UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period ended....to......................
Commission file number ...........0-4187....................
AMATI COMMUNICATIONS CORPORATION
(Formerly ICOT Corporation)
(Exact name of registrant as specified in its charter)
Delaware 94-1675494
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3801 Zanker Road, PO Box 5143, San Jose , CA 95150-5143
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(408) 433-3300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for at least the past 90 days.
YES X NO
Number of shares outstanding of each of the issuer's classes of common stock:
As of March 8, 1996, 17,098,692 shares of Registrant's Common Stock were
outstanding.
<PAGE>
FORM 10-Q
Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
Consolidated Condensed Balance Sheets
Consolidated Condensed Statements of Cash Flows
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMATI COMMUNICATIONS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
January 27, January 28, January 27, January 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 2,524 $ 2,638 $ 5,878 $ 5,701
Cost of sales 1,546 1,446 3,387 3,194
Gross margin 978 1,192 2,491 2,507
Operating expenses:
Research and development 1,023 421 1,383 928
Marketing and sales 145 216 204 521
General and administrative 510 293 831 631
Non-recurring charge 31,554 --- 31,554 ---
Total operating expenses 33,232 930 33,972 2,080
Income (loss) from
operations (32,254) 262 (31,481) 427
Other income (expense):
Interest income 58 63 144 125
Interest expense (3) (2) (3) (6)
Total other income 55 61 141 119
Income (loss) before
income taxes (32,199) 323 (31,340) 546
Provision for income taxes --- 16 43 27
Net Income (Loss) $(32,199) $ 307 $(31,383) $ 519
Net Income (Loss)
Per Share $ (2.12) $ 0.03 $ (2.32) $ 0.04
Weighted Average Number of
Common Shares and Common
Share Equivalents 15,223 11,444 13,551 11,625
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statments.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMATI COMMUNICATIONS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
January 27, July 29,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,007 $ 1,066
Short-term investments --- 2,425
Accounts receivable, less allowance of
$41 in 1996 and $21 in 1995 2,074 1,933
Inventories 1,315 1,427
Other current assets 804 942
Total current assets 6,200 7,793
Equipment and leasehold improvements-net 664 586
Amati advances and acquisition costs --- 3,240
Other assets 371 492
Total Assets $ 7,235 $ 12,111
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current liabilities of capitalized
lease obligations $ 3 $ 10
Accounts payable and accrued expenses 2,613 1,231
Employee compensation 344 350
Convertible notes payable 395 ---
Total current liabilities 3,355 1,591
Long-term liabilities:
Obligations under lease commitments 294 294
Total long-term liabilities 294 294
Stockholders' equity 3,586 10,226
Total Liabilities and Stockholders'
Equity $ 7,235 $ 12,111
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMATI COMMUNICATIONS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
January 27, January 28,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(31,383) $ 519
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 277 239
Non-recurring charges - merger 31,554 ---
Provision for bad debts 20 ---
Retirement of capital equipment 3 1
Decrease in accounts receivable 790 129
Decrease (increase) in inventories 112 (44)
Decrease (increase) in other assets 158 (202)
Decrease in accounts payable, accrued
expenses and employee compensation (1,909) (366)
Increase (decrease) in other liabilities 395 (124)
Net cash provided by operating activities 17 152
Cash flows from investing activities:
Advances to Amati and acquisition costs
incurred (2,266) ---
Purchases of held-to-maturity investments --- (3,437)
Proceeds from maturities of held-to-maturity
investments 2,425 4,402
Capital expenditures (14) (13)
Net cash provided by investing activities 145 952
Cash flows from financing activities:
Payment of lease obligations (7) (52)
Repurchase of common stock --- (564)
Proceeds from exercise of stock options 786 2
Net cash provided by financing activities 779 (614)
Net increase in cash and cash equivalents 941 490
Beginning balance - Cash and cash equivalents 1,066 645
Ending balance - Cash and cash equivalents $ 2,007 $ 1,135
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 3 $ 6
<FN>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</TABLE>
<PAGE>
AMATI COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
January 27, 1996
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring entries) considered necessary for a fair
presentation have been included. For further information, refer to the
financial statements and footnotes included in the Company's Annual Report on
Form 10-K for the year ended July 29, 1995. The results for the period are
not necessarily indicative of results for the full fiscal year.
During the second quarter of fiscal 1996, the Company announced the completion
of its merger with Amati Communications Corporation ("Old Amati"). The
business combination, accounted for as a purchase, resulted in a one time
write-off of $31,554,000 for acquired in-process research and development
(See Note E for further discussion). The accompanying condensed financial
statements include the results of the Old Amati since the consummation of the
merger on November 28, 1995.
Note B - Net Income (Loss) Per Share
Net income (loss) per share is based on the weighted average number of shares
outstanding of common stock and common stock equivalents (when dilutive) using
the treasury stock method. No common stock equivalents have been included in
fiscal 1996 because the effect would decrease the loss per share.
Note C - Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and are comprised of the following:
January 27, 1996 July 29, 1995
Finished goods $ 1 $ 1
Work in process 412 711
Purchased and service parts 902 715
$ 1,315 $ 1,427
<PAGE>
AMATI COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
January 27, 1996
(Unaudited)
Note D - Litigation
In November 1993, an action was brought against the Company for damages
related to the use of the Company's products. The plaintiff filed a suit
claiming repetitive stress injuries resulting from the use of the Company's
product in the course of employment with American Airlines form the period
May 1981 through July 1991. The plaintiff alleges damages in the amount of
$1 million and punitive damages of $10 million. The Company believes that
the claim is without merit and has tendered defense of this action to its
insurance carriers. In the opinion of management, the outcome of this
litigation will not have a material adverse effect on the Company's financial
position or its results of operations. The Company is not involved in any
other substantial litigation.
Note E - Acquisition of Old Amati
On November 28, 1995, the Company acquired all of the outstanding shares of
Amati Communications Corporation ("Old Amati") for approximately $ 29.5
million based upon the fair market value of the Company's common stock of
$3.8875 per share using the average of the closing prices of the Company's
common stock as reported by the Nasdaq National Market for the five trading
days between November 1, 1995 and November 7, 1995.
In accordance with an Emerging Issues Task Force Consensus in November 1995,
because the purchase price was contingent upon the Adjustment Condition, as
defined in the Prospectus/Proxy Statement, the measurement date for valuing
the equity securities is established as of November 3, 1995 which is the date
the Adjustment Condition was met and the applicable ratio was established.
The purchase price consisted of the issuance of 2.6 million shares of Company
common stock in exchange for all shares of Old Amati common stock, 1.5 million
shares of Company common stock in exchange for all shares of Old Amati Series
A Preferred Stock, warrants for the purchase of 1.1 million shares of Company
common stock in exchange for all Old Amati warrants, and 1.6 million stock
options for the purchase of Company common stock in exchange for all Old Amati
stock options. The purchase price also includes registration and other
acqusition costs of $0.8 million, total cash advances to Old Amati prior
to the merger of $5.6 million, net of the estimated proceeds from the assumed
exercise of Old Amati options and warrants of $3.3 million.
The transaction was accounted for using the purchase method of accounting.
The Company allocated the purchase price to the net assets based upon their
estimated fair values. The fair values of tangible assets acquired and
liabilities assumed were $1.2 million and $3.2 million, respectively. The
balance of the purchase price, $31.6 million, was charged to earnings to
write off in-process research and development that had not reached
technological feasibility and had no alternative future uses.
<PAGE>
The following table reflects unaudited pro forma combined results of operations
of the Company and Old Amati on the basis that the acquisition had taken place
and the related charge, noted above, was recorded at the beginning of the
fiscal year for each of the periods presented:
Six Months Ended
January 27, 1996 January 28, 1995
(in thousands except per share data)
Revenues $ 7,305 $ 6,279
Net loss $ (33,832) $ (33,963)
Net loss per share $ (2.03) $ (2.09)
Shares used in computation 16,672 16,261
In management's opinion, the unaudited pro forma combined results of operations
are not necessarily indicative of the actual results that would have occurred
had the acquisition been consummated at the beginning of 1995 or at the
beginning of 1996 or of future operations of the combined companies under the
ownership and management of the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction
To the extent that Management's Discussion and Analysis of Financial Condition
and Results of Operation discusses financial projections, information or
expectation about the Company's products or markets, or otherwise makes
statements about future events, such statements are forward-looking and are
subject to a number of risks and uncertainties that could cause actual results
to differ materially from the statements made. These include, among others,
successful and timely development and acceptance of new products, the
availability of sufficient funding to complete development of new products
and other factors described below. In addition, such risks and uncertainties
also include the matters identified under the heading "Risk Factors" below.
Overview
On November 28, 1995, ICOT Corporation, the ("Company"), and Amati
Communications Corporation ("Old Amati"), a privately held Mountain View,
California based company completed a merger by which Old Amati became a
wholly-owned subsidiary of the Company. Effective as of the merger, the name
of the Company was changed to "Amati Communications Corporation," and the
Company's common stock began trading on the Nasdaq National Market under the
symbol "AMTX" on November 29, 1995.
Under the terms of the merger agreement with Old Amati, the shareholders,
warrant holders and option holders of Old Amati acquired approximately 35% of
the fully diluted shares (6,788,924) of the Company. As of the merger date,
Old Amati employed twenty-four full time employees, including four in
manufacturing, two in sales and customer support, fifteen in engineering and
three in finance and administration. Old Amati is a development stage company
that develops and markets advanced transmission systems utilizing Discrete
Multi-tone ("DMT") technology to provide high speed transmission over copper
and cable media. Old Amati's DMT technology has been selected as the ANSI and
ETSI standard for Asymmetric Digital Subscriber Line (ADSL). The Company is
not expected to operate profitably in the foreseeable future.
Results of Operations
Total net sales in the second quarter of fiscal 1996 decreased 4% to
$2,524,000 from sales of $2,638,000 in the second quarter of the prior fiscal
year. For the first six months of fiscal 1996, net sales increased 3% to
$5,878,000 compared to sales of $5,701,000 for the comparable fiscal 1995
six-month period.
<PAGE>
Sales to IBM accounted for 55% and 70% of the Company's revenue in the second
quarter and first half of fiscal 1996, respectively, compared with 81% for
the comparable periods of fiscal 1995. The Company expects that IBM will
continue to account for a substantial portion of the Company's revenues until
the time it completes development and commercialization of its ADSL products.
IBM is not obligated to purchase any specified amounts of products or to
provide binding forecasts of product purchases for any period. Since IBM
considers product sales and market data confidential, the Company has very
little ability to forecast future demand. Furthermore, since IBM has the
exclusive responsibility for marketing and selling of the products that the
Company develops, results of operations can be significantly affected by
IBM's success in the market place.
During the period following the merger, the Company shipped Old Amati's
Overture series of transceivers. The Overture 4 is a prototype that does
not have a low enough cost or low enough power consumption for mass deployment
and its components are entirely discrete (off the shelf). Revenues realized
from these field trials were $749,000 in the second quarter of fiscal 1996.
