Company at its principal office at 1900 AM Drive,
Quakertown, Pennsylvania 18951-9004 or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price and (iii) this Warrant.
Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as such Holder shall request in the notice and shall be
registered in the name of Holder or, subject to Section 9, such other name as
shall be designated in the notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash or check or checks and this
Warrant, is received by the Company as described above and all taxes required to
be paid by Holder, if any, pursuant to Section 2.4 prior to the issuance of such
shares have been paid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder, appropriate notation may be made on
this Warrant and the same returned to Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired this Warrant (or part hereof) or any Warrant
Stock otherwise than in accordance with this Warrant.
2.3 Payment. Payment of the Warrant Price shall be made at the option
of the Holder by (a) certified or official bank check, (b) the cancellation by
Holder of indebtedness of the Company to Holder (if any) in an amount equal to
such sum, or (c) a combination of (a) and (b) as Holder may determine.
2.4 Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable
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and without any preemptive rights. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof, unless such tax or
charge is imposed by law upon Holder, in which case such taxes or charges shall
be paid by Holder. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Common Stock issuable upon exercise of this
Warrant in any name other than that of Holder, and in such case the Company
shall not be required to issue or deliver any stock certificate until such tax
or other charge has been paid or it has been established to the satisfaction of
the Company that no such tax or other charge is due.
2.5 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.6 Continued Validity. A holder of shares of Common Stock issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10, 14
and 17 of this Warrant. The Company will, at the time of each exercise of this
Warrant, in whole or in part, upon the request of the holder of the shares of
Common Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Sections 9 hereof, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall, subject
to Section 9, execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if
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properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer of the warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give each Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1 Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant
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Price shall be adjusted to equal (A) the Current Warrant Price multiplied by (B)
a ratio, the numerator of which is the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment and the
denominator of which is the number of shares for which this Warrant is
exercisable immediately after such adjustment.
4.2 Certain Other Distributions. If at any time the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other
than Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than Convertible
Securities or Additional Shares of Common Stock),
then and in such event (unless and until such divided or other distribution is
legally abandoned) provision shall be made so that Holder, upon exercise of this
Warrant, shall receive, in addition to the number of shares of Common Stock
receivable thereupon, the amount of such cash, evidences of indebtedness, shares
of stock, other securities or property or warrants or other subscription or
purchase rights so distributable which Holder would have received had Holder
exercised prior to the date of such event and had thereafter, during the period
from the date of such event to and including the exercise date, retained the
same during such period, subject to all other adjustments called for during such
period under this Section 4 with respect to the rights of Holders of the
Warrants. A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value) into
shares of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
4.3 Issuance of Additional Shares of Common Stock.
(a) If the Company shall (except as hereinafter provided) at
any time issue or sell any Additional Shares of Common Stock in
exchange for consideration in an amount per Additional Share of Common
Stock less than the Current Warrant Price at the time the Additional
Shares of Common Stock are issued, then (i) the Current Warrant Price
as to the number of shares for which this Warrant is exercisable prior
to such adjustment
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shall be reduced to a price determined by dividing (A) an amount equal
to the sum of (x) the number of shares of Common Stock Outstanding
immediately prior to such issue or sale multiplied by the then existing
Current Warrant Price, plus (y) the consideration, if any, received by
the Company upon such issue or sale, by (B) the total number of shares
of Common Stock Outstanding immediately after such issue or sale; and
(ii) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product obtained by
multiplying the Current Warrant Price in effect immediately prior to
such issue or sale by the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such issue or sale and
dividing the product thereof by the Current Warrant Price resulting
from the adjustment made pursuant to clause (i) above.
