Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[x] Quarterly Report pursuant Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period to .
------------ ------------
Commission File Number 0-21766
BroadBand Technologies, Inc.
Delaware 56-1615990
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4024 Stirrup Creek Drive, Durham, N.C. 27703
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (919) 544-0015
---------------------------
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 the past 90 days.
Yes ___X___ No_______
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest feasible date.
Classes Outstanding as of August 9, 1996
- -------
Common Stock ($.01 par Value) 13,241,019
<PAGE>
BroadBand Technologies, Inc.
Index
<TABLE>
<CAPTION>
Page No.
-------------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements:
Condensed Balance Sheets
June 30, 1996 and December 31, 1995 3
Condensed Statements of Income
Three Months Ended June 30, 1996 and 1995 5
Condensed Statements of Income
Six Months Ended June 30, 1996 and 1995 6
Condensed Statements of Cash Flows 7
Six Months Ended June 30, 1996 and 1995
Notes to Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 11
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 18
Signature 18
</TABLE>
2
<PAGE>
BroadBand Technologies, Inc.
Condensed Balance Sheets
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
June 30, December 31,
---------------------------------------
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
Assets
Current assets:
Cash, cash equivalents and short term investments
(Notes 2 and 3) $162,698,004 $65,350,943
Accounts receivable, trade 3,320,441 4,313,465
Inventories (net) (Note 4) 1,228,620 2,007,362
Prepaid expenses and other current assets 1,042,759 692,171
------------------------------------
Total current assets 168,289,824 72,363,941
Property, plant and equipment, at cost 25,312,880 23,827,633
Less allowance for depreciation and amortization (12,720,270) (10,233,135)
-----------------------------------
12,592,610 13,594,498
Deferred debt issuance costs (Note 8) 3,782,139 0
-------------------------------------
Total assets $184,664,573 $ 85,958,439
======================================
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
BroadBand Technologies, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
----------------------- --------------------
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $8,417,022 $10,410,803
Accrued warranty reserve 2,843,024 2,758,743
Deposits 3,670,003 5,418,776
Deferred revenue 8,887,600 8,193,970
Current installments of capitalized leases 131,235 264,447
--------------------------------------------
Total current liabilities 23,948,884 27,046,739
Capitalized leases, excluding current installments 0 43,420
Long term debt (Note 8) 115,000,000 0
Stockholders' equity:
Common stock, $.01 par value: 30,000,000 shares
authorized; 13,239,055 shares issued and
outstanding at June 30, 1996; and 13,151,167
shares issued and outstanding at December 31, 1995. 132,391 131,512
Additional paid-in capital 161,824,064 160,927,240
Accumulated deficit (116,240,766) (102,190,472)
--------------------------------------------
Total stockholders' equity 45,715,689 58,868,280
--------------------------------------------
Total liabilities and stockholders' equity $184,664,573 $85,958,439
============================================
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
BroadBand Technologies, Inc.
Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
1996 1995
--------------------------------------------
<S> <C> <C>
Net sales $5,514,917 $5,455,498
Cost and expenses:
Cost of sales 5,223,483 5,751,753
Research and development 5,095,517 4,523,371
Selling, general and administrative expenses 2,315,260 2,945,294
--------------------------------------------
12,634,260 13,220,418
--------------------------------------------
Loss from operations (7,119,343) (7,764,920)
Interest income 1,393,787 1,223,981
Interest expense (783,528) (4,694)
--------------------------------------------
Loss before income taxes (6,509,084) (6,545,633)
Income taxes 0 0
--------------------------------------------
Net Loss $(6,509,084) $(6,545,633)
============================================
Net loss per share (Note 5) $ (.49) $ (.50)
============================================
Average number of shares and equivalents 13,216,578 13,066,459
=============================================
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
BroadBand Technologies, Inc.
Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1996 1995
--------------------------------------------
<S> <C> <C>
Net sales $9,511,562 $8,676,622
Cost and expenses:
Cost of sales 9,480,134 9,968,253
Research and development 10,143,403 9,651,818
Selling, general and administrative expenses 5,241,905 5,782,301
--------------------------------------------
24,865,442 25,402,372
--------------------------------------------
Loss from operations (15,353,880) (16,725,750)
Interest income 2,093,422 2,236,592
Interest expense (789,837) (39,384)
--------------------------------------------
Loss before income taxes (14,050,295) (14,528,542)
Income taxes 0 0
--------------------------------------------
Net Loss $(14,050,295) $(14,528,542)
=============================================
Net loss per share (Note 5) $ (1.07) $ (1.11)
=============================================
Average number of shares and equivalents 13,183,626 13,060,701
=============================================
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
BroadBand Technologies, Inc.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1996 1995
--------------------------------------------
<S> <C> <C>
Operating activities
Net cash used in operating activities $(13,101,030) $ (5,741,779)
Investing activities
Acquisitions of furniture, fixtures, and equipment (1,485,247) (2,092,236)
Disposal of furniture, fixtures, and equipment 0 242,839
--------------------------------------------
Net cash used in investing activities (1,485,247) (1,849,397)
Financing activities
Issuance of common stock 897,703 128,971
Issuance of Warrants 0 7,000,000
Net proceeds from sale of Convertible Debt 111,212,267 0
Principal repayments on capital lease obligation (176,632) (187,522)
--------------------------------------------
Net cash provided by (used in) financing activities 111,933,338 6,941,449
--------------------------------------------
Increase/(decrease) in cash and cash equivalents 97,347,061 (649,727)
Cash and cash equivalents at beginning of period 65,350,943 80,289,960
--------------------------------------------
Cash and cash equivalents at end of period $162,698,004 $79,640,233
============================================
</TABLE>
See notes to condensed financial statements.
7
<PAGE>
BroadBand Technologies, Inc.
Notes to Condensed Financial Statements
June 30, 1996
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they 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 accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and six months ended June 30, 1996 and 1995 are not necessarily
indicative of the results that may be expected for a full fiscal year. For
further information, refer to the financial statements and accompanying
footnotes for the year ended December 31, 1995 included in the Company's
Form 10-K submission.
2. Restricted Cash
The Company has outstanding stand-by letters of credit in the amount of
$2,706,348. These letters of credit are collaterized by restricted cash
of the same amount.
3. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents. Cash equivalents consists
principally of United States treasury securities and commercial paper.
Investments in Debt Securities
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (FAS
115), in 1994. There was no cumulative effect as a result of adopting FAS
115.
Management determines the appropriate classification of its investments in
debt securities at the time of purchase and reevaluates such determination
at each balance sheet date. Debt securities for which the Company has both
the intent and ability to hold to maturity are classified as held to
maturity. These securities are carried at amortized cost. At June 30, 1996,
the Company had no investments that qualified as trading or available for
sale.
8
<PAGE>
BroadBand Technologies, Inc.
Notes to Condensed Financial Statements
3. Investments in Debt Securities (continued)
At June 30, 1996, the Company's investments in debt securities were
classified as cash and cash equivalents and short-term investments. The
Company maintains cash and cash equivalents and short-term investments
principally of United States treasury securities and commercial paper with
a maturity date less than twelve months with various financial
institutions. These financial institutions are located in different areas
of the U.S. and Company policy is designed to limit exposure to any one
institution. The Company performs periodic evaluations of the relative
standing of those financial institutions that participate in the Company's
investment strategy.
The following is a summary of cash and cash equivalents and short-term
investments by balance sheet classification for June 30, 1996 and December
31, 1995:
June 30, December 31,
1996 1995
----------------------------------------
Cash and cash equivalents:
Demand deposit accounts $ 116,179,062 $ 17,544,401
Commercial paper 22,229,313 17,678,067
U.S. Treasury Obligations 8,095,650 12,026,297
----------------------------------------
$ 146,504,025 $ 47,248,765
========================================
Short-term investments:
Commercial paper $ 11,263,246 $ 5,425,895
U.S. Treasury Obligations 4,930,733 12,676,283
----------------------------------------
$ 16,193,979 $ 18,102,178
========================================
The estimated fair value of each investment approximates the amortized cost
and, therefore, there are no unrealized gains or losses as of June 30,
1996.
6
<PAGE>
BroadBand Technologies, Inc.
Notes to Condensed Financial Statements
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. The components of inventory consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------------------------------
<S> <C> <C>
Electronic parts and other components $ 2,597,873 $ 2,629,801
Work In Process 585,090 479,914
Finished goods 1,796,966 816,538
-------------------------------------
4,979,929 3,926,253
Inventory Reserve (3,751,309) (1,918,891)
-------------------------------------
$ 1,228,620 $ 2,007,362
=====================================
</TABLE>
5. Net Loss Per Share
The net loss per share is governed by APB 15. Under this guidance, options,
warrants, convertible debt and securities and other common stock
equivalents are considered as outstanding only if their effect is dilutive
(i.e. increasing the net loss per share).