The Company anticipates the Overture series to participate in additional field
trials internationally for fiscal 1996.
PC to Mainframe Connectivity sales of $378,000 and $1,012,000 in the second
quarter and first six months of fiscal 1996 represent a decline of 26% and
10%, respectively, when compared with the same periods of the prior fiscal
year. The PC to Mainframe Connectivity market is highly competitive and is
characterized by rapid advances in technology which frequently result in the
introduction of new products with improved performance characteristics,
thereby subjecting the Company's products to risk of technological
obsolescence. The Company competes directly or indirectly with a broad range
of companies, many of whom have significantly greater resources. In addition,
the Company is only competing for a limited and declining segment of the
market.
Gross margins as a percent of sales were 39% in the second quarter and 42% for
the first six months of fiscal 1996 compared with 45% and 44% for the same
periods of fiscal 1995. The decrease in margins was primarily attributable
to product mix resulting from shipment of new products to IBM and costs to
complete test trials. Amortization of capitalized software costs charged to
cost of sales were $61,000 and $123,000 in the second quarter and first six
months of fiscal 1996, respectively.
Net research and development expenses increased 143% to $1,023,000 in the
second quarter and 49% to $1,383,000 in the first six months of fiscal 1996
when compared to the same periods of fiscal 1995 largely as a result of the
fifteen Old Amati engineers added as a result of the merger. Research and
development expenses are net of funded development costs from IBM. Funded
development costs in the second quarter and first half of fiscal 1996 were
$138,000 and $143,000 compared with $95,000 and $248,000, respectively, in
fiscal 1995. There was no capitalization of software development costs in
either fiscal quarter. The Company considers research and development a key
element in its ability to compete and will continue to make investments in
product development for IBM and its support of product reliability. From the
technology acquired in the merger, the Company believes it has a technological
leadership position in DMT modulation. Maintaining this position is largely
dependent on the Company's ability to develop new products that meet a wide
range of customer needs. Research and development efforts for the DMT
technology are grouped into three areas: the
<PAGE>
microelectronics group primarily focused on ADSL and Very High Speed Digital
Subscriber Lines (VDSL) markets, the software group on the development of
firmware for the Overture series and the hardware group directed towards
analogy and digital design activities. All research and development expenses
related to this technology are charged
to operations as incurred.
Marketing and sales expenses decreased by $71,000 or 33% in the second quarter
and by $317,000 or 61% for the six months of fiscal 1996 when compared with
the same periods of prior fiscal year. Expenses decreased due to a reduction
in inside sales personnel and less participation in trade shows related to
the PC-Connectivity business. Sales, marketing and customer support operations
of the acquired business, which cover both domestic and international markets,
is handled by three persons. The Company's strategy is to sell to telephone
companies worldwide through large telecommunication suppliers who will
integrate the Company's products into larger systems for their customers.
This type of OEM selling does not require a large sales force.
General and administrative expenses increased by $217,000 or 74% in the second
quarter and $200,000 or 32% for the six months of fiscal 1996 when compared
with the same periods of prior fiscal year. This is primarily due to
additional corporate staffing and occupancy costs associated with the merger.
Interest income decreased to $58,000 in the second quarter due to maturities
of held-to-maturity investments when compared to the same period of fiscal
1995. The increase to $144,000 for the comparable six-month period is a
result of higher interest yields of short term investments in fiscal 1996.
The provision for income taxes for the six months of fiscal 1996 were $43,000
compared to $27,000 for the comparable period of fiscal 1995. This provision
was a result of net operating profit after benefit of Federal net operating
loss carryforwards. Tax provisions were required for Federal alternative
minimum tax and California state taxes due to limitations on the use of
California's loss carryforwards. The Company had provided a valuation
allowance against the deferred tax asset attributable to the net operating
losses due to uncertainties regarding the realization of these assets.
Liquidity and Capital Resources
The Company had cash and short term investments of $2,007,000 as of January 27,
1996, compared to $3,491,000 as of July 29, 1995. Cash provided by operating
activities of $17,000 related primarily to the Company's net loss after
adjusting for non-recurring charges. Cash provided by investing activities
of $145,000 resulted primarily from the purchase of Amati, net of cash
acquired of $2,266,000 offset by the maturity of held-to-maturity investments
of $2,425,000. Cash provided by financing activities of $779,000 was
primarily a result of proceeds from the exercise of stock options of $786,000.
During the second quarter, the Company secured a bank line of credit for
$1,200,000. The Company anticipates that available cash reserves, along with
its collaborative research and development agreements, licensing agreements
and investment income should be adequate to satisfy capital
<PAGE>
requirements of the Company through the 1996 fiscal year under currently
projected revenues and levels of spending. The Company's future capital
requirements will depend on many factors, including sales levels, progress
in research and development programs, the establishment of collaborative
agreements, and costs of manufacturing facilities and commercializat on
activities. It is likely that the Company will seek additional funding
through collaborative agreements or through public or private sale of
securities prior to the commercialization of Old Amati products. Old Amati's
core technology is DMT, a multicarrier modulation technology. The purpose
of a modulation technology is to transmit a signal over a given medium as
efficiently as possible. The Company is currently developing products to
provide high speed digital video, voice and data transmission over copper
and coaxiable cable media. The Company believes that, in order to design
and manufacture commercially acceptable products, cost and performance
improvements beyond what is available with current technology will be
necessary. Accordingly, the Company has assembled a microelectronic team
that is designing custom integrated semiconductor circuits utilizing standard
ASIC design systems and certain technologies beyond ASIC. The Company intends
to continue to invest in and expand this activity. The Company had no
material commitments for capital expenditures as of January 27, 1996.
It is the Company's policy to monitor the state of its business, cash
requirements, and capital structure.
Risk Factors
Any long-term viability, profitability and growth from the Company's
technology depends upon successful commercialization of products resulting
from research and development activities. Extensive additional research and
development will be required prior to commercialization of certain products.
There can be no assurance that the Company will be successful in developing
ADSL products that can be sold at prices low enough to be variable in the
market. Furthermore, there is no assurance that the Company's DMT technology
will be successful in developing ANSA VDSL standard.
Competition in the telecommunications transmission business is expected
to increase. Most of the Company's competitors in the communications
industry, including major communications companies, are more established,
benefit from greater market recognition and have greater financial, technical,
production and marketing resources than the Company. There can be no assurance
that developments by others will not render the Company's products or
technologies obsolete or noncompetitive or that the Company will be able to
keep pace with new technological developments.
The Company is largely dependent on systems integrators for the introduction
of its telecommunications products to field trials. There can be no assurance
that systems integrators will select the Company's products for field trials
or, if they do initially select the Company's products, that they will
continue to use them.
The Company expects that sales outside of the United States will represent
a significant portion of its future sales, especially of the Company's ADSL
products. Operations outside of the United States are subject to various
risks, including exposure to currency fluctuations, the imposition of
<PAGE>
governmental controls, the need to comply with a wide variety of foreign and
United States export laws, political and economic instability, trade
restrictions, changes in tariffs and taxes, and longer payment cycles
typically associated with international sales.
Legislation recently passed by Congress significantly alters the regulations
on telephone companies and cable companies in the United States, and there
can be no assurance that such legislation will not adversely affect the
commercialization of the Company's telecommunications products.
The Company intends to outsource its manufacturing operations to independent
third party manufacturers. There can be no assurance that the Company's third
party manufacturers will provide adequate supplies of quality product on a
timely basis. The inability to obtain such products on a timely basis would
have a material adverse effect on the Company's business, operation results
and financial condition.
There can be no assurance that any patents owned or controlled by the Company
will provide commercially significant protection of the Company's technology
or ensure that the Company not be determined to infringe valid patents of
others.
The Company's future capital requirements depend on many factors, including
sales levels, progress in research and development programs, establishment
of collaborative agreements, and costs of manufacturing and commercialization
activities. There can be no assurance that additional funding will be
available on acceptable terms, if at all. Stockholders and potential
investors should carefully consider the risks associated with the Company
and should be aware that these risks may negatively impact the Company's stock
price.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits
10.16* License Agreement dated January 1, 1992 between Registrant and
Stanford University and University Ventures II, a California limited
investment partnership, is filed as Exhibit 10.16 hereto.
10.17* License Agreement dated March 16, 1995 between Registrant and Motorola
is filed as Exhibit 10.17 hereto.
10.18 Employment Agreement dated May 5, 1995 with Dr. John Cioffi is
filed as Exhibit 10.18 hereto.
* Confidential treatment has been requested with respect to specific portions
of this exhibit.
Reports on Form 8-K
The Company filed a Current Report on Form 8-K for November 28, 1995, as
amended, relating to the acquisition of the former Amati Communications
Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMATI COMMUNICATIONS CORPORATION
(Registrant)
Dated: March 11, 1996 /S/ JAMES STEENBERGEN
James Steenbergen
Director, President,
Chief Executive Officer and
Chief Financial Officer
Dated: March 11, 1996 /S/ TERRY MEDEL
Terry Medel
Controller, Treasurer, Secretary and
Chief Accounting Officer
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED BY AMATI COMMUNICATIONS CORPORATION
AGREEMENT
Effective as of January 1, 1992, THE BOARD OF TRUSTEES OF THE LELAND STANFORD
JUNIOR UNIVERSITY, a body having corporate powers under the laws of the State
of California ("STANFORD"), AMATI COMMUNICATIONS CORPORATION, having a
principal place of business at 101 University Avenue, Palo Alto, California
94301 ("AMATI"), and UNIVERSITY VENTURES II, COMMTECH INTERNATIONAL, and
COMMTECH TECHNOLOGY PARTNERS IV, all having a principal place of business at
545 Middlefield Road, Suite 180, Menlo Park, California 94025, agree as
follows:
1.BACKGROUND
1.1 STANFORD has rights to the following inventions hereinafter referred to
either jointly or separately as "Invention(s)":
(a) The Programmable Viterbi Signal Processing Invention(s) as described in
Stanford Docket S90-099;
(b) Method and Apparatus for Reduced Complexity Parametric Estimation of
Echoes as described in Stanford Docket S91-040;
(c) Band-Optimized Digital Modulation and Error Correction Apparatus
for High Speed Data Transmission as described in Stanford Docket S92-018; and
(d) Reception Apparatus for Reducing the Complexity of Multicarrier
Demodulators as described in Stanford Docket S92-019,
and any Licensed Patent(s), as hereinafter defined, which may issue to such
Invention(s).
<PAGE>
1.2 STANFORD has rights to certain technical data and information
("Technology") pertaining to Invention(s).
1.3 STANFORD desires to have the Technology and Invention(s) perfected
and marketed at the earliest possible time in order that products resulting
therefrom may be available for public use and benefit.
1.4 AMATI desires to acquire a license under said Technology, Invention(s),
and Licensed Patent(s) for the purpose of undertaking development to
manufacture, use, and sell Licensed Product(s) and to sublicense the Licensed
Patent(s).