(b) If the Company shall (except as hereinafter provided) at
any time issue or sell any Additional Shares of Common Stock, in
exchange for consideration in an amount per Additional Share of Common
Stock less than the Current Market Price at the time the Additional
Shares of Common Stock are issued, then (i) the number of shares of
Common Stock for which this Warrant is exercisable shall be adjusted to
equal the product obtained by multiplying the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to
such issue or sale by a fraction (A) the numerator of which shall be
the number of shares of Common Stock Outstanding immediately after such
issue or sale, and (B) the denominator of which shall be the number of
shares of Common Stock Outstanding immediately prior to such issue or
sale plus the number of shares which the aggregate offering price of
the total number of such Additional Shares of Common Stock would
purchase at the then Current Market Price; and (ii) the Current Warrant
Price as to the number of shares for which this Warrant is exercisable
prior to such adjustment shall be adjusted by multiplying such Current
Warrant Price by a fraction (X) the numerator of which shall be the
number of shares for which this Warrant is exercisable immediately
prior to such issue or sale; and (Y) the denominator of which shall be
the number of shares of Common Stock purchasable immediately after such
issue or sale.
(c) If at any time the Company (except as hereinafter
provided) shall issue or sell any Additional Shares of Common Stock, in
exchange for consideration in an amount per Additional Shares of Common
Stock which is less than the Current Warrant Price and Current Market
Price at the time the Additional Shares of Common Stock are issued, the
adjustment required under Section 4.3 shall be made in accordance with
the formula in paragraph (a) or (b) above which results in the lower
Current Warrant Price following such adjustment. The provisions of
paragraphs (a) and (b) of Section 4.3 shall not apply to any issuance
of Additional Shares of Common Stock for which an adjustment is
provided under Section 4.1 or 4.2. No adjustment of the number of
shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of Section 4.3 upon the
issuance of any Additional Shares of Common Stock which are issued
pursuant to the exercise of any warrants or other subscription or
purchase
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rights or pursuant to the exercise of any conversion or exchange rights
in any Convertible Securities, if any such adjustment shall previously
have been made upon the issuance of such warrants or other rights or
upon the issuance of such Convertible Securities (or upon the issuance
of any warrant or other rights therefor) pursuant to Section 4.4 or
Section 4.5.
(d) For the purposes of this Section 4.3 only, "Additional
Shares of Common Stock" shall not include the following: (i) 4,000,000
shares of Common Stock issuable under the Company's 1991 Incentive
Stock Option Plan; (ii) 2,100,000 shares of Common Stock issuable under
the Company's 1982 Incentive Stock Option Plan; (iii) warrants issued
in 1988 (not Series D), 1989 and 1993 covering 300,000 shares of Common
Stock in the aggregate; and (iv) 2,582,500 shares of Common Stock
issuable upon the conversion of 25,825 currently outstanding shares of
Senior Convertible Redeemable Preferred Stock.
4.4 Issuance of Warrants or Other Rights. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such Warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Current Warrant Price or the
Current Market Price in effect immediately prior to the time of such issue or
sale, then the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Company shall be deemed to have received all of the
consideration payable therefor, if any, as of the date of the issuance of such
warrants or other rights. No further adjustments of the Current Warrant Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such Convertible
Securities.
4.5 Issuance of Convertible Securities. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
Shares for which this Warrant is exercisable and the Current Warrant
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Price shall be adjusted as provided in Section 4.3 on the basis that the maximum
number of Additional Shares of Common Stock necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued and outstanding and the Company shall be deemed to have received all of
the consideration payable therefor, if any, as of the date of actual issuance of
such Convertible Securities. No adjustment of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price shall be made under
this Section 4.5 upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any such adjustment shall previously have been made
upon the issuance of such warrants or other rights pursuant to Section 4.4. No
further adjustments of the number of Shares for which this Warrant is
exercisable and the Current Warrant Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of Shares for which
this Warrant is exercisable and the Current Warrant Price have been or are to be
made pursuant to other provisions of this Section 4, no further adjustments of
the number of Shares for which this Warrant is exercisable and the Current
Warrant Price shall be made by reason of such issue or sale.