6. Warrants
The Company received on April 28, 1995, $7 million for six-year Warrants
that entitles Holder of Warrant Certificates to purchase 1,000,000 shares
of the Company's Common Stock for $41.75 per share.
7. Stock Options
The Company accounts for its employee stock option plans in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB 25"). Under APB 25, no compensation expense has been
recognized since the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant.
8. Long Term Debt
The Company issued on May 17, 1996, $115 million of 5% Convertible
Subordinated Bonds Securities that entitles Holders of Bond Certificates to
convert into shares of the Company's Common Stock. Interest is
payable on May 15th and November 15th of each year, commencing on
November 15, 1996. Each $1,000 bond is convertible into 24.1080
shares of common stock of the Company at a conversion price of
$41.48 per share. The bonds are not redeemable by the
Company prior to May 15, 1999. Thereafter, the Company may redeem the bonds
initially at 102%, and at decreasing prices thereafter to 100% at maturity,
in each case together with accrued interest. Costs associated with this
financing have been deferred and are being amortized on a straight-line
basis over the term of the debt.
10
<PAGE>
BroadBand Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Recent Developments
In July, the Company signed a six and one half year multi-million dollar
contract addendum to supply Lucent Technologies with broadband components
in support of a contract between Lucent & Bell Atlantic for the deployment
of the SLC 2000 Access System with FLX SDV platform that will be used to
modernize Bell Atlantic's network.
Product Development
The Company's Second Generation product is a "global core" platform that
enables a Digital Loop Carrier system to provide telephony that will easily
interface with the Company's FLX-2500 System. The FLX-2500 provides
broadband video and data interfaces and switching, as well as transport
technology. The FLX-2500 is modular which enables network operators to
deploy the FLX-2500 for telephony first that can be easily upgraded for
broadband services. The Company has begun shipments of the FLX-2500
telephony modules to international and domestic System Integration
customers for telephony integration testing with Digital Loop Carriers'
systems and field deployment.
The Comany developed and demonstrated the FLX PC adapter card with Intel
that will provide users with internet and data communications services at
significantly higher speeds than are available today. The company
successfully demonstrated the new product, along with the broad band
capability of the FLX 2500, at the SuperComm tradeshow during
the quarter.
Net Sales and Net loss
Net sales for the second quarter ending June 30, 1996 were $5.5 million,
virtually unchanged from the same period in the prior year. Net sales
for the six month period ended June 30, 1996 were $9.5 million,
compared to $8.7 million for the same period in 1995. Sales for the quarter
included the Company's First Generation platform and related software
plus some shipments of the telephony modules from the Company's Second
Generation product. Sales for the balance of 1996 are expected to reflect a
higher percentage of the Company's Second Generation product as the Company
begins to transition from its First to its Second Generation product. The
timing of this transition could be either the third or fourth quarter of
this year. The net loss for the second quarter was $6.5 million or $.49
per share, compared with $6.5 million or $.50 per share for the same
period in 1995. The net loss for the six month period ended June 30, 1996
was $14.1 million or $1.07 per share, compared with $14.5 million or $1.11
per share for the same period in 1995. Net losses reflect the Company's
continued investment in research and development to ensure it is well
positioned to deliver the Second Generation product and to maintain
its acknowledged lead over competition related to Switched Digital Video
technology.
11
<PAGE>
BroadBand Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cost of Sales
Cost of sales for the three month and six month periods ended June 30, 1996
was $5.2 million and $9.5 million, respectively, compared to $5.8
million and $10.0 million for the same period in 1995. The gross margin
resulting from the cost of sales as a percentage of net sales for the three
month and six month periods ended June 30, 1996 was a positive 5.3% and
.3% compared to a negative 5.4% and 14.9% for the same periods in 1995.
The improved gross margin for the period is a result of a change in
product mix as compared to the prior year.
Research and Development Expense
Research and development expenses for the three month and six month periods
ended June 30, 1996 were approximately $5.1 million and $10.1 million
compared to $4.5 million and $9.7 million for the same periods in 1995.
The Company continues to invest in the development of the hardware and
software for its Second Generation platform and enhancements and
support for its First Generation platform.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three month and six
month periods ended June 30, 1996 were approximately $2.3 million and $5.2
million compared to $2.9 million and $5.8 million for the same periods
in 1995. These expenses include support for field service, sales and
marketing resources as well as administrative requirements.
Other Income (Expense)
Other income (expense) consists primarily of interest income and interest
expense. Net other income for the three month and six month periods ended
June 30, 1996 was approximately $.6 million and $1.3 million compared to
$1.2 million and $2.2 million for the same periods in 1995. Interest
income is the result of investing activities of the cash balance available
during the period. The increase in interest income for the period ended
June 30, 1996 compared to the same period last year was the result of a
higher cash balance from the proceeds of the May 1996 bond offering. The
increase in interest expense for the period ended June 30, 1996 compared
to the same period last year was the result of accrued interest
expense on the convertible bond offering.
12
<PAGE>
BroadBand Technologies, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources
For the six-month period ended June 30, 1996, Cash and Cash Equivalents,
which consists of investments in demand deposits, commercial paper and U.S.
Treasury obligations with maturities of less than 90 days and short-term
investments, which consists of commercial paper and U.S. Treasury
obligations with maturities of less than 360 days, increased approximately
$97.4 million. The ending balance is $162.7 million compared to a balance
of $65.3 million at December 31, 1995.
During the quarter, the Company completed a $115 million financing of
convertible debentures, resulting in net proceeds of approximately
$111 million, providing it with financial strength and
flexibility to meet the growth in the market demand for its products. The
increase in funds was partially offset by cash requirements for research
and development and other operating activities.
$2.7 million of the total cash balance is restricted pursuant to
outstanding Letters of Credit.
Management expects that cash and cash equivalents at June 30, 1996 and cash
generated from the sale of the Company's products will be adequate to fund
operating requirements and property and equipment expenditures for at least
the next twelve (12) months based on current projections of operations.
However, management recognizes the dynamic nature of the telecommunications
industry and will consider financing alternatives when and if market
conditions are deemed to be available on favorable terms.
Other Financial Information
The Company's backlog includes sales orders received by the Company that
have a scheduled delivery date prior to June 30, 1997. The aggregate sales
price of orders received and included in backlog was approximately $12.2
million at June 30, 1996. The Company believes that the orders included in
the backlog are firm orders that will be shipped prior to June 30, 1997.
However, some orders may be canceled by the customer without penalty where
management believes it is in the Company's best interest to do so.
13
<PAGE>
BroadBand Technologies, Inc.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
On May 22, 1996, the Annual Meeting of Stockholders of the Registrant
was held at which the following matters were submitted to and voted
on by the stockholders, with the results set forth below:
Proposal 1 -- Setting the Number of Directors
a.) The Stockholders voted to set the number of Board of Directors
at seven until such number is increased or decreased by the Board of
Directors or Stockholders in accordance with the bylaws of the
Company.
Votes Votes Votes
for against abstaining
Votes to set at 7 the
number of Directors 11,839,619 11,145 11,109
Proposal 2 -- Election of Directors
b.) Two members of the Board of Directors were elected to fill
positions as Class III directors, whose terms will expire at the 1999
Annual Meeting of the Stockholders. The following persons were
elected to the Board of Directors. Each person received the number of
votes set forth next to their name below:
Votes Votes Votes
Name for against abstaining
Salim A.L. Bhatia 11,827,841 0 34,032
Charles T. Lee 11,827,941 0 33,932
14
<PAGE>
BroadBand Technologies, Inc.
Item 4. Submission of Matters to a vote of Security Holders (continued)
Proposal 3 -- Amendment to the 1988 Incentive Stock Option Plan
c.) The Stockholders approved an amendment of the 1988 Incentive
Stock Option (ISO) Plan of the Company to increase to 2,150,000 the
number of shares of Common Stock issuable pursuant to the Plan. The
votes cast for and against and the number of abstentions are set
forth below:
Votes Votes Votes
for against abstaining
Votes to increase
(ISO) Plan 7,253,658 1,678,536 72,716
Proposal 4 -- Amendment to the 1992 Nonqualified Stock Option Plan
d.) The Stockholders approved an amendment of the 1992 Nonqualified
Stock Option Plan of the Company to increase to 650,000 the number of
shares of Common Stock issuable pursuant to the Plan. The votes cast
for and against and the number of abstentions are set forth below:
Votes Votes Votes
for against abstaining
Votes to increase
Nonqualified Plan 6,901,358 2,203,912 75,091
Proposal 5 -- Independent Accountant
e.) The Stockholders ratified the selection of Ernst and Young LLP to
serve as the independent accountants of the Registrant for the audit
of the 1996 financial statements of the Registrant . The votes cast
for and against and the number of abstentions are set forth below:
Votes Votes Votes
for against abstaining
11,839,171 9,762 12,940
15
<PAGE>
BroadBand Technologies, Inc.