1.5 Theo. A. Bruinsma ("Bruinsma") and University Ventures II ("UVII") were
general partners in a California limited partnership with CommTech
International (a California limited partnership) and CommTech Technology
Partners IV (another California limited partnership) pursuant to the Agreement
of Limited Partnership of UVII dated January 1, 1988, and Attached as Exhibit
A ("Limited Partnership"). The mission of the Limited Partnership was to
sponsor research at universities in exchange for an option to a limited-term
Exclusive license to develop any subsequent and commercially viable inventions.
1.6 Bruinsma, as president of University Technology Transfer Incorporated
("UTTI"), designated UTTI as an agent on behalf of Bruinsma and the Limited
Partnership to support research at STANFORD on Stanford Dockets S90-099 and
S91-040 referenced above. Said support and subsequent UTTI rights are defined
under Sponsored Projects Agreement No. 7779 dated February 9, 1990 ("SPO
Agreement"), and hereto attached as Exhibit B.
<PAGE>
1.7 Bruinsma, pursuant to the Withdrawal Agreement dated December 31, 1990,
and attached hereto as Exhibit C, withdrew from the Limited Partnership.
Bruinsma has assigned all of his and UTTI's rights pursuant to the SPO
Agreement to UVII pursuant to the UTTI/Bruinsma/UVII Assignment of Rights
Agreement hereto attached as Exhibit D.
2. DEFINITIONS
2.1"Licensed Patent(s)" means, either jointly or separately, any Letters
Patent issued:
(a) Upon STANFORD's U.S. Patent Application, Serial No. 07/621,460 (Stanford
Docket S90-099), filed November 30, 1990; or
(b) Upon a patent application(s) filed by STANFORD and pertaining to any of
the other Invention(s);
including the information contained in any such application(s), with respect
to the Invention(s), any foreign patents corresponding thereto, and/or any
divisions, continuations, continuation-in-part, or reissue thereof.
2.2 "Technology" means existing models and algorithms implemented in a
prototype made at STANFORD using multicarrier signaling techniques and
associated supporting software.
2.3 "Licensed Product(s)" means any product or part thereof in the Licensed
Field of Use, the manufacture, use, or sale of which:
(a)Is covered by a valid claim of an issued, unexpired Licensed Patent(s)
directed to the Invention(s). A claim of an issued, unexpired Licensed
Patent(s) shall be presumed to be valid unless and until it has been held
to be invalid by a final judgment of a court of competent jurisdiction from
which no appeal can be or is taken;
<PAGE>
(b) Is covered by any claim being prosecuted in a pending application directed
to the Invention(s); or
(c) Incorporates any of the Technology.
2.4 "Net Sales" means ----------------------------------------------------
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(a)-----------------------------------------------------------------------
(b)-----------------------------------------------------------------------
(c)-----------------------------------------------------------------------
(d)----------------------------------------------------------------------
2.5 "Direct Manufacturing Costs" means the total cost, including, but not
limited to, material, material overhead, labor, and labor overhead associated
with the manufacturing of Licensed Product(s) by sublicensee(s).
2.6 "Licensed Field of Use" means all fields of use.
2.7 "Licensed Territory" means worldwide.
2.8 "Exclusive" means STANFORD shall not grant further licenses in the
Licensed Territory in the Licensed Field of Use.
<PAGE>
3. ASSIGNMENT OF RIGHTS AND FUTURE RIGHTS
3.1 University Ventures II ("UVII") warrants that UTTI and Bruinsma have
irrevocably assigned to UVII all of the rights and privileges granted under
the SPO Agreement, and that UVII has the rights necessary to enter into this
Agreement.
3.2 UVII, CommTech International, and CommTech Technology Partners IV, in
exchange for compensation provided under the UVII/AMATI agreement hereto
attached as Exhibit E, agree to irrevocably assign to AMATI all rights
associated with the SPO Agreement.
3.3 UVII, CommTech International, CommTech Technology Partners IV, and AMATI
agree that upon execution of this Agreement and the UVII/AMATI agreement:
(a) All of STANFORD's obligations pursuant to the SPO Agreement shall be
considered fulfilled and no further obligations, either express or implied,
exist; and
(b) If AMATI ceases to exist or this Agreement is terminated pursuant to the
provision of Article 16, all right, title, and interest in all of the
Invention(s) shall vest with STANFORD.
4. GRANT
4.1 STANFORD hereby grants and AMATI hereby accepts a license to practice the
Licensed Patent(s) and Technology in the Licensed Field of Use to make, use,
and sell Licensed Product(s) in the Licensed Territory.
4.2 Said license shall be Exclusive, including the right to sublicense
pursuant to Article 15 of this Agreement, for a term commencing as of
January 1, 1991, and ending upon the expiration of the last to expire of the
Licensed Patent(s).
<PAGE>
5.ROYALTIES
5.1 AMATI agrees to pay to STANFORD a nonrefundable license issue royalty of
One Hundred and Twenty-Five Thousand (125,000) Shares of Series A Preferred
Stock (having an assumed value of One Dollar [$1] per share) upon signing of
this Agreement.
5.2 In addition, AMATI shall pay STANFORD ---------- on gross revenues of
contract work and an earned royalty of--------- on the Net Sales of Licensed
Product(s).
5.3 AMATI further agrees to pay STANFORD --------- of Net Sales of Licensed
Product(s) sold by sublicensee(s). If the Net Sales price for sublicensee(s)
can not be determined, STANFORD agrees that the royalties due from
sublicensee(s) may be calculated based on ----- the sublicensee(s)'s Direct
Manufacturing Costs.
5.4 If this Agreement is not terminated in accordance with other provisions
hereof, AMATI's obligation to pay earned royalties hereunder shall continue
for so long as AMATI or AMATI sublicensee(s), by its activities would, but
for the license or sublicense(s) granted herein, infringe a valid claim of
an unexpired Licensed Patent(s) of STANFORD covering said activity.
5.5 The royalty on sales in currencies other than U.S. Dollars shall be
calculated using the appropriate foreign exchange rate for such currency
quoted by the Bank of America (San Francisco) foreign exchange desk, on
the close of business on the last banking day of each calendar quarter.
Royalty and payments to STANFORD shall be in U.S. Dollars. All non-U.S.
taxes related to royalty payments shall be paid by AMATI and are not
deductible from the payments due STANFORD.
<PAGE>
6. ANTIDILUTION
6.1 During the term of this Agreement, and in the case of later stock
offerings by AMATI, should AMATI seek additional capital from the sale of
stock, AMATI agrees that STANFORD has the right to participate in any such
sale up to, but not limited to, an amount of stock which would retain
STANFORD's percentage ownership of AMATI at the level STANFORD owned
immediately before any such sale of stock. AMATI agrees to notify STANFORD
in writing of its intent to sell such shares, including the prospective
structure of the offering, at such time as AMATI has determined a capital
requirement and estimated number of shares and share price. STANFORD shall
have thirty (30) days from receipt of said notice to accept the offer, or
any part of thereof.
6.2 If STANFORD declines the offer, or any part thereof, and AMATI subsequently
reaches agreement with a third party or parties under substantially altered
form than the offer made to STANFORD, then AMATI shall notify STANFORD in
writing of these new terms and offer STANFORD a right to participate.
STANFORD shall then have fourteen (14) days from receipt of said notice under
Paragraph 6.2 to accept the offer, or any part thereof.
6.3 The price of the stock under Paragraphs 6.1 and 6.2 shall be at the same
price per share as is offered to the other party(ies) or to the public at that
same time.
<PAGE>
6.4 AMATI employee stock option plans and stock issued to founders of AMATI
under employment agreements shall be exempt from the antidilution provisions
of this Article 6.
6.5 AMATI agrees that STANFORD may pay for the additional stock in the form
of credits toward present or future earned royalties due STANFORD from AMATI
under Article 5.
6.6 STANFORD's antidilution rights pursuant to this Article 6 shall terminate
upon closing of an initial underwritten offering of AMATI's stock to the public
under Securities Act of 1933, as amended.
7. PATENT PROSECTION EXPENSE
7.1 AMATI agrees that within thirty (30) days after receipt of a statement
from STANFORD, AMATI shall reimburse STANFORD for all reasonable expenses
incurred by STANFORD in connection with the filing, prosecution, and
subsequent maintenance of all United States patent applications filed on the
Invention(s) and any corresponding foreign applications filed as a result of
written request to STANFORD by AMATI.
7.2 If at any time AMATI decides not to, refuses, or is delinquent or unable
to reimburse STANFORD for prosecution or maintenance expenses associated
with a particular Licensed Patent(s), STANFORD may, at its sole discretion
and expense and for its sole benefit, continue the prosecution and/or
maintenance of such particular Licensed Patent(s). AMATI agrees that any
such particular Licensed Patent(s) shall then be excluded from this Agreement
and STANFORD may license said particular Licensed Patent(s) to others.
STANFORD agrees to notify AMATI in writing at such time that it intends to
exercise the provisions of this Paragraph 7.2.
<PAGE>
8. REPORTS, PAYMENTS, AND ACCOUNTING
8.1 Quarterly Earned Royalty Payment and Report. Beginning after the first
commercial sale, the start of any contract work, or the issuance of a
sublicense(s), AMATI shall make written reports and associated royalty
payments to STANFORD within forty-five (45) days after the end of each
calendar quarter. This report shall state the number, description, and
aggregate Net Sales of Licensed Product(s) during such completed calendar
quarter, information sufficient to determine the gross revenues on contract
work, and the number of sublicensee(s) and sublicense royalties received.
The report also shall include the resulting calculations for royalties due
for such completed calendar quarter. Concurrent with the making of each such
report, AMATI shall include payment due STANFORD of royalties for the calendar
quarter covered by such report.
8.2 Accounting. AMATI agrees to keep records for a period of three (3) years
showing the manufacturing, sales, use, and other disposition of products sold
or otherwise disposed of under the license herein granted in sufficient detail
to enable the royalties payable hereunder by AMATI to be determined, and
further agrees to permit its books and records to be examined by STANFORD from
time to time to the extent necessary to verify reports provided for in
Paragraph 8.1. Such examination is to be made by STANFORD, at the expense
of STANFORD, except in the event that the results of the audit reveal a
discrepancy in AMATI's favor of ----- --------- or more, then the audit
fees shall be paid by AMATI.
<PAGE>
8.3 Progress Report. On or before September 1 of each year until AMATI
markets a Licensed Product(s), AMATI shall make a written annual report
to STANFORD covering the preceding year ending June 30, regarding the
progress of AMATI toward commercial use of Licensed Product(s). Such report
shall include, as a minimum, information sufficient to enable STANFORD to
ascertain progress by AMATI toward meeting the diligence requirements of
Article 14.