4.6 Superseding Adjustment. If, at any time after any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall have been made pursuant to Section 4.4 or Section
4.5 as the result of any issuance of warrants, rights or Convertible Securities,
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all or
a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
(b) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the terms of
such other Convertible Securities, shall be increased solely by virtue
of provisions therein contained for an automatic increase in such
consideration per share upon the occurrence of a specified date or
event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such rights or options or other Convertible Securities on the basis of
(y) treating the number of Additional Shares of Common Stock
or other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise
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of any such warrants or rights or any such right of conversion or
exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable
therefor, and
(z) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which shares of Common Stock or other
property are issuable under such warrants or rights or other
Convertible Securities; whereupon a new adjustment of the number of
shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
4.7 Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public-offering
price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and without taking into account
any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the
issuance thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to
be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company. In
case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase
such Additional Shares of Common Stock or Convertible Securities shall
be issued in connection with any merger in which the Company issues any
securities, the amount of consideration therefor shall be deemed to be
the fair value, as determined in good faith by the Board of Directors
of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to
be attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The
consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration
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received by the Company for issuing such warrants or other rights plus
the additional consideration payable to the Company upon exercise of
such warrants or other rights. The consideration for any Additional
Shares of Common Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration received by the
Company for issuing warrants or other rights to subscribe for or
purchase such Convertible Securities, plus the consideration paid or
payable to the Company in respect of the subscription for or purchase
of such Convertible Securities, plus the additional consideration, if
any, payable to the Company upon the exercise of the right of
conversion or exchange in such Convertible Securities. In case of the
issuance at any time of any Additional Shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon
any class of stock other than Common Stock, the Company shall be deemed
to have received for such Additional Shares of Common Stock or
Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except
in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 4.1) up to, but not beyond the date
of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon
as such adjustment, together with other adjustments required by this
Section 4 and not previously made, would result in a minimum adjustment
or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(d) Escrow of Warrant Stock. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, and Holder exercises this
Warrant, any such property or Additional Shares of Common Stock
issuable upon exercise by reason of such adjustment shall be deemed the
last shares of Common Stock for which this Warrant is exercised
(notwithstanding any other provision to the contrary herein) and such
shares or other property shall be held in escrow for Holder by the
Company to be issued to Holder upon and to the extent that the
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event actually takes place. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to
occur or is rescinded, then such escrowed shares shall be cancelled by
the Company and escrowed property returned.
(e) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination
in good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Majority Holders,
and any dispute shall be resolved by an investment banking firm of
recognized national standing selected by the Company and acceptable to
the Majority Holders.
4.8 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant, the number of shares of common stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of the Common Stock
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.8, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
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4.9 Other Action Affecting Common Stock. In case at any time or from
time to time the Company shall take any action in respect of its Common Stock
other than action described in this Section 4, then, unless such action will not
have a materially adverse effect upon the rights of the Holders, the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
4.10 Allocation Among Blocks of Shares. In the event of any adjustment,
made pursuant to this Section 4, to the number of shares of Common Stock for
which this Warrant is exercisable, the number of shares constituting such
adjustment, whether an increase or a decrease (such number of shares, the
"Adjusting Number of Shares") shall be allocated among the three Blocks of
Shares in equal amounts; and, if the Adjusting Number of Shares is a positive
number, the Vesting Date for the incremental shares so allocated shall be the
same as the Vesting Date for the Block of Shares to which such shares are
allocated. Provided, however, that: (i) if the date of such adjustment is after
a date which is later than thirty (30) days prior to the Expiration Date for any
Block of Shares, no portion of the Adjusting Number of Shares shall be allocated
to such expiring or expired Block of Shares and, instead, the Adjusting Number
of Shares shall be allocated to the remaining one or two Block of Shares, as the
case may be; and (ii) in the event the Adjusting Number of Shares is not equally
divisible by two or three (as the case may be, where allocation is being made
among two or three Blocks of Shares), the excess amount of shares shall be
allocated to the Block of Shares having the latest Expiration Date.
4.11 Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
5. NOTICES TO WARRANT HOLDERS
5.1 Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of the Warrants, shall
be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section
4.7(a)), specifying the number of shares of Common Stock for which this Warrant
is exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such
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certificate to be delivered to each Holder in accordance with Section 17.2. The
Company shall keep at its office or agency designated pursuant to Section 12
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2 Notice of Corporate Action. If at any time
(a) The Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17.2.