Item 5. Other Information
Risk Factors
In connection with the "safe "harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this document are advised that this
document contains both statements of historical facts and forward looking
statements which include statements about the Company's Second Generation
Product and future financial requirements. Forward looking statements herein,
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those indicated by the forward looking
statements, including the following: Telephone companies may not widely deploy
the Company's products in their local distribution networks. The Company must
complete the development of the new products that will be integrated with
Lucent Technologies' SLC(R)-2000 Access System and the joint product
must meet the industry standards established by Bell Communications
Research and must be compatible with the products of other telephone
company suppliers, including competitors of the Company. The provisions
of the Company's agreement with Lucent Technologies makes sales of the
Company's new products in the U.S. and Canada substantially dependent on the
marketing efforts of Lucent Technologies, which will continue to market
alternative technology in competition with the joint Lucent Technologies/BBT
product. In recent years, the purchasing behavior
of the Company's large customers has increasingly been characterized by the use
of fewer, larger contracts. This trend is expected to intensify, and contributes
to the variability of the Company's results. Such larger purchase contracts
typically involve longer negotiating cycles, require the dedication of
substantial amounts of working capital and other Company resources and in
general, require investments which may substantially precede recognition of
associated revenues. Moreover, in return for larger, longer-term purchase
commitments, customers often demand more stringent acceptance criteria, which
can also cause revenue recognition delays. For example, customers have requested
that products be priced based on volume estimates of customers' future
requirements, but the failure of such customers to take delivery of product
comparable to volume anticipated, could result in negative margins on product
sales. Certain multi-year contracts may relate to new technologies which may not
have been previously deployed on a large-scale commercial basis. The Company may
incur significant initial cost overruns and losses on such contracts which would
be recognized in the quarter in which they became ascertainable. Future
estimates on such contracts are revised periodically over the lives of the
contracts, and such revisions can have a significant impact on reported earnings
in any one quarter. As the Company announces succeeding generations of its
products to better meet the changing requirements of customers, customers may
delay orders of existing products until the next generation product is available
for shipment, or until small volumes of next generation products are adequately
field tested.
16
<PAGE>
BroadBand Technologies, Inc.
Item 5. Other Information (continued)
Risk Factors (continued)
The Company competes against many larger companies that have significantly
greater resources than the Company. The Company, which has an accumulated
deficit of approximately $116 million as of June 30, 1996, has never been
profitable and may never achieve profitability. The Company may require
additional capital and may not be able to raise such capital or may be able to
raise such capital only on unfavorable terms. In May 1996, the Company sold
$115 million of 5% convertible five-year notes. Failure to pay principal and
interest when due would have a material adverse effect on the Company.
Currently, the Company is dependent upon a single customer in North America,
which if lost would deprive the Company of substantially all its revenue. As the
Company's market is dominated by a few large potential customers, the Company
may not have sufficient bargaining power to sell its products on favorable
terms. If the Company is successful in expanding its sales, growth will place
significant strain on its operational resources and systems. In some cases, the
Company depends on single source suppliers or parts which are available only
from a limited number of sources. Delays in filling orders of the Company's
customers resulting from supplier delays may cause customer dissatisfaction. The
customers of the Company are subject to substantial government regulation which
could affect their ability to utilize the products of the Company. To remain
competitive, the Company must continue to invest substantial resources in
research and development. Notwithstanding such investment, competitors may
develop competing technology and products that are more attractive to customers
than is the technology and products of the Company. The ability of the Company
to compete effectively depends upon its ability to attract and retain
highly-skilled engineering, manufacturing, marketing and managerial personnel.
The patent and other proprietary rights of the Company may not prevent the
competitors of the Company from developing non infringing technology and
products that are more attractive to customers than the technology and products
of the Company. The technology and products of the Company could be determined
to infringe the patents or other proprietary rights of others. The market price
of the Company's securities has been very volatile as a result of many factors,
some of which are outside the control of the Company, including, but not limited
to, quarterly variations in financial results, announcements by the Company, its
competitors, customers, potential customers or government agencies and
predictions by industry analysts, as well as general economic conditions. Sales
by the Company's existing stockholders, trading by short-sellers and other
market factors may adversely affect the market price of the Company's
securities. Any or all these risks could have a material adverse affect on the
market price of the securities of the Company. Continued pursuit of
international markets exposes the Company to increased risks of currency
fluctuations and controls, political and social risks, trade barriers, new
competitors and other risks associated with international markets.
17
<PAGE>
BroadBand Technologies, Inc.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits --
10.1 Bell Atlantic Network Services, Inc. and BroadBand
Technologies, Inc. Procurement Agreement, Contract
No. BA 14494, dated July 1, 1996. *
10.2 First Amendment to Agreement LGC-A65-D executed
July 12, 1996 between the Company and Lucent
Technologies, Inc. *
b) Reports on Form 8-K --
o May 17, 1996
o May 22, 1996
* Pursuant to Rule 24b-2, the Company has requested confidential
treatment be granted to portions of this exhibit.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this Report of Form 10-Q to be signed on its behalf by
the undersigned, thereunto duly authorized.
August 9, 1996 /S/ Timothy K. Oakley
---------------------------------------------
Timothy K. Oakley
Vice President and
Chief Financial Officer
18
<PAGE>
EXHIBIT 10.1
[**] - CERTAIN INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST UNDER
RULE 24B-2 OF THE COMMISSION
PROCUREMENT AGREEMENT
This Agreement is made by and between Bell Atlantic Network Services, Inc.
(hereinafter referred to as "Bell Atlantic"), a Delaware corporation with
offices located at 1320 North Court House Road, Arlington, Virginia 22201 and
BroadBand Technologies, Inc. (hereinafter referred to as "BBT") a Delaware
corporation with offices located at 4024 Stirrup Creek Drive, Durham, North
Carolina 27709-3737.
DEFINITIONS. The following terms shall have the meanings indicated below when
used in this Agreement:
"Affiliate" means an entity that owns, directly or indirectly, a greater than
fifty percent (50%) voting interest in a party ("Parent"), or any entity in
which a party or its Parent owns, directly or indirectly, at least a twenty
percent (20%) voting interest.
"Agreement" means this as-order procurement Agreement and any appendices,
exhibits, diagrams attached hereto.
"Appendix" means the referenced appendix or appendices and any amendments or
modifications thereto that may be made from time to time by written agreement of
the parties.
"Lucent" shall mean Lucent Technologies, Inc.
"Material" shall mean any and all of the hardware or software listed in Appendix
A. At Bell Atlantic's request [*******************************************
******************], the parties will amend Appendix A to add additional
related or successor hardware and software.
"Services" means the repair and warranty services specified in this Agreement.
GENERAL SCOPE OF AGREEMENT. This Agreement covers the purchase of Materials and
related Services by Bell Atlantic and/or its Affiliates during the Term. This
Agreement is a non-commitment contract and Materials and/or Services shall be
furnished by BBT on an "as-ordered" basis.
TERM. The term of this Agreement shall commence on July 1, 1996, and shall,
except as otherwise provided herein, [*********] in effect thereafter until
[********************].
<PAGE>
PRICE. Prices shall be those listed in Appendix A. [***********************
*****************************].
ASSIGNMENT BY BUYER. This Agreement and any order under this Agreement may be
assigned in whole or in part by Bell Atlantic to any Parent or Affiliate of Bell
Atlantic upon written notice to BBT. Upon such assignment and an assumption of
obligations thereto by the assignee, Bell Atlantic shall be discharged of any
further liability pursuant to this Agreement or to any order which has been
assigned.
ASSIGNMENT BY SELLER. Any assignment by BBT of this Agreement, the work to be
performed, or of any other interest hereunder, in whole or in part, shall be
void unless Bell Atlantic's written consent is obtained or the assignment is
confined solely to monies due or to become due. It is expressly agreed that any
such assignment of monies shall be void to the extent that it attempts to impose
upon Bell Atlantic obligations to the assignee additional to the payment of such
monies, or to preclude Bell Atlantic from dealing solely and directly with BBT
in all matters pertaining hereto, including the negotiation of amendments or
settlements of amounts due.
"BAR CODE PACKAGE LABELING". In addition to labeling requirements in the Section
"MARKING", BBT shall label all unit, intermediate and shipping packages in
accordance with Telecommunications Industry Forum specifications (TCIF):
a. Shipping and Receiving Transaction Bar Code label Specification
BC/89-001,
b. Implementation Guideline to Package Labeling BC/89-002,
c. Product Package Label Specification BC/89-003,
d. Guideline for identification and Bar code Labeling of cable reels, if
applicable.
Copies of the TCIF reference guidelines (a, b, c, d above) may be obtained form
TCIF/ATIS, 1200 G Street, N.W., Suite 500, Washington, D.C. 20005,
202-434-8844."