9. NEGATION OF WARRANTIES
9.1 Nothing in this Agreement is or shall be construed as:
(a) A warranty or representation by STANFORD as to the validity or scope of
any Licensed Patent(s);
(b) A warranty or representation that anything made, used, sold, or otherwise
disposed of under any license granted in this Agreement is or will be free
from infringement of patents, copyrights, and other rights of third parties;
(c) An obligation to bring or prosecute actions or suits against third parties
for infringement, except to the extent and in the circumstances described in
Article 13; or
(d) Granting by implication, estoppel, or otherwise any licenses under patents
of STANFORD or other persons other than Licensed Patent(s), regardless of
whether such patents are dominant or subordinate to any Licensed Patent(s).
9.2 Except as expressly set forth in this Agreement, STANFORD MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE LICENSED PRODUCT(S)
WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS.
<PAGE>
10. INDEMNITY
AMATI agrees to indemnify, hold harmless, and defend STANFORD and its
trustees, officers, employees, students, and agents against any and all claims
for death, illness, personal injury, property damage, and improper business
practices arising out of the manufacture, use, sale, or other disposition of
Invention(s), Licensed Patent(s), Licensed Product(s), or Technology by AMATI
or sublicensee(s), or their customers.
11. MARKING
Prior to the issuance of patents on the Invention(s), AMATI agrees, when
practical, to mark Licensed Product(s), (or their containers or labels) made,
sold, or otherwise disposed of by it under the license granted in this
Agreement with the words "Patent Pending," and following the issuance of one
(1) or more patents, with the numbers of the Licensed Patent(s).
12. PROMOTIONAL ADVERTISING
12.1 AMATI may disclose the general nature of this Agreement, but may not
disclose any of its details without STANFORD's prior written consent, except
insofar as AMATI must disclose the Agreement itself when constructing
sublicense agreements.
12.2 AMATI agrees not to identify STANFORD in any mass promotional advertising
or other mass promotional materials to be disseminated to the public or to use
the name of any STANFORD faculty member, employee, or student, or any
trademark, service mark, trade name, or symbol of STANFORD or the Stanford
University Hospital, or that is associated with either of them, without
STANFORD's, or the individuals', prior written consent.
<PAGE>
13. INFRINGEMENT BY OTHERS; PROTECTION OF PATENTS.
13.1 AMATI shall promptly inform STANFORD of any suspected infringement of
any Licensed Patent(s) by a third party. In the event that AMATI, as
STANFORD's Exclusive licensee(s), further notifies STANFORD that AMATI intends
to commence a patent infringement action against a third party, AMATI shall
be entitled, at its own expense and for its sole benefit, to name STANFORD as
a part plaintiff in the event that the rules then require the owner of the
Licensed Patent(s) to be named for purposes of such infringement action.
AMATI shall conduct the lawsuit and shall be responsible for strategy and
settlement. STANFORD shall provide reasonable cooperation to AMATI and may
participate in the action at STANFORD's expense. Any recoveries gained in
any such action commenced by AMATI shall belong to AMATI except that portion
of recoveries due STANFORD arising from sublicensed royalties.
13.2 In the event that AMATI fails to commence vigorous action to enjoin
noticed infringement or seek sublicense(s) from infringing party(ies) within
one hundred and eighty (180) days of such notice, then STANFORD shall be
entitled, at its expense and for its sole benefit, to commence the action in
its name. AMATI shall provide reasonable cooperation to STANFORD and may
participate in the action at AMATI's expense. STANFORD shall be entitled
to conduct the lawsuit and its strategy and settlement, and to keep any
recoveries gained in any such action commenced by STANFORD.
<PAGE>
14. COMMERCIAL APPLICATION
14.1 As an inducement to STANFORD to enter into this Agreement, AMATI agrees
to use all reasonable efforts and diligence to proceed with the development,
manufacture, and sale or lease of Licensed Product(s) and to diligently
develop markets for the Licensed Product(s).
14.2 AMATI agrees that STANFORD may terminate this Agreement pursuant to the
provisions of Article 16 of this Agreement if:
(a) AMATI does not have a sublicensee(s) before ------------- and a Licensed
Product(s) available for commercial sale before ------------------- or
(b) After ------------------ AMATI has no existing sublicensee(s) which has a
Licensed Product(s) available for commercial sale and AMATI does not continue
to sell Licensed Product(s).
15. SUBLICENSE(S)
15.1 If AMATI is unable or unwilling to serve or develop a potential market or
market territory for which there is a willing sublicensee(s), AMATI will, at
STANFORD's request, negotiate in good faith a sublicense(s) hereunder.
15.2 Any sublicense(s) granted by AMATI under this Agreement shall be subject
and subordinate to terms and conditions of this Agreement, except:
(a) Sublicensed terms and conditions shall reflect that any sublicensee(s)
shall not further sublicense; and
(b) The earned royalty rate of Paragraph 5.2 may be at higher rates than of
this Agreement.
<PAGE>
15.3 Any sublicense(s) also shall expressly include the provisions of Articles
8, 9, and 10 for the benefit of STANFORD and provide for the transfer of all
obligations, including the payment of royalties specified in such
sublicense(s), to STANFORD or its designee, in the event that this Agreement
is terminated.
16. TERMINATION
16.1 AMATI may terminate this Agreement by giving STANFORD notice in writing
at least thirty (30) days in advance of the effective date of termination
selected by AMATI.
16.2 STANFORD may terminate this Agreement if AMATI:
(a) Is in default in payment of royalty or providing of reports;
(b) Is in breach of any provision hereof; or
(c) Provides any materially false report; and AMATI fails to remedy any such
default, breach, or false report within thirty (30) days after written notice
thereof by STANFORD.
16.3 Surviving any termination are:
(a) AMATI's obligation to pay royalties accrued or accruable;
(b) Any cause of action or claim of AMATI or STANFORD, accrued or to accrue,
because of any breach or default by the other party; and
(c) The provisions of Articles 8, 9, and 10.
17. ASSIGNMENT
This Agreement may not be assigned by AMATI except:
(a) With the advance written consent of STANFORD;
(b) As a part of a merger, sale, or transfer of substantially the entire
business of AMATI relating to the operations pursuant to this license; or
(c) To a wholly owned subsidiary of AMATI.
<PAGE>
18. ARBITRATION
18.1 Any controversy arising under or related to this Agreement, or any
disputed claim by either party against the other under this Agreement
excluding any dispute relating to patent validity or infringement arising
under this Agreement, shall be settled by arbitration in accordance with the
Licensing Agreement Arbitration Rules of the American Arbitration Association.
Upon request of either party, arbitration will be by:
(a) A third party arbitrator mutually agreed upon in writing by AMATI and
STANFORD within thirty (30) days of such arbitration request; or
(b) A member of the American Arbitration Association. Judgment upon the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof.
18.2 The parties shall be entitled to discovery in like manner as if the
arbitration were a civil suit in the California Superior Court.
18.3 Any arbitration shall be held at Stanford, California, unless the parties
hereto mutually agree in writing to another place.
<PAGE>
19. NOTICES
All notices under this Agreement shall be deemed to have been fully given when
done in writing and deposited in the United States mail, registered or
certified, and addressed as follows:
To STANFORD: Office of Technology Licensing
Stanford University
857 Serra Street, Second Floor
Stanford, CA 94305-6225
Attention: Director,
Technology Licensing
To AMATI:Amati Communications Corporation
101 University Avenue
Palo Alto CA 94301
Attention: President
Either party may change its address upon written notice to the other party.
20. WAIVER
None of the terms, covenants, and conditions of this Agreement can be waived
except by the written consent of the party waiving compliance.
21.APPLICABLE LAW
This Agreement shall be construed, interpreted, and applied in accordance with
the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate originals by their duly authorized officers or representatives.
<PAGE>
THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY
By:
Title:
Date:
AMATI COMMUNICATIONS CORPORATION
By:
Title:
Date:
UNIVERSITY VENTURES II
COMMTECH INTERNATIONAL
COMMTECH TECHNOLOGY PARTNERS IV
By:
Title
Date:
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED BY AMATI COMMUNICATIONS CORPORATION
To:J. Koepnick Date: March 22, 1994
Stanford University OTL
From: J. Cioffi cc: JFG, ANG, FK
Subject: MOU for License
This document is a Memorandum of Understanding between Amati Communications
Corporation (101 University, Suite 100, Palo Alto, CA 94301) and Stanford
University, Stanford, CA listing agreed terms for licensing of US patents
5,285,474 (J. Chow and J. Cioffi) and 5,220,570 (H. Lou and J. Cioffi) and
US patent applications with serial numbers 07/984,938 (Ho and Cioffi) and
08/057,301 (P. Chow and Cioffi). This document was written to be consistent
with Stanford's desire to increase royalties and decrease equity share in
Amati and to assist Amati in improving its overall business viability. These
terms are effective immediately except where stated otherwise.
Grant: Stanford University grants to Amati an exclusive license and right to
sublicense said patents in exchange for the following:
Current payments to Stanford _ Stanford acknowledges receipt of ------ to date
from Amati. Stanford is to receive an additional ----- by ----- from Amati.
The total to be paid by Amati to Stanford prior to ------ is -----. Amati is
to pay Stanford an annual minimum of ----- starting May 1, 1995.
Sublicenses _ Stanford will receive the following royalties after ----- on
Amati sublicenses of said patents:
- - ---------------
- - ---------------
- - ---------------
Two existing sublicenses to ECI Telecom of Israel and Northern Telecom will
remain at -------- for all product sales using sublicensed technology.
Licenses _ Stanford will receive the following royalties after ----- on
Amati products using technology claimed by these patents:
- - ---------------
- - ---------------
- - ---------------
Dilution _ Stanford will accept dilution of stock ownership percentage in
Amati to 7% as of May 1, 1994. This ownership cannot be diluted below 7%
in any subsequent offering of preferred stock prior to April 30, 1995 without
Stanford permission. Stanford will accept further dilution to a minimum of
3% in subsequent offerings until initial public offering of shares. Stanford
will accept dilution below 3% in and after initial public offering.
Contract royalties _ Contract royalty payments to Stanford will cease
effective -----.
The undersigned acknowledge their understanding and agreement to the above
conditions and agree to cooperate in good faith in completing a formal
agreement representing said conditions and completing details usually found
in Stanford licensing agreements by May 1, 1994.
Katherine Ku, Director John M. Cioffi
Office of Tech, Licensing Founder, Director, &
Stanford University VP, Eng., Amati
date date
CONFIDENTIAL TREATMENT REQUESTED BY AMATI COMMUNICATIONS CORPORATION
AGREEMENT
THIS AGREEMENT, effective as of the date of the last signature hereto, is
entered into by and between MOTOROLA, Inc., a Delaware corporation, having
an office at 3501 Ed Bluestein Blvd., Austin, Texas 78721 (hereinafter called
"MOTOROLA"), and Amati Communications Corporation, a California corporation,
having an office at 1975 El Camino Real West, Mountain View, California 94040
(hereinafter called "AMATI"). MOTOROLA or AMATI may be referred to herein
as a Party or the Parties, as the case may require.