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6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
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If any shares of Common Stock required to be reserved for issuance upon
exercise of Warrants require registration or qualification with any governmental
authority or other governmental approval or filing under any federal or state
law before such shares may be so issued, the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be
duly registered.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants with respect to any Block of Shares shall not be
transferred prior to the Vesting Date for such Block of Shares. The Warrants and
the Warrant Stock shall not otherwise be transferred, hypothecated or assigned
before satisfaction of the conditions specified in this Section 9, which
conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the Transfer of any Warrant or any Warrant Stock.
Holder, by acceptance of this Warrant, agrees to be bound by the provisions of
this Section 9.
9.1 Restrictive Legend.
(a) Except as otherwise provided in this Section 9, each
certificate for Warrant Stock initially issued upon the exercise of
this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended,
and are subject to the conditions specified in a certain
Warrant dated June 17, 1996, originally issued by AM
COMMUNICATIONS, INC. No transfer of the shares represented by
this certificate shall be valid or effective until such
conditions have been fulfilled. A copy of the form of said
Warrant is on file with the Secretary of AM COMMUNICATIONS,
INC. The holder of this certificate, by acceptance of this
certificate, agrees to be bound by the provisions of such
Warrant."
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(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby
have not been registered under the Securities Act of 1933, as
amended, and may not be transferred in violation of such Act,
the rules and regulations thereunder or the provisions of this
Warrant."
9.2 Notice of Proposed Transfers. Prior to any Transfer or attempted
Transfer of any Warrants or any shares of Restricted Common Stock, the holder of
such Warrants or Restricted Common Stock shall give ten days' prior written
notice (a "Transfer Notice") to the Company of such holder's intention to effect
such Transfer, describing the manner and circumstances of the proposed Transfer,
and obtain from counsel to such holder who shall be reasonably satisfactory to
the Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the holder of such Warrants or such
Restricted Common Stock as to whether such opinion is reasonably satisfactory
and, if so, such holder shall thereupon be entitled to Transfer such Warrants or
such Restricted Common Stock, in accordance with the terms of the Transfer
Notice. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer shall bear the restrictive legend set forth in
Section 9.1(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(b), unless in the opinion of such
counsel such legend is not required in order to ensure compliance with the
Securities Act. The holder of the Warrants or the Restricted Common Stock, as
the case may be, giving the Transfer Notice shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2(a) that such opinion is reasonably satisfactory.
9.3 Registration Rights Agreement. The holders of Warrants and Warrant
Stock shall have the right to request registration of such Warrant Stock
pursuant to the Registration Rights Agreement of even date herewith (the
"Registration Rights Agreement") between the Company and Scientific-Atlanta.
9.4 Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it that such shares may be transferred
without registration thereof under the Securities Act. Whenever the restrictions
imposed by Section 9 shall terminate as to this Warrant, as hereinabove
provided,
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the Holder hereof shall be entitled to receive from the Company, at the expense
of the Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF
THE WITHIN WARRANT CONTAINED IN SECTION 9
HEREOF TERMINATED ON ________ __, ____, AND ARE OF
NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
9.5 Listing on Securities Exchange. If the Company shall list any
shares of Common Stock on any securities exchange, it will, at its expense, list
thereon, maintain and, when necessary, increase such listing of, all shares of
Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during any such Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
holder of Restricted Common Stock in supplying such information as may be
reasonably necessary for such holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it and in
case of mutilation upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, in the case of mutilation, no indemnity shall be required if this
Warrant in identifiable form is surrendered to the Company for cancellation.
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12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the Principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. FINANCIAL AND BUSINESS INFORMATION
13.1 Quarterly Information. The Company will deliver to each Holder, as
soon as practicable after the end of each of the first three quarters of the
Company, and in any event within 45 days thereafter, one copy of an unaudited
consolidated balance sheet of the Company and its subsidiaries as at the close
of such quarter, and the related unaudited consolidated statements of income and
cash flows of the Company for such quarter and, in the case of the second and
third quarters, for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year. Such financial statements shall be prepared
by the Company in accordance with GAAP and accompanied by the certification of
the Company's chief executive officer or chief financial officer that such
financial statements are complete and correct and present fairly the
consolidated financial position, results of operations and cash flows of the
Company and its subsidiaries as at the end of such quarter and for such
year-to-date period, as the case may be.