[*************************************************************************
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2
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BUYER'S INFORMATION. All specifications, drawings, sketches, models, samples,
tools, computer programs, technical information, confidential business
information or data, written, oral or otherwise (all hereinafter designated
"Information") obtained from Bell Atlantic by BBT hereunder or in contemplation
hereof shall remain Bell Atlantic's property. All copies of such Information in
written, graphic or other tangible form shall be returned to Bell Atlantic upon
request. Unless such Information was previously known to BBT free of any
obligation to keep it confidential or has been or is subsequently made public by
Bell Atlantic or a third party, it shall be kept confidential by BBT, shall be
used only in the filling of orders, or in performing otherwise hereunder, and
may be used for other purposes only upon such terms as may be agreed upon in
writing by Bell Atlantic.
CHOICE OF LAW. The construction, interpretation and performance of this
Agreement shall be governed by and construed in accordance with the domestic
laws of the Commonwealth of Virginia.
COMPATIBILITY INFORMATION. Compatibility information is that technical
information, including but not limited to software interfaces, required to
design equipment and/or software which is functionally interconnectable with
Bell Atlantic's network and the Material supplied by BBT hereunder. Should the
interface information not be available from other sources without additional
cost to Bell Atlantic, BBT for a period of ten (10) years after providing such
Material shall supply, at no charge, such compatibility information to such
Material to Bell Atlantic within thirty (30) days of a request from Bell
Atlantic.
COMPLIANCE WITH LAWS. BBT shall comply with all applicable federal, state,
county and local laws, ordinances, regulations and codes (including procurement
of required permits or certificates) in BBT's performance hereunder,
irrespective of whether a specification is furnished. This includes, but is not
limited to, compliance with the Occupational and Safety Health Act of 1970 as
amended, the Small Business Investment Act of 1958 as amended, the Hazardous
Material Transportation Acts as amended, the Toxic Substance
3
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Control Act as amended, and any applicable state or local law, rule or
regulation affecting safety and health, including applicable "right to know"
laws and regulations. If Material, Services or containers furnished are required
to be constructed, packaged, labeled or registered in a prescribed manner, BBT
shall comply with federal law and regulations and, in addition, with applicable
state or local laws and regulations, including but not limited to compliance
with the Hazard Communication Standard by furnishing applicable Material Safety
Data Sheets and any other required notices to Bell Atlantic on or before the
date of delivery of the associated Material, service or container. BBT agrees to
defend, indemnify and hold harmless Bell Atlantic for any loss, damage, penalty,
fine, or liability sustained because of BBT's noncompliance.
CONTINGENCY. Neither of the parties shall be held responsible for any delay or
failure in performance hereunder caused by fires, strikes, embargoes,
requirements imposed by Government regulation, civil or military authorities,
acts of God or by the public enemy or other similar causes beyond such party's
control. However, BBT's delay or failure to perform shall not be excused by a
default of any of its subcontractors, suppliers, or Lucent unless such default
arises out of causes beyond the control of BBT and its subcontractor, supplier
and Lucent and without the fault or negligence of any of them, and unless the
supplies or services to be furnished by such subcontractor, supplier or Lucent
are not obtainable from other sources on commercially reasonable terms. If such
contingency occurs, the party injured by the other's inability to perform may
elect to: (a)
[********************************************************************]; (b)
[***********************************************************************
**************************************************************************
***********************************************]; or (c) resume performance
hereunder once the delaying cause ceases with an option in the injured party to
extend the period hereunder up to the length of time the contingency endured.
Unless written notice is given within thirty (30) days after such injured party
is apprised of the contingency, (b) shall be deemed selected.
CONTINUING AVAILABILITY. BBT agrees to offer for sale to Bell Atlantic, for a
period of five (5) years after the expiration date of this Agreement,
functionally equivalent maintenance, replacement, and repair parts. Such parts
shall be priced at the then current Agreement price, or if no such Agreement
exists, at a price agreed upon by BBT and Bell Atlantic. In addition, should BBT
decide, during the Term, to discontinue manufacturing systems of Material BBT
shall give at least one (1) year prior written notice to Bell Atlantic of such
manufacture discontinuance. In the event BBT fails to continue to supply
Material and parts or provide advance notification prior to discontinuing
manufacture of Material and BBT is unable to obtain another source of supply
4
<PAGE>
for Bell Atlantic, then such inability shall be considered noncompliance with
this Section and, in addition to all other rights and remedies at law or in
equity, Bell Atlantic may require BBT, without obligation or charge to Bell
Atlantic, to provide Bell Atlantic with the technical information or any other
rights required so that Bell Atlantic can manufacture, have manufactured or
obtain such Material or parts from other sources. The technical information
includes, by example and not by way of limitation: (a)_manufacturing drawings
and specifications of raw materials and components comprising such parts;
(b)_manufacturing drawings and specifications covering special tooling and the
operation thereof; (c)_a detailed list of all commercially available parts and
components purchased by BBT on the open market disclosing the part number, name
and location of the supplier, and price lists for the purchase thereof; and
(d)_one complete copy of the then current source code used in the preparation of
any software licensed or otherwise acquired by Bell Atlantic from BBT hereunder.
DEFAULT. Time is of the essence to this Agreement. In the event BBT fails to
deliver the Material and/or complete the performance of Services ordered
hereunder within the time specified or in accordance with agreed upon schedules,
or in the event BBT is in breach or default of any other term, condition or
provision of this Agreement and if such breach or default [******************
**************************************************************************
**************************************************************************
*************************************************************************].
ENGINEERING COMPLAINTS. Bell Atlantic may issue engineering complaints in
writing to notify BBT of unsatisfactory conditions or performance of Material
which Bell Atlantic believes require a change in the design, manufacturing
process or installation and engineering instructions. BBT shall provide a
written acknowledgment to Bell Atlantic within ten (10) working days stating
that BBT has received and will act on the complaint. BBT shall provide a written
final report to each engineering complaint within ninety (90) days of receipt of
such complaint. This report shall include a plan for resolving the complaint and
an estimated schedule for implementing the plan. To the extent not inconsistent
with this Agreement, BBT agrees to administer engineering complaints in
accordance with Bellcore Technical Reference TR-EOP-000230, Guidelines for
Engineering Complaints and Operational Trouble Reports. Nothing herein shall
obviate BBT's obligations under the Sections titled "PRODUCT CHANGES" and
"WARRANTY."
ENTIRE AGREEMENT. This Agreement shall incorporate the provisions of Bell
Atlantic's orders as required by this Agreement and issued pursuant to
5
<PAGE>
this Agreement. This Agreement, supplemented by such provisions, shall
constitute the entire agreement between Bell Atlantic and BBT with regard to the
subject matter hereof, shall supersede all prior quotations, communications,
understandings and agreements between Bell Atlantic and BBT with regard to the
subject matter hereof, and shall not be modified or amended except by a writing
signed by the party against whom the modification or amendment is to be
enforced. Printed provisions on the reverse side of Bell Atlantic's written
orders and all provisions on BBT's written and electronic forms shall be deemed
deleted. It is further agreed that Bell Atlantic Network Services, Inc. or its
authorized assignee shall be the only Bell Atlantic party to this Agreement with
the authority to modify or amend this Agreement pursuant to this Section "ENTIRE
AGREEMENT", provided that Bell Atlantic, as noted in the Section "ORDERS", can
agree with BBT pursuant to this Section "ENTIRE AGREEMENT" to modify or amend
the terms and conditions of this Agreement with respect to a particular order
issued by such Bell Atlantic.
FREIGHT CLASSIFICATION. BBT is obligated to show on their bill of lading the
proper description and piece count of articles shipped, according to the noun
description shown in the National Motor Freight Classification Tariff, e.g., "15
cartons on 1 pallet," and to conform to rules and regulations as set forth in
the carrier's classifications.
GOVERNMENT CONTRACT PROVISIONS. Orders placed hereunder containing a notation
that the Material or Services are intended for use under Government Contracts
shall be subject to the then current Government Provisions referenced thereon or
in attachments thereto.
GOVERNMENT REQUIREMENTS. Appendix C, "GOVERNMENT REQUIREMENTS", shall form a
part of this Agreement and any amendment hereto.
[*************************************************************************
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6
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HAZARDOUS MATERIALS COMPLIANCE PROVISION. BBT represents and warrants that all
products and Material provided hereunder will be packaged, labeled, handled and
shipped in accordance with all applicable federal, state, county and local laws,
rules, regulations, orders and other lawfully mandated requirements. This
obligation shall include but not be limited to compliance with the following:
a) all product labeling and other requirements imposed by the New Jersey
Worker and Community Right-to-Know Act, N.J.S.A. 34:5A-1, et. seq., and
all regulations adopted pursuant thereto;
b) all product labeling and other requirements imposed by the Occupational
Safety and Health Act of 1970 (OSHA), as amended, and all regulations
adopted pursuant thereto, including the Hazard Communication Standard
regulations;
c) all requirements of the Hazardous Material Transportation Act, the
Toxic Substance Control Act, as amended, the Federal Insecticide,
Fungicide and Rodenticide Act (FIFRA) and the New Jersey Pesticide
Control Code (N.J.A.C. 7:30).