WHEREAS AMATI has proprietary technology and design expertise relating to
Asymmetric Digital Subscriber Loop (ADSL) using Discrete Multitone (DMT)
line code, and is believed to be in rightful possession of certain proprietary
rights in such technology;
WHEREAS MOTOROLA desires to obtain licenses and other rights from AMATI with
regard to the aforementioned proprietary rights in order to manufacture and
sell integrated circuits based thereon; and
WHEREAS AMATI recognizes the particular qualifications of MOTOROLA and desires
to assist MOTOROLA in the development of such integrated circuits, and desires
that MOTOROLA become a source for such integrated circuits.
NOW, THEREFORE, MOTOROLA and AMATI agree as follows:
Section 1 - Definitions
Terms in this Agreement, other than names of the Parties hereto, which appear
in capital letters, shall have the following meanings:
1.1 AMATI PATENTS shall mean all classes or types of patents, utility models,
and design patents of all countries of the world, arising out of inventions
made by employees of AMATI, the applications for which have a first effective
filing date in any country prior to the date of expiration or termination of
this Agreement, or which Patents may, prior to or during the term of this
Agreement, be acquired by or become under the control of AMATI, or become
licensable by AMATI, and under which and to the extent to which and subject
to the conditions under which AMATI or any successor may have, as of the
effective date of this Agreement, or at the date of acquisition with respect
to patents acquired by or after the effective date of this Agreement, the
right to grant licenses of the scope granted herein.
AMATI PATENTS include, but are not limited to 1) patents listed in Appendix
B and 2) patents issuing from patent application based on those listed in
Appendix B.
<PAGE>
1.2 DERIVATIVE PRODUCTS shall mean integrated circuits designed by MOTOROLA
using TECHNICAL INFORMATION OF AMATI.
1.3 INTERIM CHIP SET shall mean the ADSL chip set designed by AMATI which
complies with the specifications in Appendix A, and which is intended to serve
as an interim solution to ADSL applications until the LICENSED PRODUCT is
introduced by MOTOROLA.
1.4 LICENSED PRODUCTS shall mean ADSL integrated circuits including but not
limited to the transceiver chip or chip set designed by MOTOROLA under this
Agreement which utilize TECHNICAL INFORMATION OF AMATI, and which integrated
circuits are in substantial compliance with the T1/E1.4 standard, or as
amended, and are further defined in the specifications in Appendix A, attached
hereto and made a part hereof.
1.5 TECHNICAL INFORMATION OF AMATI shall mean circuitry, algorithms,
documentation, and other know-how pertaining to the subject of this Agreement,
and which is provided to MOTOROLA by AMATI pursuant to this Agreement or
pursuant to a previously executed non-disclosure agreement.
1.6 SUBSIDIARY shall mean any Corporation, Company or other entity more than
fifty percent (50%) of whose outstanding share of stock entitled to vote for
the election of Directors (other than any shares of stock whose voting rights
are subject to restriction) are owned or controlled by either Party hereto,
directly or indirectly, now or hereafter during the term of this Agreement,
but only for so long as such ownership or control exists.
Section 2 - Licenses
2.1 AMATI grants and agrees to grant MOTOROLA and its SUBSIDIARIES a worldwide,
nonexclusive, nonassignable, irrevocable (subject to Section 6.5), royalty
bearing right and license, without the right to grant sublicenses, under
TECHNICAL INFORMATION OF AMATI to design, manufacture, have manufactured,
use, lease, sell, or otherwise dispose of LICENSES PRODUCTS and DERIVATIVE
PRODUCTS. No patent license is granted or implied by this section 2.1.
2.2 AMATI grants and agrees to grant to MOTOROLA and its SUBSIDIARIES a
worldwide, nonexclusive, nonassignable, irrevocable (subject to Section 6.5),
royalty bearing right and license, without the right to grant sublicenses,
under AMATI PATENTS to design, manufacture, have manufactured, use, lease,
sell, or otherwise dispose of LICENSED PRODUCTS.
2.3 AMATI grants to MOTOROLA a worldwide, nonexclusive, nonassignable,
irrevocable (subject to Section 6.5), royalty free, right and license, without
the right to grant sublicenses, under AMATI's applicable copyrights, to copy,
use, sell and distribute to customers or potential customers copies of data
sheet documentation transferred hereunder.
2.4 MOTOROLA grants to AMATI a worldwide, nonexclusive, nonassignable,
irrevocable(subject to section 6.6), royalty free right and license, without
the right to grant sublicenses, under MOTOROLA's Trellis Code patents numbered
4,755,998, 4,713,817, and 4,700,349 to have manufactured, use, lease, sell or
otherwise dispose of the INTERIM CHIP SET until twelve (12) months after
MOTOROLA's first sale of the LICENSED PRODUCT, or until January 1, 1998
whichever occurs first.
<PAGE>
2.5 Except as provided for in this Section 2, no other licenses are granted
herein.
Section 3 - Transfer of TECHNICAL INFORMATION OF AMATI and Joint Design
Activity
3.1 MOTOROLA acknowledges that AMATI has transferred certain AMATI TECHNICAL
INFORMATION to MOTOROLA under one or more previously executed non-disclosure
agreements. Additional AMATI TECHNICAL INFORMATION may be transferred under
this Agreement upon request by MOTOROLA as necessary to carry out the design
of the LICENSED PRODUCT.
3.2 Upon MOTOROLA's reasonable request, AMATI shall provide assistance to
MOTOROLA in the understanding of the TECHNICAL INFORMATION OF AMATI during
the design phase of the LICENSED PRODUCT. Such assistance shall include:
3.2.1 Technical review of MOTOROLA specifications for the LICENSED PRODUCT;
3.2.2 Sharing of knowledge about performance and interface requirements of
the ADSL/DMT system -----------------------------------------------------
3.2.3 Details about the DMT algorithms required for ADSL.----------------
- - -------------------------------------------------------------------------
3.2.4 Access to AMATI engineers on an as-needed basis,-------------------
3.3 Until ------ AMATI shall also provide its services, facilities and
equipment for evaluating and characterizing prototypes of the LICENSED PRODUCT.
This includes the hardware and software support in testing the LICENSED
PRODUCT, and design support for any revisions of such prototypes required
after characterization, evaluation, and board level checkout.
3.4 Representatives and personnel of each Party, during the time they are
present on the premises of the other Party, shall be subject to all rules
and regulations prevailing on such premises. Each Party shall be responsible
for the payment of all compensation and expense of its respective
representatives and personnel. None of the representatives or personnel of
either Party shall be considered, for any reason, to be an employee of the
other.
<PAGE>
3.5 Each party agrees that if any person connected with it, or assigned by it
to work hereunder, or his legal representative, shall present any claim or
institute any suit or action against the other Party, or their directors,
officers, agents or employees, for any property damage or personal injury,
including death, connected with, related to, or arising out of the performance
of this Agreement, the Party associated with such a person shall defend and
indemnify the other Party, and their directors, officers, agents and employees,
against any and all such claims, suits or actions.
3.6Amati has no obligation to provide any software under this agreement.
Section 4 - Compensation
4.1----------------------------------------------------------------------
4.2----------------------------------------------------------------------
4.3----------------------------------------------------------------------
4.3.1--------------------------------------------------------------------
4.3.2--------------------------------------------------------------------
<PAGE>
4.3.3--------------------------------------------------------------------
4.4----------------------------------------------------------------------
4.5----------------------------------------------------------------------
4.6----------------------------------------------------------------------
4.7----------------------------------------------------------------------
<PAGE>
Section 5 - Commitments
5.1 MOTOROLA agrees to design, manufacture, and sell the LICENSED PRODUCT on
the open market,------------------------------------------------------------
5.2 MOTOROLA agrees to sell the LICENSED PRODUCT to AMATI------------------
5.3 AMATI agrees to perform conformance testing of the LICENSED PRODUCT
samples provided to AMATI by MOTOROLA under Section 5.1, and assist MOTOROLA
in modifying such LICENSED PRODUCT to conform to the ANSI T1E1.4 standard for
ADSL in the event of nonconformance.
5.4 MOTOROLA and AMATI both agree to participate in the ANSI T1E1.4
standards activities.
5.5 MOTOROLA and AMATI agree to meet to discuss the possibility of engaging
in other mutually beneficial relationships regarding the use of DMT.
Section 6 - Term, Termination and Assignability
6.1 This Agreement shall become effective as of the last signature date
hereto, and shall remain in effect until termination of MOTOROLA's obligation
to pay royalties pursuant to Section 4.1 or termination under this Section 6.
6.2 If either Party shall at any time default in rendering any of the
statements required hereunder, or in the payment of any monies due hereunder,
or in fulfilling any of the other obligations or conditions hereof, and such
default shall not be cured within forty five (45) days after written notice
from the complaining Party to the defaulting Party specifying the nature of
the default, the complaining Party shall have the right to cancel this
Agreement by giving written notice of cancellation to the defaulting Party
and, upon giving of such notice of cancellation this Agreement shall terminate
on the thirtieth (30th) day after such notice is given. The defaulting Party
shall have the right to cure any such default up through but not after the day
of termination. In the event of a cure of the deault, such cure shall be
considered as effective retroactively to the date of notice thereof.
<PAGE>
6.3 This Agreement is personal to each of the Parties hereto and either Party
shall have the right to cancel this Agreement by giving written notice of
cancellation to the other Party at any time upon or after: 1) the filing by
the other Party of a petition in bankruptcy or insolvency; 2) any adjudication
that the other Party is bankrupt or insolvent; 3)) the filing by the other
Party under any law relating to bankruptcy or insolvency; 4) the appointment
of a receiver for all or substantially all of the property of the other
Party; 5) the making by the other Party of any assignment or attempted
assignment of this Agreement for the benefit of creditors; or 6) the
institution of any proceedings for the liquidation of winding up of the other
Party's business r for the termination of its corporate charter. Upon the
giving of such notice of cancellation, this Agreement shall be terminated
forthwith.
6.4 This Agreement and any rights or licenses granted herein are personal to
each Party and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however, that
neither Party shall assign any of its rights or privileges hereunder without
the prior written consent of the other Party except to a successor in ownership
of all the relevant assets of the assigning Party, which successor shall
expressly assume in writing the performance of all terms and conditions of
this Agreement to be performed by the assigning party. Any attempted
assignment in derogation of the foregoing shall be null and void and shall
automatically terminate all rights of the assigning Party under this Agreement.
6.5 If this Agreement is canceled by AMATI in accordance with Section 6.2 or
6.3, the license to MOTOROLA of Section 2.1 shall terminate. MOTOROLA shall
agree, and hereby does agree to hold all Confidential Information of AMATI
(as defined herein) in confidence under the terms and conditions set forth
herein in Section 7.
6.6 If this Agreement is canceled by MOTOROLA in accordance with Section
6.2 or 6.3 any MOTOROLA Confidential Information previously transferred to
AMATI shall be returned to MOTOROLA forthwith, all licenses granted to AMATI
shall cease, and all licenses of Section 2 granted to MOTOROLA shall continue
and any continuing compensation for the licenses of Section 2 shall be reduced
from those described in Section 4 commensurate with the damages to Motorola.