13.2 Annual Information. The Company will deliver to each Holder as
soon as practicable after the end of each fiscal year of the Company, and in any
event within 90 days thereafter, one copy of:
(i) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(ii) audited consolidated statements of income, retained
earnings and cash flows of the Company and its subsidiaries for such
year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming any adjustment made pursuant
to Section 4 during such year.
13.3 Filings. The Company will file on or before the required date all
regular or periodic reports (pursuant to the Exchange Act) with the Commission
and will deliver to Holder promptly upon their becoming available one copy of
each report, notice or proxy statement sent
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by the Company to its stockholders generally, and of each regular or periodic
report (pursuant to the Exchange Act) and any Registration Statement, prospectus
or written communication (other than transmittal letters) (pursuant to the
Securities Act), filed by the Company with (i) the Commission or (ii) any
securities exchange on which shares of Common Stock are listed.
14. APPRAISAL
Any determination of the Appraised Value per share of Common Stock
pursuant to the terms hereof shall be made by an investment banking firm of
nationally recognized standing selected by the Company and acceptable to the
Majority Holders. If the investment banking firm selected by the Company is not
acceptable to the Majority Holders and the Company and the Majority Holders
cannot agree on a mutually acceptable investment banking firm, then the Majority
Holders and the Company shall each choose one such investment banking firm and
the respective chosen firms shall agree on another investment banking firm which
shall make the determination. The Company shall retain, at its sole cost, such
investment banking firm as may be necessary for the determination of Appraised
Value required by the terms of this Warrant.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
16. MISCELLANEOUS
16.1 Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If the Company fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, the Company shall pay
to Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
16.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and (a) delivered in person with receipt acknowledged; or (b) sent by
registered, certified or express mail, return receipt requested, postage
prepaid, or (c) by reputable overnight courier service, or (d) by confirmed
facsimile transmission with a copy sent by means of (a), (b) or (c) hereof,
addressed as follows:
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(a) If to any Holder or holder of Warrant Stock, at its last
known address appearing on the books of the Company maintained for such
purpose.
(b) If to the Company at
AM COMMUNICATIONS, INC.
1900 AM Drive
Quakertown, Pennsylvania 18951-9004
Attention: President
Facsimile Number: (215) 536-1475
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, acknowledged, transmitted by confirmed facsimile, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
approval, declaration, delivery or other communication to the person designated
above to receive a copy shall in no way adversely affect the effectiveness of
such notice, demand, request, approval, declaration, delivery or other
communication.
16.3 Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of (i) Holder's exercise
of this Warrant and/or ownership of any shares of Warrant Stock issued in
consequence thereof, or (ii) any litigation to which Holder is made a party in
its capacity as a stockholder of the Company; provided, however, that the
Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
16.4 Remedies. Each holder of Warrant and Warrant Stock, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
- 24 -
<PAGE>
16.5 Successors and Assigns. Subject to the provisions of Sections 3.1
and 9, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors of the Company and the successors and
assigns of Holder. The provisions of this Warrant and the Registration Rights
Agreement are intended to be for the benefit of all Holders from time to time of
this Warrant or holder of Warrant Stock, as the case may be, and shall be
enforceable by any such Holder or holder of Warrant Stock.
16.6 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Majority Holders, provided that no such Warrant may be modified or
amended to reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof.
16.7 Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
16.8 Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
16.9 Governing Law. This Warrant shall be governed by the laws of the
State of Delaware, without regard to the provisions thereof relating to conflict
of laws.