If required, every container must bear a label indicating the following:
a) name of the product;
b) chemical name and Chemical Abstracts Service (CAS) number of the five
(5) most predominant substances in a container, whether they are
hazardous or non-hazardous;
c) chemical name and CAS number for all hazardous substances constituting
greater than one percent (1%) of the product (or greater than 0.1% for
carcinogens, mutagens, and teratogens);
d) appropriate hazard warnings; and,
e) the name and address of the manufacturer, importer, or other
responsible party.
The label must be a sign, emblem or sticker of durable nature affixed to or
stenciled onto every individual item package. Labels must be in English, easy to
read, not obscured, and prominently displayed on every individual item package.
7
<PAGE>
In addition, BBT agrees to furnish Bell Atlantic on or before the date of
delivery of Material, and thereafter upon request of Bell Atlantic, a copy of
the applicable Material Safety Data Sheet(s) (MSDS) for all Material provided
hereunder, in accordance with the OSHA requirements cited above. In the event of
any change in the composition of the Material during the course of the
Agreement, BBT shall provide Bell Atlantic an updated MSDS and BBT must update
the product label accordingly.
BBT agrees to defend, indemnify and hold harmless Bell Atlantic for any loss,
damage, penalty, fine or liability (including any reasonable costs and
attorney's fees) sustained because of BBT's noncompliance with the foregoing.
IMPLEADER. BBT agrees that it will not implead or bring any action against Bell
Atlantic or Bell Atlantic's customers or the employees of either: (i) based on
any claim by any person for personal injury or death that occurs in the course
or scope of employment of such person by Bell Atlantic or Bell Atlantic's
customers and that arises out of Material or Services furnished under this
Agreement, or (ii) arising from or relating to BBT's contract with Lucent.
INDEPENDENT CONTRACTOR STATUS. In carrying out the provisions of this Agreement,
BBT is and shall be deemed to be for all purposes, an independent contractor.
BBT shall select its employees, agents and subcontractors, if any, and such
employees, agents, and subcontractors shall be under the exclusive and complete
supervision and control of BBT, not Bell Atlantic. BBT hereby acknowledges
responsibility for full payment of wages and other compensation to all
employees, agents, and subcontractors engaged by it in the performance of
Services under this Agreement, and for full compliance with all laws, rules and
regulations involving, but not limited to, employment of labor, hours of labor,
working conditions, and payment of taxes, such as unemployment, social security
and a new payroll after taxes, including applicable contributions from its
employees, agents, and subcontractors required by law. It is the expressed
intent of this Agreement that the relationship of BBT to Bell Atlantic shall be
solely that of independent contractor and not that of a joint venture,
partnership, or any other joint relationship.
INFRINGEMENT. The following terms apply to any infringement or claim of
infringement of any U.S. patent, trademark, copyright, trade secret or other
proprietary interest based on the manufacture, use or sale of any Material,
Services or equipment furnished to Bell Atlantic under this Agreement or in
contemplation of this Agreement. BBT shall defend, indemnify and hold harmless
Bell Atlantic and Bell Atlantic's customers for any loss, damage, expense or
liability that may result by reason of any such infringement or
8
<PAGE>
claim, except where such infringement or claim arises solely from BBT's
adherence to Bell Atlantic's written instructions or directions which involve
the use of merchandise or items other than (1) commercial merchandise which is
available on the open market or is the same as such merchandise, or (2) items of
BBT's origin, design or selection; and Bell Atlantic shall so indemnify BBT in
such excepted cases. Each party shall defend or settle at its own expense, any
action or suit against the other for which it is responsible under this Section.
Each party shall notify the other promptly of any claim of infringement for
which the other is responsible, and shall cooperate with the other in every
reasonable way to facilitate defense of any such claim. Should any of the
Material, Services or equipment furnished to Bell Atlantic hereunder or in
orders placed hereunder, or in the operation hereof, become the subject of a
claim of any infringement of a patent, trademark, copyright, trade secret, or
other proprietary interest, BBT shall, at its expense, and at BBT's option,
either (i) procure for Bell Atlantic the right to continue using the Material,
Services or equipment, or (ii) replace or modify the same so that they become
non-infringing. If Seller's good faith effort to accomplish (i) or (ii) fails,
then Seller will refund to Bell Atlantic the full purchase price of the
infringing items.
INSIGNIA. Upon Bell Atlantic's written request certain of Bell Atlantic's
trademarks, trade names, insignia, symbols, decorative designs, or evidences of
Bell Atlantic's inspection (hereafter "Insignia"), will be properly affixed by
BBT to the Material furnished. Such Insignia will not be affixed, used or
otherwise displayed on the Material furnished or in connection therewith without
Bell Atlantic's written approval. The manner in which such Insignia will be
affixed must be approved in writing by Bell Atlantic. Material rejected or not
purchased by Bell Atlantic which utilized such Insignia shall have all such
Insignia removed prior to any sale, use or disposition thereof. BBT agrees to
indemnify and hold Bell Atlantic harmless from any claim, loss or damage arising
out of BBT's failure to do so. This Section shall in no way modify provisions
relating to the Section "BUYER'S INFORMATION".
INSPECTION. Unless Bell Atlantic gives BBT written notice to the contrary, BBT
shall notify Bell Atlantic or Bell Atlantic's agent when the Material is ready
for inspection and Bell Atlantic or Bell Atlantic's agent shall be given
reasonable opportunity to inspect the Material at any time prior to shipment
under Quality Program Specifications listed in Appendix D. Inspection or failure
to inspect on any occasion shall not affect Bell Atlantic's rights under the
Section "WARRANTY" or other provisions of this Agreement. BBT shall make
available at no additional cost to Bell Atlantic, such production testing
facilities, labor, data, specifications, procedures and such other documents,
and assistance as necessary for Bell Atlantic or Bell Atlantic's agent to
perform inspection. In addition, BBT shall make available to Bell Atlantic or
Bell Atlantic's agent, at no additional cost, data obtained through BBT's normal
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routines which show results of BBT's inspection, tests and audits of Material as
specified in the Quality Program Specifications. Such data shall be sufficient
to demonstrate that the Material meets all quality and reliability requirements.
INVOICING FOR STOCKS. If Bell Atlantic requests, for reasons other than covered
by the Section "CONTINGENCY", that shipment be postponed beyond the date shown
on an order, BBT may invoice Bell Atlantic as of the original scheduled delivery
date for Material manufactured hereunder, if it has been inspected and approved
by Bell Atlantic or Bell Atlantic's Agent (provided inspection has been
specified).
[*************************************************************************
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*************************************************************************].
LIABILITY, INSURANCE, INDEMNITY. BBT agrees to indemnify and save Bell Atlantic
harmless from any liabilities, claims, or demands (including the costs, expenses
and reasonable attorney's fees on account thereof) that may be made: (1) by any
third person for injuries, including death to persons or damage to property,
including theft, resulting from BBT's negligent or otherwise wrongful acts or
omissions, or those of persons furnished by BBT hereunder; (2) by any third
person for injuries, including death to persons or damage to property, caused by
any Material supplied by BBT hereunder in a defective or unreasonably dangerous
condition; or (3) under Worker's Compensation, or similar employer-employee
liability acts, against Bell Atlantic by persons provided by BBT. BBT agrees to
defend Bell Atlantic at Bell Atlantic's request, against any such liability,
claim or demand. The foregoing indemnification shall apply whether BBT or Bell
Atlantic defends such suit or claims. The parties agree to cooperate in the
defense or settlement of concurrent or joint claims, to use their best efforts
to agree privately on the
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sharing of fault and the defense of claims, and, if necessary, to litigate the
issue of comparative fault and/or contribution in a tribunal or proceeding
independent of claimant. BBT's liability for indemnification shall be based on
the comparative fault of BBT compared to other persons, including Bell Atlantic.
Neither party shall be bound by a settlement made by the other to which it has
not consented. Bell Atlantic agrees to notify BBT promptly of any written claims
or demands against Bell Atlantic for which BBT is responsible hereunder. BBT
shall maintain, during the term thereof, all insurance and/or bonds required by
law, including but not limited to:
(1) Commercial General Liability Insurance, on an Occurrence Basis,
including, but not limited to (premises-operations, broad form property
damage, products/completed operations, contractual liability,
independent contractors, personal injury) with limits of at least
$500,000 combined single limit for each occurrence.
(2) Automobile Liability, Comprehensive Form, with limits of at least
$500,000 combined single limit for each occurrence.
(3) Excess Liability, with limits of at least $1,000,000 combined single
limit for each occurrence.