Any such reduction does not preclude Motorola from pursuing any other
remedies or compensation for damages which may have occurred as a result of
a breach of the agreement by AMATI. AMATI shall agree, and hereby does agree
to hold all Confidential Information of MOTOROLA in confidence under the terms
and conditions set forth herein in Section 7.
6.7 No termination of this Agreement shall release either Party from any of
its obligations of Sections 7 and 8, nor its obligations to furnish
statements, to pay compensation, and to permit the inspections of records,
files and books of account.
6.8 No failure or delay on the part of either Party in exercising its right
of termination hereunder for any one or more causes shall be construed to
prejudice its right of termination for such or for any other or subsequent
cause.
6.9 The rights and obligations of Sections 2, 4 and 7 shall survive expiration
of this Agreement.
<PAGE>
6.10 MOTOROLA may terminate this Agreement, which terminates all licenses
under Section 2 and obligations to make payments to AMATI under Section 4
as of the effective date of the termination, at any time with 60 days notice
prior to the effective date of the termination except that termination shall
not be effective prior to December 31, 1995.
Section 7 - Confidentiality
7.1 It is the intention of AMATI and MOTOROLA to transfer and/or exchange
information as may be essential for the accomplishment of the intended
purpose of this Agreement. Such information may be disclosed in oral,
written, or graphic form, or in the form of a computer program or database
in machine-readable form, and will include MOTOROLA Confidential Information
and TECHNICAL INFORMATION OF AMATI.
7.2 Each Party shall designate of or more Documentation Managers. The
responsibility of the Documentation Managers for each Party will be to control
the exchange of information between the Parties, and to monitor within their
company the distribution of information received from the other Party to those
who have a need to know. The Documentation Managers for each Party shall also
arrange conferences and visitations between personnel of the respective
Parties, maintain pertinent records and the like, and acknowledge the receipt
from the other Party of all information.
7.3 With respect to information which is confidential to a Party hereto, when
such is disclosed in writing and accepted, such writing will state the date
of disclosure, that the information contained therein is confidential, that
it is being disclosed pursuant to this Agreement, and will contain an
appropriate legend, such as "Motorola Confidential Proprietary" or "AMATI
Confidential Proprietary". If such disclosure is orally and/or visually made,
it shall be identified at the time of disclosure as being confidential and
shall be confirmed in a written resume within twenty (20) days following
such disclosure. The resume will specifically point out that which is
confidential in sufficient detail to allow the receiving Party to identify
that information deemed to be confidential. Such resume will also contain
an appropriate legend as set forth above. When such disclosure is in graphic
form or in the form of a computer program or database, it shall be identified
as confidential by a label with an appropriate legend or by notice of the
confidential nature of the information appearing in machine-readable form in
the program or database.
7.4 Except as provided hereinafter, for a period of five (5) years from the
date of receipt of the Confidential Information of the disclosing Party, as
measured from the date of first receipt under this Agreement, the receiving
Party agrees to use the same care and discretion, but at least reasonable care
and discretion, to avoid disclosure, publication, or dissemination of received
"Motorola Confidential Proprietary" or "AMATI Confidential information", as
the case may be, outside the receiving Party as the receiving Party employs
with similar information of its own which it does not desire to publish,
disclose, or disseminate. If the Confidential Information of the disclosing
Party was first received under any other agreement previously entered into by
the Parties relating to the subject matter of this Agreement, the period of
confidentiality shall be as specified in that previous agreement and shall
be measured from the date of first receipt under that previous agreement.
<PAGE>
7.5 Disclosure of any information which is confidential to a Party hereto
shall not be precluded if such disclosure is:
7.5.1 in response to a valid order of a court or other governmental body
of the UnitedStates or any political subdivision thereof; provided, however,
that disclosing Party shall first have made a good faith effort to obtain a
protective order requiring that the information and/or documents so disclosed
be used only for the purpose for which the order was issued; or
7.5.2 otherwise required by any law, provided that the disclosure is limited
to the extent required to comply with such law.
7.6The obligations specified above in Section 7.4 will not apply to any
information which is confidential to a Party hereto, that:
7.6.1 is already in possession of the receiving Party without obligation of
confidence;
7.6.2 is independently developed by the receiving Party;
7.6.3 is or becomes publicly available without breach of this Agreement;
7.6.4 is rightfully received by the receiving Party from a third party;
7.6.5 is released for disclosure by the disclosing Party with its written
consent; or,
7.6.6 is inherently disclosed in the use, lease, sale or other distribution
of any product or service licensed hereunder, or documentation therefor, by
or for the receiving Party such product not having been designed for the
purpose of such disclosure.
7.7 It is expressly understood that any drawings, blueprints, descriptions,
or other papers, resumes, documents, tapes, or any other media and all copies
and derivatives thereof shall remain the property of the disclosing Party,
and the receiving Party is authorized to use those materials only within the
scope of this Agreement.
Section 8 - Inventions
Ownership of any new inventions conceived or first reduced to practice in
developing the LICENSED PRODUCT hereunder shall be the property of the Party
employing the inventor thereof. In the event any invention is conceived
jointly by at least one employee of each of the Parties hereto, such invention
shall be jointly owned, and may be made, licensed, used and sold by and for
either Party without the consent of and without accounting to the other Party.
In the event of joint authorship of software, such software shall be jointly
owned, and may be made, licensed, and used by and for either Party without
the consent of and without accounting to the other Party.
<PAGE>
Section 9 - Publication
All notices to third parties and all other publicity concerning the terms
and conditions of this Agreement shall be jointly planned and coordinated
by the Parties. Neither of the Parties shall act unilaterally in this regard
without the prior written approval of the other Party, which approval,
however, shall not unreasonably be withheld.
Section 10 - Warranties and Indemnities
10.1 AMATI and MOTOROLA represent that the terms and conditions of this
Agreement do not violate their respective Articles of Incorporation or
By-Laws and do not conflict with any other agreements to which they are a
party or by which they are bound, and AMATI represents that it has ownership
the the TECHNICAL INFORMATION OF AMATI or the right to transfer such TECHNICAL
INFORMATION OF AMATI to MOTOROLA, and has the right to grant the licenses of
Section 2 hereof.
10.2 In the event of a suit against AMATI based upon a claim that any portion
of the LICENSED PRODUCT contributed by MOTOROLA directly infringes a U.S.
patent, a copyright, a registered mask work, or a trade secret MOTOROLA agrees
to defend AMATI at MOTOROLA's expense, and to pay costs and damages finally
awarded in any such suit, provided that MOTOROLA is notified promptly in
writing of the suit and at MOTOROLA's request and at its expense is given
control of the suit and all requested reasonable assistance for defense of
same. If the use or sale of any portion of the LICENSED PRODUCT contributed
by MOTOROLA hereunder is enjoined as a result of such suit, MOTOROLA, at its
sole option and at no expense at AMATI, shall obtain for AMATI the right to
use and sell the LICENSED PRODUCT, or shall make a modification of the
LICENSED PRODUCT so that the LICENSED PRODUCT is no longer subject to
enjoinment, or shall terminate this AGREEMENT with five (5) days written
notice with all licenses contained in the AGREEMENT terminating. This section
10 describes MOTOROLA's sole obligations for claims of infringement of the
LICENSED PRODUCT.
10.3 In the event of a suit against MOTOROLA based upon a claim that any
portion of the LICENSED PRODUCT contributed by AMATI directly infringes a
U.S. patent, a copyright, a registered mask work, or a trade secret AMATI
agrees to defend MOTOROLA at AMATI's expense, and to pay costs and damages
finally awarded in any such suit, provided that AMATI is notified promptly in
writing of the suit and at AMATI's request and at its expense is given control
of the suit and all requested reasonable assistance for defense of same. If
the use or sale of any portion of the LICENSED PRODUCT contributed by AMATI
hereunder is enjoined as a result of such suit, AMATI, at its sole option and
at no expense to MOTOROLA, shall obtain for MOTOROLA the right to manufacture,
use, and sell the LICENSED PRODUCT, or shall make a modification of the
LICENSED PRODUCT so that the LICENSED PRODUCT is no longer subject to
enjoinment, or shall terminate this AGREEMENT with five (5) days written
notice with all licenses contained in the AGREEMENT terminating. In the event
that AMATI chooses to modify the LICENSED PRODUCT pursuant to this section
9.4, and such modifications are not acceptable to MOTOROLA, MOTOROLA at its
sole option may terminate this AGREEMENT with five (5) days written notice
with all licenses contained in the AGREEMENT terminating. This section 10
describes AMATI's sole obligations for claims of infringement of the LICENSED
PRODUCT.
<PAGE>
10.4 NEITHER PARTY MAKES ANY WARRANTY AS TO THE ACCURACY (EXCEPT AS STATED
IN SECTION 10.1), SUFFICIENCY, OR SUITABILITY FOR THE OTHER'S USE OF ANY
TECHNICAL INFORMATION OR ASSISTANCE PROVIDED HEREUNDER FOR THE MANUFACTURE,
OR THE YIELD FROM THE MANUFACTURE
THEREOF, OR FOR THE QUALITY OF SUCH PRODUCT MADE THEREBY, AND ASSUMES NO
RESPONSIBILITY OR LIABILITY FOR LOSS OR DAMAGES, WHETHER DIRECT, INDIRECT,
CONSEQUENTIAL, OR INCIDENTAL, WHICH MIGHT ARISE OUT OF THE OTHER'S USE
THEREOF, WHICH SHALL BE ENTIRELY AT THE USER'S RISK AND PERIL.
10.5 AMATI represents that, as of the effective date of this Agreement, it
knows of no TECHNICAL INFORMATION OF AMATI embodied in the LICENSED PRODUCT
which infringes any intellectual property of any other party, and that to the
best of its knowledge, such TECHNICAL INFORMATION OF AMATI does not infringe
any intellectual property.
Section 11 - General Provisions
11.1 This Agreement, and the Appendices attached hereto and made a part
hereof, embody the entire understanding of the Parties with respect to the
subject matter contained herein and shall supersede all previous
communications, representations of understandings, either oral or written,
between the Parties relating to the subject matter hereof. No amendment or
modification of this Agreement shall be valid or binding upon the Parties
unless signed by their respective, duly authorized officers.
11.2 Nothing contained in this Agreement shall be construed as:
11.2.1 conferring any rights to use in advertising, publicity, or other
marketing activities any name, trademark, or other designation of either
Party hereto, including any contraction, abbreviation, or simulation of
any of the foregoing, provided such restriction shall not apply to device
identification numbers and descriptions; or
11.2.2conferring by implication, estoppel, or otherwise upon either Party
hereunder any license or other right except the licenses and rights expressly
granted hereunder to a Party hereto; or
11.2.3 a warranty or representation that the manufacture, sale, lease, use,
or other disposition of systems, processes, circuits, devices, software, and
products hereunder will be free from infringement of intellectual property
rights of third parties, including patents, utility models, design patents,
copyrights, and rights in mask works; or
<PAGE>
11.2.4 limiting the rights which a Party has outside the scope of this
Agreement.