- 25 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: June 17, 1996
AM COMMUNICATIONS, INC.
a Delaware corporation
By:
----------------------------------
Name:
------------------------
Title:
------------------------
ATTEST:
By:
----------------------------------
Name:
------------------------
Title:
------------------------
- 26 -
<PAGE>
Exhibit A
SUBSCRIPTION FORM
To be executed only upon exercise of Warrant
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of _____ Shares of Common Stock of AM
COMMUNICATIONS, INC. for the Blocks of Shares set forth in the schedule below
and in accordance with the schedule set forth below, and the undersigned
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_______________________ whose address is ________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, the undersigned requests that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
Block of Vesting Total No. of Shares
Shares Date Shares in Block Purchased
Block 1 July 1, 1997 _______________ __________
Block 2 July 1, 1998 _______________ __________
Block 3 July 1, 1999 _______________ __________
---------------------------------------------
(Name of Registered Owner)
---------------------------------------------
(Signature of Registered Owner or Authorized
Representative of Registered Owner)
---------------------------------------------
(Street Address)
---------------------------------------------
(City) (State) (Zip Code)
- 27 -
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the Block of
Shares and the number of shares of Common Stock set forth below:
Assignee Name: ______________________________
Address of Assignee: ______________________________
------------------------------
------------------------------
Block of Vesting Total No. of No. of
Shares Date Shares in Block Shares Assigned
Block 1 July 1, 1997 _______________ __________
Block 2 July 1, 1998 _______________ __________
Block 3 July 1, 1999 _______________ __________
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of AM COMMUNICATIONS,
INC. maintained for the purpose, with full power of substitution in the
premises.
Dated: Print Name:
----------------- ----------------------------
Signature of Registered
Owner (or Authorized
Representative of
Registered Owner):
---------------------------
Witness:
---------------------------
- 28 -
<PAGE>
Exhibit 11
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------
March 30, April 1,
1996 1995
---- ----
<S> <C> <C>
Primary Earnings Per Share Data:
Net Income (Loss) for Year $ (1,101,000) $ 767,000
--------------- ------------
Weighted Average Number of Common and
Common Equivalent Shares:
Weighted Average Common Shares Outstanding
During the Year 30,041,652 24,511,058
Common Equivalents: (1)
Convertible Preferred Stock --- 2,582,500
Incremental Shares Issuable on Exercise
of Warrants --- 4,381,789
Incremental Shares Issuable on Exercise
of Options --- 2,347,677
--------------- ------------
Total Shares 30,041,652 33,823,024
--------------- ------------
Primary Per Share Data ($0.04) $0.02
======== =====
Fully Diluted Per Share Data:
Net Income (Loss) for Year $ (1,101,000) $ 767,000
--------------- ------------
Common and Common Equivalent Shares:
Weighted Average Common Shares Outstanding
During the Year 30,041,652 24,511,058
Common Equivalents: (1)
Convertible Preferred Stock --- 2,582,500
Incremental Shares Issuable on Exercise
of Warrants --- 5,310,983
Incremental Shares Issuable on Exercise
of Options --- 2,972,579
--------------- ------------
Total Shares 30,041,652 35,377,000
--------------- ------------
Fully Diluted Per Share Data ($0.04) $0.02
======== =====
</TABLE>
(1) In loss years common stock equivalents are not included in the calculations
of the loss per share.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-53822 and 33-81500 of AM Communications, Inc. on Form S-8 of our report dated
June 26, 1995, appearing in this Annual Report of AM Communications, Inc. on
Form 10-KSB for the fiscal year ended March 30, 1996.
Philadelphia, PA
June 27, 1996
<PAGE>
KPIWG Peat Marwick LLP
1600 Market Street
Philadelphia, PA 19103-7212
Consent of Independent Auditors
The Board of Directors
AM Communications, Inc.:
We consent to incorporation by reference in the registration statements on Form
S-8 (No.33-53822 and No.33-81500) of AM Communications, Inc. of our report dated
June 21, 1996, relating to the balance sheet of AM Communications, Inc. as of
March 30, 1996, and the related statements of operations, stockholders' equity,
and cash flows for the year ended March 30, 1996, which report is included in
the March 30, 1996 Annual Report on Form 10-KSB of AM Communications, Inc.
Philadelphia, Pennsylvania
June 21, 1996