(4) Workers' Compensation Insurance as required by Statute and Employers
Liability Insurance with limits of not less than $100,000 per
occurrence.
(5) Professional Liability, Errors and Omissions, with limits of not less
than $1,000,000 per occurrence.
BBT agrees that BBT, BBT's insurer(s) and anyone claiming by, through, under or
in behalf of BBT shall have no claim, right of action or right of subrogation
against Bell Atlantic or Bell Atlantic's customers based on any loss or
liability insurable under the foregoing insurance. BBT shall be prepared, prior
to the start of work, to furnish certificates or adequate proof of the foregoing
insurance. BBT shall also require its subcontractors, if any, who may enter upon
Bell Atlantic premises to maintain similar insurance and to agree to furnish
Bell Atlantic, if requested, certificates or adequate proof of such insurance.
Certificates furnished by BBT or its subcontractors shall contain a clause
stating that "Bell Atlantic is to be notified in writing at least thirty (30)
days prior to cancellation of, or any material change in, the policy." BBT shall
maintain insurance, as required by this Agreement, through insurance carriers
which have and maintain an A.M. Best rating of B+VII or greater. Bell Atlantic
and its Parent and Affiliates shall be named as an
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additional insured to the insurance policies required under this Agreement and
this shall be so evidenced upon the Certificate(s) of Insurance.
LICENSES. No licenses, express or implied, under any patents are granted by Bell
Atlantic to the BBT under this Agreement.
LIMITATION OF CERTAIN DAMAGES.
(a) Except with respect to BBT's indemnification obligations, Neither party
shall be liable for incidental, consequential or special damages.
[*************************************************************************
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***************].
MARKING. BBT shall mark all Material furnished hereunder for identification
purposes as follows:
(a) Model/part number and serial number, if applicable
(b) Month and year of manufacture
(c) Identification codes specified in Bell Communications Research
Practices:
- TR-TAP-000485, Issue 1, April 1987, entitled "Common Language
CLEI Code Assignment and Equipment Marking Requirements"
- TR-TAP-000383, Issue 4, July 1989, entitled "Generic
Requirements for Common Language Bar Code Labels"
- TR-ISD-000325, Issue 1, September 1986, entitled "EQUIPMENT
INFORMATION Required from Suppliers for Operations Systems"
(d) Containers of Material shall be marked in accordance with the
requirements set forth in SR-NWT-2759, Issue 3, January, 1995, entitled
"A View of Packaging, Packing, Palletization and Marking Requirements".
(e) If applicable, BBT shall show the SSI# (nine digit number for the
Material) on all preliminary and final packaging, packing slip, and
invoices. The SSI# shall be shown directly above the identification
marking in the same size print.
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(f) Other identification which might be requested by Bell Atlantic.
MONTHLY ORDER REPORTS. BBT will provide to Bell Atlantic by the tenth day of
each month a report of Bell Atlantic's purchasing activity hereunder. The format
of this report shall be mutually agreed upon by both parties. To the extent
information is available to BBT from Bell Atlantic's purchase orders, BBT's
report will identify at a minimum: (i) the ship to location (state or district),
(ii) Bell Atlantic's Job or TEO number, (iii) company placing order, (iv) order
date, (v) agreed to ship date, (vi) actual ship date, for completed orders,
(vii) quantity of Material ordered/shipped ( plug-ins, hardware, misc.), and
(viii) dollar value for each order.
M/WBE EXPENDITURE QUARTERLY REPORTS. Bell Atlantic has established a
subcontracting plan to encourage the use of minority (MBE), women-owned (WBE)
and protected class (PC) subcontractors utilized by BBT. For this purpose, BBT
shall provide quarterly reports to Bell Atlantic of expenditures with MBE/WBE/PC
subcontractors. BBT agrees to complete Bell Atlantic's MBE/WBE/PC Summary
Subcontract Report, attached hereto as Appendix E, and send to: Bell Atlantic
Network Services, Inc., ATTN: M/WBE Subcontracting Administrator, Two Bell
Atlantic Plaza, 1320 North Court House Road, 4th Floor, Arlington, Virginia
22201.
[*************************************************************************
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*******************************************************************]. Bell
Atlantic shall determine, at its own discretion, the extent to which Bell
Atlantic will market, advertise, promote, support or otherwise assist in further
offerings of the Material. BBT agrees that purchases by Bell Atlantic under this
Agreement shall not require Bell Atlantic to continue any level of such
purchases. Bell Atlantic assumes no liability for Material produced, processed,
rendered or shipped in excess of the amount specified in this Agreement or in an
order issued pursuant to this Agreement. Estimates or forecasts furnished by
Bell Atlantic shall not constitute commitments.
NON-WAIVER. Bell Atlantic's failure at any time to enforce any of the provisions
of this Agreement or any right or remedy available hereunder or at law or
equity, or to exercise any option herein provided will in no way be construed to
be a waiver of such provisions, rights, remedies or options or in any way to
affect the validity of this Agreement. The exercise by Bell Atlantic of any
rights, remedies or options provided hereunder or at law or equity shallnot
preclude or prejudice the exercising thereafter of the same or any other rights,
remedies or options.
NOTICES. Any notices or demand which under the terms of this Agreement or under
any statute must or may be given or made by BBT or Bell Atlantic shall be in
writing and shall be given or made by facsimile or similar communication or by
certified or registered mail addressed to the respective parties as follows:
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To Bell Atlantic: Bell Atlantic Network Services, Inc.
ATTN: Director of Purchasing -
Switching/Public & Operator Services/Network Transport
1320 N. Court House Road, 4th Floor
Arlington, Virginia 22201
To BBT: BroadBand Technologies, Inc.
Attn: Mr. Tim Oakley VP & CFO
4024 Stirrup Creek Drive
Durham, North Carolina 27709-3737
Such notice or demand shall be deemed to have been given or made when sent by
facsimile or other communication or when deposited, postage prepaid in the U.S.
mail. The above addresses may be changed at any time by giving thirty (30) days
prior written notice as provided above.
ORDERS. Orders applying against this Agreement may be sent to BBT by Bell
Atlantic and/or any Affiliates. Each order issued under this Agreement shall be
the sole responsibility of the company issuing the order. No company shall be
liable for an order issued by another company. Orders may be issued: (1) in
writing, with delivery by U.S. mail, private delivery service, or hand delivery;
(2) in writing, with delivery by telephone facsimile transmission; or, (3)
electronically, with delivery in a manner to be agreed upon by the ordering
party and BBT. Unless otherwise agreed in writing by the ordering party and BBT,
all of the provisions of this Agreement shall apply to all orders placed for
Material or Services specified herein. BBT shall accept orders on any of the
following bases:
(a) Standard interval orders for Material and/or Services in accordance
with prices and ordering intervals contained herein, or where such
prices do not exist, then at prices agreed to by Bell Atlantic and BBT;
or
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(b) Short interval orders for Material and/or Services required in less
than standard intervals, at intervals agreed to by the ordering party
and BBT.
If, at any time, BBT feels that it does not have sufficient Material forecast
information, BBT may contact Bell Atlantic's purchasing organization for
assistance. Material order volumes that significantly exceed any nonbinding
forecast, i.e., more than fifty percent (50%) will be delivered on a schedule to
be agreed upon by the parties prior to placement of the order(s). Orders shall
include: (a) description and quantity of Material and/or Services; (b) requested
delivery and/or completion date; (c) applicable price; (d) location to which the
Material is to be shipped and/or at which Services are to be performed; (e)
location to which invoices shall be rendered for payment.
Orders will be sent to:
BroadBand Technologies, Inc.
Attn: Customer Service
4024 Stirrup Creek Drive
P.O. Box 13737
Research Triangle Park, North Carolina 27709-3737
BBT shall acknowledge receipt of: (1) each written order which is delivered by
U.S. mail, private delivery service, or hand delivery, within two (2) weeks
after it is received; (2) each written order which is delivered by telephone
facsimile transmission, by the next business day after it is received; and, (3)
each electronic order, the same day that it is received. An order shall be
deemed accepted by BBT unless written or electronic notice to the contrary is
received by Bell Atlantic from BBT within two (2) weeks from BBT's receipt of
the order. Any changes to an accepted order must be mutually agreed upon and
delineated in a change order referencing the original order.
ORDER DEFERRAL. Bell Atlantic will notify BBT of the need to defer or cancel
delivery of any order or portion thereof due to its failure to obtain all
regulatory approvals required to take delivery or deploy such order, and will
thereafter confer with BBT as to possibility of having the Material covered by
such order delivered to another location. Upon such notice being given, BBT will
not ship any Material covered by such order until Bell Atlantic instructs it, in
writing, to do so.
PACKING. Material shall be packaged and packed at no additional charge for
shipment in suitable boxes, reels, or bundles, pieces or coils, etc., which will
provide protection against damage during domestic shipment, handling, and
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storage in reasonably dry, unheated quarters. Corrugated shipping containers
shall comply with requirements of Rule 41 of the uniform freight classification.