11.3 All notices required or permitted to be given hereunder (except for
notices to be addressed to the Documentation Managers) shall be in writing
and shall be valid and sufficient if dispatched by certified mail, return
receipt requested, postage prepaid, in any post office in the
United States, or in the case of international delivery, dispatched by a
delivery service providing a receipt of delivery, addressed as follows:
If to MOTOROLA: If to AMATI:
Motorola, Inc Amati Communications Corp.
3501 Ed Bluestein Blvd. 1975 El Camino Real West
Austin, TX 78721 Suite 303
Mountain View, CA 94040
Attn: Intellectual Property Department Attn: President
Either Party may change its address by a notice given to the other Party in
the manner set forth above. Notices given as herein provided shall be
considered to have been given seven (7) days after the mailing thereof.
11.4 Anything contained in this Agreement to the contrary notwithstanding, the
performance of the obligations of the Parties hereto shall be subject to all
laws, both present and future, of any government having jurisdiction over the
Parties hereto, and to orders, regulations, directions, or requests of any
such government, or any department, agency, or corporation thereof, and to any
contingencies resulting from war, acts of public enemies, strikes, or other
labor disturbances, fires, floods, acts of God, or any causes of like or
different kind beyond the control of the Parties, and the Parties hereto shall
be excused from any failure to perform or any delay in the performance of any
obligation hereunder to the extent such failure or delay is caused by any such
law, order, regulation, direction, request, or contingency.
11.5 Any failure or delay on the part of either Party in the exercise of any
right or privilege hereunder shall not operate as a waiver thereof, nor shall
any single or partial exercise of any such right or privilege preclude other
or further exercise thereof or of any other right or privilege.
11.6 If any provisions of this Agreement shall be held to be invalid, illegal,
or unenforceable, this Agreement shall remain in effect excluding such
invalid, illegal, or unenforceable provisions.
11.7 MOTOROLA and AMATI, both agree not to export or reexport, or cause to
be exported or reexported, any technical data (including any TECHNICAL
INFORMATION) received hereunder, or the direct product of such technical
data, to any country to which, under the laws of the United States, both
Parties are or may be prohibited from exporting its technology or the direct
product thereof.
<PAGE>
11.8 The captions used in this Agreement are for convenience only and are not
to be used in interpreting the obligations of the Parties under this Agreement.
11.9 The applicable law governing any cause of action arising out of this
Agreement, or the performance by either Party hereto, shall be governed by
the laws of the State of New York, U.S.A.
11.10 Nothing contained herein, or done in pursuance of this Agreement, shall
constitute the Parties as entering upon a joint venture or shall constitute
either Party hereto the agent for the other Party for any purpose or in any
sense whatsoever.
11.11 The Parties agree that any disputes which arise out of or are based upon
this Agreement shall be subject to mediation before any legal or administrative
process may be initiated by either Party, except disputes relating to
intellectual property which by their nature require immediate or extraordinary
relief. The Parties agree to cooperate in good faith in the selection of a
mediator, and to share equally any costs incurred in the mediation process.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the last date written below.
MOTOROLA, INC. AMATI
By: By:
Signature Signature
Name: Pete Bingham Name: James F. Ottinger
Title: Corporate Vice President and Title: President and CEO
General Manager
MOS Digital-Analog IC Division
Date: Date
By:
(Signature)
James W. Gillman
Senior Vice President and Director,
Patents, Trademarks and Licensing
Date:
<PAGE>
APPENDIX A
LICENSED PRODUCT SPECIFICATIONS
(See attached document)
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- - ----------------------------------------------------------------
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>PAGE>
APPENDIX B
AMATI PATENTS AND PATENT APPLICATIONS
- - ------------------------------------------------------------------
- - ------------------------------------------------------------------
- - ------------------------------------------------------------------
Mr. John M. Cioffi
7879 Creekline
Cupertino, CA 95014
Re: Employment Agreement
Dear John:
Pursuant to our recent discussions, this letter describes your continuing
employment relationship with Amati Communications Corporation (the "Company")
as well as our understanding with respect to any termination of that
relationship. The terms and conditions of your ongoing employment with the
Company are set forth below.
1. Position. You are currently employed by the Company as its Vice President
Engineering. You will continue to serve in that position until the Company
hires a new Vice President Engineering, which we anticipate will occur in
approximately four to six months. Once the Company hires a new Vice President
Engineering, your title will be changed to Chief Technical Officer.
2.Duties. You accept continued employment with the Company on the terms and
conditions set forth in this Agreement, and you agree to devote your best
energy and skill to your duties at the Company while working on its behalf.
In light of your professorship at Stanford University, we agree that your
work for the Company shall be performed according to a schedule that is
mutually agreed upon by you and the Company's Board of Directors (the
"Board"). You will report to me as Chief Executive Officer. Your duties
for the Company will include, but not be limited to, the following:
(a) attendance at management staff meetings;
(b) development and maintenance of technical strategies and intellectual
property, including review and oversight of the new Vice President Engineering
(subject to the last sentence of this paragraph) and the Vice President
Marketing;
(c) assistance in the recruitment of personnel;
(d) assistance in the Company's public relations and marketing efforts,
including customer visits as your schedule permits;
(e) assistance in the Company's investor relations efforts; and
(f) assistance to the Company's new Vice President Engineering as may be
requested by him or her.
<PAGE>
Initially, you will continue to be responsible for the Company's engineering
function. As such, the new Vice President Engineering will report directly
to you. At some future time (to be agreed upon by you and the Chief
Executive Officer), the Vice President Engineering will report directly to
the Chief Executive Officer.
3. Term of Employment. Your employment with the Company is for a period of
four years beginning on September 30, 1994. Your employment may be terminated
by you or the Company prior to September 30, 1998, but only on the terms set
forth in paragraphs 5 and 6 below.
4. Compensation. You will be compensated by the Company for your services as
follows:
(a) Salary: You will be paid a monthly salary of $9,000.00, less applicable
withholding, in accordance with the Company's normal payroll procedures.
Your salary may be reviewed by the Board from time-to-time, and may be subject
to upward (but not downward) adjustment based upon various factors including,
but not limited to, your performance and the Company's profitability. Any
adjustment to your salary shall be in the sole discretion of the Board.
(b) Bonus: You may be eligible to receive an annual bonus. The decision to
award you a bonus, as well as the amount of the bonus, shall be in the
discretion of the Chief Executive Officer of the Company and the Board, and
shall be based upon various factors including, but not limited to, your
performance and the Company's profitability. If you are awarded a bonus,
it shall be paid to you within 30 days of the date it is awarded, and it
shall be subject to applicable withholding.
(c) Benefits: You will have the right, on the same basis as other executive
employees of the Company, to participate in and to receive benefits under any
of the Company's group health insurance plans, as well as under the Company's
vacation and business expense reimbursement policies. You will also be
provided with appropriate office space and secretarial support.
(d) Stock Option: You will be granted an option to purchase 100,000 shares
of the Company's common stock by the Board. The exercise price for the shares
subject to your option shall be determined by the Board and your option will
vest on a pro rata basis over a period of four years starting on April 17,
1995. The Company's grant of this stock option to you is conditioned upon
your signing of the Company's standard form of stock option agreement, which
will set out the specific terms and conditions applicable to your stock
option, including your right to exercise the option by providing a promissory
note to the Company (in a form satisfactory to the Company and payable in four
years) for the exercise price.
<PAGE>
5. Benefits Upon Voluntary Termination. In the event that you resign from
your employment with the Company, or in the event that your employment is
terminated by the Company as a result of your death or disability, you shall
be entitled to no compensation or benefits from the Company other than those
earned under Paragraph 4 through the date of your termination and other than
those otherwise payable under applicable insurance programs. You shall be
entitled to resign from your employment with the Company for any reason and
at any time, upon delivery to the Company of three months' prior written
notice of your resignation. The Company may, in its sole discretion, elect
to waive all or any part of such notice period and accept your resignation
effective as of an earlier date.
6. Benefits Upon Other Termination.
(a)Termination For Cause: If your employment is terminated by the Company
for cause, you shall be entitled to no compensation or benefits from the
Company other than those earned under Paragraph 4 through the date of your
termination. For purposes of this Agreement, a termination "for cause" occurs
if you are terminated for any of the following reasons: (I) theft,
dishonesty, or falsification of any employment or Company records; (ii)
unauthorized and improper disclosure of the Company's confidential or
proprietary information; or (iii) your repeated failure to perform any
material, reasonable assigned duties after written notice from the Company
of, and a reasonable opportunity to cure, such failure.
(b) Termination For Other Than Cause: If your employment is terminated by
the Company for any reason other than for cause (as defined above), you shall
receive severance payments at your final salary rate, less applicable
withholding, until the earlier of (I) September 30, 1998, or (ii) one year
after the date of such termination without cause. Severance payments will
be made in accordance with the Company's normal payroll procedures. In
addition to any severance to which you are entitled under this subsection,
you shall also be entitled to receive any compensation and benefits that you
have earned under Paragraph 4 through the date of your termination, and to
the extent that your stock option (described in Paragraph 4(d)) is unvested,
you shall immediately become vested in 50,000 of the unvested shares (or any
lesser remaining unvested portion) of that option. Any outstanding promissor
notes given to the Company by you to exercise all or any portion of that
option will be forgiven by the Company upon your termination pursuant to
this subsection.
<PAGE>
7. Confidential and Proprietary Information. As a condition of your continued
employment with the Company, you agree to sign the Company's standard employee
"Agreement Concerning Certain Duties of Amati Communications Corporation
Employment" which is attached hereto as Exhibit A, and we agree that such
agreement shall be deemed to be effective from the date on which you first
commenced employment with the Company. Provided, however, that such agreement
will be deemed to apply only to information received, services performed and
inventions conceived in connection with your performance of services for the
Company, and not for services performed by Stanford University; it shall also
not apply to service performed by you for other persons or entities so long
as the performance of such services is not in violation of Exhibit B hereto.
In addition, we agree that the Technology Assignment Agreement of February 1,
1992, between you and the Company shall remain in full force and effect.
8. Non-Competition. Subject to the conditions set forth in Exhibit B, you
agree to be bound by and comply with the terms of that Exhibit. Provided,
however, that Exhibit B shall cease to be of any force or effect in the event
that you terminate your employment as a result of any material breach of this
Agreement by the Company which breach is not cured within 30 days of the
Company's receipt of written notice of such breach from you.
9. Dispute Resolution. In the event of any dispute or claim relating to or
arising out of our employment relationship or this Agreement (including, but
not limited to, any claims of breach of contract, wrongful termination or age
or other discrimination), we agree that all such disputes shall be fully and
finally resolved by binding arbitration conducted by the American Arbitration
Association in San Jose, California; provided, however, that this arbitration
provision shall not apply to any disputes or claims relating to or arising
out of the misuse or misappropriation of the Company's trade secrets or
proprietary information.