Containers of any type that are too heavy or too large to be palletized shall be
skidded to facilitate fork truck and/or mechanical handling. In addition, all
electronic plug-ins shipped separately from their associated frames or mountings
must be packaged at no additional charge using electrostatic shielded packaging.
Electrostatic shielded packaging is defined herein as packaging that meet the
applicable requirements for "Electrostatic Shielding Type" packaging as
prescribed in Electronic Industries Association (EIA) Interim Standard IS-5-A
("Packaging Material Standards for ESD Sensitive Items) dated November, 1985.
PAYMENT. Invoices shall be paid in accordance with the terms stated in this
Agreement unless payment terms more favorable to Bell Atlantic appear on BBT's
invoice and Bell Atlantic elects to pay on such terms. Absent such selection by
Bell Atlantic, all Material ordered hereunder shall be paid for within thirty
(30) days after Bell Atlantic's receipt of BBT's invoice for such Material. If
prepayment of transportation charges is authorized, BBT shall include the
transportation charges from the FOB point to the destination as a separate item
on BBT's invoice.
PLANT AND WORK RULES. BBT's employees and agents and those of Bell Atlantic,
shall, while on the premises of the other, comply with all plant and work rules
and regulations, including, where required by Government Regulations submission
of satisfactory clearance from the U.S. Department of Defense and other federal
authorities concerned.
PRODUCT CHANGES. BBT agrees to perform and administer all "Product Changes" in
accordance with Bell Communications Research Technical Reference No.
GR-209-CORE, entitled "Generic Requirements for Product Change Notices." BBT may
make changes to Material, or modify drawings, or manufacturing specifications
provided the changes or modifications do not have an impact on performance,
reliability, form, fit, or function. BBT shall maintain written records of all
such changes, and make these records available for Bell Atlantic's review upon
request. For such changes or modifications which do have an impact on
performance, reliability, form, fit, or function, BBT shall identify each such
change or modification in accordance with classifications contained in the above
referenced Technical Reference. In addition, BBT shall submit one copy of the
Product Change Notification (PCN) for each such change or modification to Bell
Atlantic's PCN Coordinator at least thirty (30) days prior to the proposed
effective date of such change or modification. All PCN's shall be sent via
facsimile or through the U.S. mail to Bell Atlantic at the following address:
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<PAGE>
Bell Atlantic Network Services, Inc.
Transport Maintenance Specialist
Shawan and York Roads, #308
Cockeysville, MD 21030
Facsimile No. (410) 785-5772
Bell Atlantic may reject any Material offered by BBT which has been changed or
modified in a manner unacceptable to Bell Atlantic. In the event that any such
change or modification is unacceptable to Bell Atlantic's PCN Coordinator, Bell
Atlantic shall so advise BBT within (30) days of receipt of BBT's PCN. If Bell
Atlantic's PCN Coordinator has not notified BBT that the change or modification
is unacceptable within thirty (30) days following receipt of the PCN, BBT shall,
unless instructed to the contrary, forward within the next thirty (30) day
period to each of Bell Atlantic's Field Maintenance Engineering Organizations a
copy of the PCN. Addresses for Bell Atlantic's Regional and Field Maintenance
Engineering Organizations are shown below:
Bell Atlantic - Penn, Inc. Bell Atlantic - Penn, Inc.
Manager, Maintenance Engineer Manager, Maint. Engineer
Strawberry Square, 6th Floor 1717 Arch Street
Harrisburg, PA 17101 17th Floor
Philadelphia, PA 19103
Bell Atlantic - Wash. DC, Inc. Bell Atlantic - Md, Inc.
Manager, Maintenance/CSPEC Manager, Engr. Svcs.
2055 L Street, NW 1 E. Pratt St. Svcs.
Washington, DC 20036 Baltimore, Md. 21202
Manager, Engineering Support Manager, CSPEC/Mtce.
10 N. Nansemond Street Engineering
Richmond, VA 23221 1500 MacCorkle, Rm. 411
Charleston, W. VA 25314
Bell Atlantic - New Jersey, Inc.
Manager, Special Projects
One Washington Park
13th Floor
Newark, NJ 07102
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PUBLICITY. BBT agrees to submit to Bell Atlantic all advertising, sales
promotion, press releases and other publicity matters relating to the Material
furnished or the Services performed by BBT under this Agreement wherein Bell
Atlantic's names or marks are mentioned or language from which the connection of
said names or marks therewith may be inferred or implied; and BBT further agrees
not to publish or use such advertising, sales promotion, press releases, or
publicity matters without Bell Atlantic's prior written approval.
QUALITY AND RELIABILITY SPECIFICATIONS. BBT agrees to abide by and meet the
requirements of the Quality and Reliability related documents listed in Appendix
D, QUALITY AND RELIABILITY SPECIFICATIONS.
QUALITY COMMITMENT. Quality is a process of assuring conformance to each and
every term, condition and specification of the Agreement. BBT agrees that its
commitment to quality and the processes it has in place to fulfill this
commitment with respect to each service and Material provided by BBT are primary
and material requirements of this Agreement. In addition to other rights and
remedy available to Bell Atlantic under this Agreement, Bell Atlantic reserves
the right to assure, throughout the term of this Agreement, BBT's continued
commitment to quality and BBT agrees to take appropriate steps, as noted by Bell
Atlantic, to improve BBT's commitment to quality. BBT will demonstrate
commitment to a Quality Improvement Process by providing:
(a) A published statement of its quality policy signed by an officer of the
company;
(b) An established means of measuring and reporting customer satisfaction;
(c) A quality training and awareness program;
(d) A continuous Quality Improvement Process;
(e) An established means of monitoring conformance to requirements for
products, Materials and/or Services; and,
(f) An established in-coming Material Quality Inspection Program.
RADIO FREQUENCY ENERGY STANDARDS. Material furnished hereunder shall comply, to
the extent applicable, with the requirements of Subpart J of Part 15 of the
Federal Communications Commission's Rules and Regulations, as may be amended
from time to time, including those Sections concerning
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the labeling of such Material and the suppression of radio frequency and
electromagnetic radiation to specified levels. Should the Material during use
generate harmful interference to radio communications, BBT shall provide to Bell
Atlantic information relating to methods of suppressing such interference. In
the event such interference cannot reasonably be suppressed, BBT shall, at the
option of Bell Atlantic, accept return of the Material and refund to Bell
Atlantic the price paid for the Material. Nothing herein shall be deemed to
diminish or otherwise limit BBT's obligations under the Section "WARRANTY" of
this Agreement.
RECORDS AND AUDIT. BBT shall maintain complete and accurate records of all
amounts billable to and payments made by Bell Atlantic hereunder in accordance
with generally accepted accounting practices. BBT shall retain such records for
a period of three (3) years from the date of final payment for Material or
Services covered by this Agreement. BBT agrees to provide reasonable supporting
documentation concerning any disputed amount of invoice to Bell Atlantic within
thirty (30) days after Bell Atlantic provides written notification of the
dispute to BBT. Bell Atlantic and its authorized agents and representatives
shall have access to such records for purposes of audit during normal business
hours during the term of this Agreement and during the respective periods in
which BBT is required to maintain such records. The correctness of BBT's billing
shall be determined from the results of such audits.
REGISTRATION. When Material furnished under this Agreement may be subject to
Part 68 of the Federal Communications Commission's Rules and Regulations, as may
be amended from time to time, BBT warrants that such Material are registered
under and complies with Part 68 of the Federal Communications Commission's Rules
and Regulations, including, but not limited to, all labeling and customer
instruction requirements. BBT agrees to indemnify and save Bell Atlantic
harmless from any liability, claims or demand (including the costs, expenses and
reasonable attorney's fees on account thereof) that may be made because of BBT's
noncompliance with Part 68 of the Federal Communications Commission's Rules and
Regulations. BBT agrees to defend Bell Atlantic, at Bell Atlantic's request,
against such liability, claim or demand.
REGULATORY. If requested by Bell Atlantic, BBT will, to the best of its ability,
provide information and assistance required in the planning, conduct and
research associated with Regulatory matters in connection with the Material
and/or Services provided herein.
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RELEASE OF CERTAIN CLAIMS.
(a) General Release of Claims. In consideration of BBT's execution of this
Agreement, BBT (including its directors, officers, employees and/or
anyone claiming through it) hereby releases Bell Atlantic (and its
parent, affiliates, subsidiaries, successors, and assigns) from any
claims which may have arisen or may subsequently arise relating to
Contract BCO9557.
(b) Specific Release and Amendment Regarding Shortfall Liability. In addition to
the foregoing, Bell Atlantic is and shall not be obligated to pay BBT any
amounts whatsoever under Sections 6 and/or 8 of Contract BCO9557, whether such
amounts are claimed to have accrued as of the effective date of this Agreement
or thereafter. To the extent Section 6 and/or 8 of Contract BCO9557, or any
other provision thereof, is inconsistent with this paragraph, it shall be deemed
amended hereby.