10. Attorneys' Fees. The prevailing party shall be entitled to recover from
the losing party its attorneys' fees and costs incurred in any action brought
to enforce any right arising out of this Agreement.
11. Assignment. In view of the personal nature of the services to be
performed under this Agreement by you, you shall not have the right to assign
or transfer any of your obligations or benefits under this Agreement. All
rights, obligations and benefits under this Agreement shall inure to the
benefit of and be binding upon the legal successors and assigns of the
Company.
<PAGE>
12. Severability. If a court shall refuse to enforce any term of this
Agreement, then that unenforceable term shall be deemed eliminated or
modified to the minimum extent necessary to permit the remaining terms of
this Agreement to be enforced.
13. Entire Agreement. This letter, along with the stock option and other
agreements referred to in paragraphs 4(d) and 7, constitute the entire
Agreement between you and the Company regarding the terms and conditions
of your continued employment, and they supersede all prior negotiations,
representations or agreements between you and the Company, whether written
or oral.
14. Modification. This Agreement may only be modified or amended by a
document signed by you and an authorized officer of the Company.
John, we look forward to continuing to work with you at Amati. Please sign
and date this letter on the spaces provided below to acknowledge your
acceptance of the terms of this Agreement.
Sincerely,
AMATI COMMUNICATIONS CORPORATION
By:
James F. Ottinger
President and Chief Executive Officer
I agree to and accept continued employment with Amati Communications
Corporation on the terms and conditions set forth in this Agreement.
Dated: May 5, 1995
John M. Cioffi
<PAGE>
EXHIBIT A
AGREEMENT CONCERNING CERTAIN DUTIES OFAMATI COMMUNICATIONS
CORPORATION EMPLOYMENT
I, John M. Cioffi, make the following agreement with Amati Communications
Corporation (hereinafter AMATI) which is essential to my continuing or new
employment.
1. Duty to Protect AMATI Trade Secrets and Confidential Information. I will
not use for the benefit of anyone besides AMATI or disclose, either during
or after my employment by AMATI, any trade secrets or confidential information
belonging to AMATI, including information relating to AMATI's products,
processes, notebooks and other writings, know-how, machines, designs,
drawings, software, computer programs, formulas, test data, marketing data,
business pans and strategies, employees, negotiations and contracts with other
companies, disclosures and applications for patents and the status of their
prosecution, or any other subject matter pertaining to its present and
future products, business or finances. I understand that trade secrets and
confidential information received in confidence from a third party by me or
others for AMATI are included within my obligations hereunder, but I have no
right to accept confidential information from third parties on behalf of
AMATI without written permission of an officer of AMATI.
2. Duty to Respect Obligations of Confidentiality I Owe to Others. I will
not disclose to AMATI any trade secrets or confidential information belonging
to any of my previous employers or others.
3. Duty to Avoid Conflicting Relationships. During my employment with AMATI,
I will not engage in any other employment, occupation, consultation, or other
activity relating to the present or anticipated business or investigations of
AMATI or otherwise which may conflict with my obligations to AMATI, without
prior written consent of AMATI.
4. Disclosure Where Family Members Work for Competitors. During my employment
with AMATI, I will immediately notify AMATI whenever I learn that any member
of my family or any person with whom I reside is engaged as an employee,
consultant, or agent from any person or firm or is a principal engaged in or
serving any business which is in competition with AMATI.
<PAGE>
5. Duty to Disclose Inventions Conceived or Developed While Employed Even
Though They Are Not Assignable to AMATI. I will promptly disclose and
describe to AMATI all inventions, computer programs, improvements, writings,
discoveries and technical developments, whether patentable or not patentable
or copyrightable (herein collectively "Inventions"), which I solely or jointly
with others conceive, write or reduce to practice or reduce to writing during
the term of my employment with AMATI. My disclosure must be of all Inventions
I conceive or reduce to practice while employed by AMATI, even those to which
AMATI may have no right. However, my disclosure to AMATI of my inventions
to which I believe AMATI has no rights shall be limited to the information
I believe is necessary to enable AMATI to confirm its concurrence with my
belief. I agree, though, to furnish AMATI with a complete disclosure of any
such invention if requested by AMATI to do so, which disclosure AMATI will
keep in confidence, subject to the provision that any obligation on the part
of AMATI to keep such information confidential shall not apply to information
which is public or independent known to AMATI of which becomes public or
independently known to AMATI.
6.Assignment of Inventions and other results of my work for AMATI. I hereby
assign, and agree to assign, to AMATI or its designee my entire right, title
and interest in and to all such Inventions which relate to the Business of
AMATI, its actual or demonstrably anticipated research and development or
which results from work performed by me for or on behalf of AMATI. I will
cooperate with AMATI in its efforts to obtain and maintain protection on such
Inventions. The results of all my work for AMATI belong to AMATI irrespective
of whether such results are considered inventions and in this connection all
copyrightable material developed by me in the course of my employment by
AMATI shall be considered to be "works made for hire."
My obligation set forth above to assign inventions to AMATI or its designee
shall encompass Inventions conceived or made by me solely or jointly with
others within one year after terminating my employ with AMATI if such
inventions are based upon trade secret or confidential information of AMATI.
If a patent application is filed by or for me within six months after
termination of my employee, describing or claiming subject matter directly
related to the scope of my work for AMATI during my employment by AMATI, or
which otherwise relates to a portion of AMATI's business of which I had
knowledge during my employment by AMATI, it is to be presumed that the
Invention was conceived by me during the period of such employment and
terms of this agreement apply thereto.
7. What the Invention Assignment Does Not Include. My duty to assign
inventions to AMATI or its designee does not apply to inventions for which
no equipment, supplies, facilities or trade secret information of AMATI
was used and which were developed entirely on my own time and (a) which do
not relate at the time of conception or reduction to practice of the invention
(1) to the business of AMATI or (2) to actual or demonstrably anticipated
research or development, or (b) which do not result form any work performed
by me for AMATI.
>PAGE>
If at the time of disclosing an Invention to AMATI I believe it is subject
to the above limited exclusion and I have no libation to assign it to AMATI,
I will so inform AMATI in writing and ask AMATI to determine the respective
rights and obligations of the parties relative to such Invention, which
determination shall not be unreasonably withheld.
8. No Conflicting Obligations. To the best of my knowledge there is no other
contract or duty on my part which may be inconsistent with my obligations
hereunder.
9. Employment Earlier Than This Agreement. I agree that if I was employed by
AMATI before signing this agreement, as a condition to my continued
employment, the provisions of this agreement apply to my term of employment
before such signing.
10. Items to be Surrendered to AMATI Upon Termination of Employment. When my
employment with AMATI ends, I will surrender to AMATI all equipment,
materials, parts, records, notebooks, files, drawings, documents, software
and computer programs and all evidence of Invention, trade secret or
confidential information and I will not prepare, carry away or receive any
copies thereof without AMATI's prior written consent.
11. Injunctive Relief if Breach. I agree that it would be difficult if not
impossible to measure or calculate the actual or pending damage if I breach,
or threaten to breach, this agreement. I agree that if I breach or threaten
to breach any paragraph of this agreement, AMATI shall be entitled to an
injunction or other order restraining such breach.
12. Promises Severable. Each obligation I have made under this agreement
is separate from the others. Thus, if one provision shall at any time be
determined to be invalid it shall not affect the validity of the balance of
the agreement as written.
13. Only Agreement on Subject Matter. This is my only agreement with AMATI
on the subject matter. It supersedes any previous oral or written
understanding and cannot be changed or rescinded other than in writing and
signed by AMATI.
I HAVE READ THIS ENTIRE AGREEMENT, NOT JUST THE PARAGRAPH HEADINGS.
BY SIGNING THE SAME I ACKNOWLEDGE RECEIPT OF A COPY OF IT.
Employee Printed Name Date
Employee Signature
<PAGE>
EXHIBIT B
The obligations set forth in this exhibit arise out of and are contingent
upon the completion of a pending transaction between ICOT Corporation ("ICOT")
and the Company, pursuant to which ICOT will acquire all of the shares of
stock and all of the assets and goodwill of the Company (the "Transaction"),
including all of the shares of Company stock owned by John Cioffi ("Cioffi").
The obligations set forth in this exhibit shall not take effect unless and
until the Transaction is successfully completed.
Cioffi is the chief inventor of the Company's technology and the largest
holder of the Company's securities, holding 200,000 shares of the Company's
stock (and an option to purchase 50,000 shares of the Company's stock and
another option to purchase 100,000 shares of the Company's stock) prior to
the Transaction. As further consideration and as a condition for ICOT to
enter into the Transaction, ICOT wishes to restrict Cioffi from competing
with ICOT on the terms and conditions set forth herein, in order to protect
the goodwill of the Company that ICOT is acquiring in the Transaction.
Cioffi agrees to and shall abide by the following non-competition and
non-solicitation covenants throughout his employment with the Company (as
used in this exhibit, "the Company" shall include the Company and any of
its successors), and for a period of one year following the termination of
his employment with the Company for any reason (other than as a result of
a material breach of this Agreement as described in paragraph 8).
(a) Non-competition. Cioffi shall not own an equity interest in (other than
a 5% or less interest in a publicly-traded entity), or provide any labor or
services to (whether as an employee, consultant, partner, joint venturer or
otherwise), any person or entity that is engaged in the business of
developing, marketing or selling transmission products utilizing discrete
multitone technology that addresses asymmetric and high speed digital
lines. Notwithstanding the foregoing, such limitation shall in no way
restrict Cioffi's performance of his duties as a member of the faculty
at Stanford University including, without limitation, communication and work
with students and faculty members both at Stanford University and at other
academic institutions.
(b) Non-Solicit of Customers. Cioffi shall not directly or indirectly
solicit, on behalf of himself or any other person or entity, any customer
of the Company to purchase, lease, license or otherwise exploit any goods
or services that are similar to or competitive with any goods or services
offered (or then under active development) by the Company.
(c) Non-Solicit of Employees. Cioffi shall not directly or indirectly
solicit, on behalf of himself or any other person or entity, any employee
of the Company to (I) terminate his or her employment relationship with
the Company or (ii) provide any labor or services to any person or entity
other than the Company.
The covenants describe in subsections (a)-(c) shall apply to and be effective
in any county in California, any other state of the United States and any
other country in the world where the Company's business has been carried on.
These covenants shall be construed as a series of separate covenants with
regard to each county in California, each state of the United States, and
each country of the world. If a court shall refuse to enforce any of these
separate covenants (or any part hereof), then that unenforceable covenant
(or such part) shall be deemed eliminated or modified to the minimum extent
necessary to permit the remaining separate covenants (or parts thereof) to
be enforced. Cioffi acknowledges that the restrictions contained in this
exhibit regarding geographic scope, length of term and types of activities
restricted are reasonable.
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<FISCAL-YEAR-END> JUL-27-1996
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