REPAIR PROCEDURES. To facilitate the repair of Material hereunder Bell Atlantic
may contact Customer Service, on (800) 736-4228, with any questions that may
arise concerning repair Services, and if required, specify any special packing
of Material which might be necessary to provide adequate in-transit protection
from transportation damage. Bell Atlantic shall furnish the following
information with Material returned to BBT for repair: (a) Bell Atlantic's name
and complete address; (b) name and telephone number of Bell Atlantic's employee
to contact in case of questions about the Material to be repaired; (c) ship to
address for return of repaired Material if different than (a); (d) a complete
list of Material returned; (e) the nature of the defect or failure, if known;
and (f) whether or not returned Material is in warranty, if known. Material
repaired by BBT shall have the repair completion date stenciled or otherwise
identified in a permanent manner at a readily visible location on the Material
and the repaired Material shall be returned with a tag or other papers
describing the repairs which have been made. All invoices originated by BBT for
repair Services must be clearly identified as such, and must contain: (1)_a
reference to Bell Atlantic's purchase order or requisition for these repair
Services, (2)_a detailed description of repairs made by BBT and the need
therefore, and (3)_an itemized listing of parts and labor charges, if any.
Replaced parts will, upon request, be available for inspection by or returned to
Bell Atlantic. Further, the provisions of the Section "SHIPPING AND BILLING",
other than provisions relating to transportation charges with respect to
Material repaired or replaced, shall apply to BBT's return to Bell Atlantic of
repaired Material.
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REPAIRS NOT COVERED UNDER WARRANTY. In addition to repairs provided for in the
Section "WARRANTY", BBT agrees to provide repair service on all Material ordered
hereunder for a period of ten (10) years after the expiration of this Agreement.
Bell Atlantic will return Material to be repaired under this Section to a
location designated by BBT, and unless otherwise agreed upon by BBT and Bell
Atlantic, BBT shall ship the repaired Material which meets the specifications
established in the Section "SPECIFICATIONS OR DRAWINGS", within thirty (30) days
of receipt of the defective Material. With the concurrence and scheduling of
Bell Atlantic, repair may be made by BBT on site. If Material are returned to
BBT for repair as provided for in this Section, and are determined to be beyond
repair, or repair costs are expected to exceed eighty percent (80%) of the cost
of a replacement, BBT shall so notify Bell Atlantic. If requested by Bell
Atlantic, BBT will sell to Bell Atlantic a replacement at the current Agreement
price or, if no such Agreement exists, at a price agreed upon by BBT and Bell
Atlantic. Further, BBT shall, unless otherwise directed by Bell Atlantic, return
to Bell Atlantic said un-repairable Material with full accountability and at no
cost(s) to Bell Atlantic, other than applicable return transportation charges.
If directed by Bell Atlantic, BBT shall take all the necessary steps to dispose
of said un-repairable Material, in a manner consistent with all applicable
Federal, State and Local laws and environmental regulations, with full salvage
value rendered to Bell Atlantic. All transportation charges associated with the
return of un-repairable Material to Bell Atlantic will be borne by Bell
Atlantic. Replacement and repaired Material shall be warranted as outlined in
the section "WARRANTY". It is expressly understood and agreed that this
Agreement does not grant BBT any exclusive privilege to repair any or all of the
Material purchased hereunder for which Bell Atlantic may require repair; and BBT
and Bell Atlantic may contract with others for these Services. In addition, BBT
authorizes Bell Atlantic and any qualified repairer with whom Bell Atlantic may
contract to perform out of warranty repairs on all Material purchased under this
Agreement. All transportation charges for, and risk of in-transit loss or damage
to, Material returned to BBT for repair under this section will be borne by Bell
Atlantic. All transportation charges associated with the return of such repaired
and replacement Material to Bell Atlantic will be borne by Bell Atlantic.
Charges for repairs under this Section are covered in Appendix A.
RIGHT OF ACCESS. Each party shall normally permit access to the other's
respective facilities in connection with work hereunder. No charge shall be made
for such access. It is agreed that prior notification will be given when access
is required.
SECTION HEADINGS. The headings of the Sections herein are inserted for
convenience only and are not intended to affect the meaning or interpretation of
this Agreement.
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SELLER'S INFORMATION. No specifications, drawings, sketches, models, samples,
tools, computer programs, technical information or data, written, oral or
otherwise, furnished by BBT to Bell Atlantic hereunder or in contemplation
hereof in support of the Material for normal installation, administration,
provisioning and maintenance activities shall be considered by BBT to be
confidential or proprietary.
SEVERABILITY. In the event that any one or more of the provisions contained
herein shall, for any reason, be held to be unenforceable in any respect, such
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall then be construed as if such unenforceable provision or
provisions never had been contained herein.
SHIPPING AND BILLING. Unless instructed otherwise by Bell Atlantic, BBT shall,
for orders placed hereunder: (1) ship orders complete; (2) ship to the
destination designated in the order in accordance with specific shipping
instructions; (3) see that all subordinate documents bear Bell Atlantic's order
number; (4) enclose a packing memorandum with each shipment and when more than
one package is shipped, identify the one containing the memorandum; (5)_mark
Bell Atlantic's order number on all packages and shipping papers; (6)_render
invoices in duplicate or as otherwise specified, showing order number; (7)
render separate invoices for each shipment or order; (8)_forward bills of lading
and shipping notices with invoices, and (9) invoice Bell Atlantic by mailing or
otherwise transmitting invoices, bills, and notices to the billing address on
the order. Routing instructions may be altered by Bell Atlantic without a
writing.
SHIPPING INTERVAL. The delivery schedule applicable to each order will be agreed
upon by BBT and Bell Atlantic and set forth in such order. For planning
purposes, BBT has indicated that Material can usually be shipped an average of
six (6) weeks after receipt of Bell Atlantic's order. BBT agrees not to ship
Material prior to the agreed upon delivery schedule without Bell Atlantic's
prior authorization.
SPECIFICATIONS OR DRAWINGS.
(a) The Material covered herein shall be as specified in the applicable
Commercial Specifications (including drawings) as outlined in Appendix
C of agreement BC13760 between Bell Atlantic and Lucent.
(b) In accordance with the notification requirements outlined in the
Section, "PRODUCT CHANGES," BBT shall notify Bell Atlantic in writing
thirty
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(30) days prior to any change to be made in the Material furnished in
accordance with the applicable Commercial Specifications.
(c) In the event that the parties shall fail to reach agreement on any such
change to be made, then in addition to all other rights and remedies at law or
in equity or otherwise, Bell Atlantic shall have the right to cancel this
Agreement and any or all purchase orders affected by such change.
STORAGE OF PAID FOR STOCKS. All Material invoiced to Bell Atlantic in accordance
with the Section, "INVOICING FOR STOCKS," shall be marked conspicuously as Bell
Atlantic's property, and safely stored by BBT separated from any other Material
stocks, and shall be shipped out as ordered by Bell Atlantic. BBT's total
liability under this Section is for [*************************] per order. BBT
assumes responsibility for any loss or damage to such Material while stored by
BBT. Seller shall advise in writing of the specific location where Material is
stored and of any subsequent removal of the Material from one building to
another, or from one part of the same building to another and give such advance
notice as may be requested by Bell Atlantic. BBT agrees, upon request by Bell
Atlantic, to execute and deliver to Bell Atlantic a bill of sale evidencing
conveyance of such Material, free from liens and encumbrances, together with any
other document such as a bailment agreement, warehouse receipt, lease (on
storage space), mortgage, deed of trust, or surety bond as Bell Atlantic may
deem necessary to secure title in such Material as against third parties, all of
which documents shall be in a form acceptable to Bell Atlantic.
SUBCONTRACTING. BBT shall not, without Bell Atlantic's prior written approval,
subcontract any portion of the work to be performed hereunder. Subassembly work
such as circuit board stuffing or printed circuit board assembly and etching are
not considered subcontracting work under this Section.
SURVIVAL. All obligations hereunder on BBT's part incurred prior to the
cancellation, termination, or expiration of this Agreement or of any order
placed hereunder by Bell Atlantic shall survive such cancellation, termination,
or expiration.
TAXES. Bell Atlantic shall be liable for and shall reimburse BBT only for the
following tax payments with respect to the transaction under this Agreement:
Federal Manufacturers' and Retailers' Excise taxes, State and Local Sales taxes
and Use taxes, as applicable. Taxes payable by Bell Atlantic shall be billed as
separate items on BBT's invoices.
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TECHNICAL SUPPORT. Bell Atlantic shall be entitled to ongoing technical support,
including field service and assistance provided, however, that the availability
or performance of this technical support service shall not be construed as
altering or affecting BBT's obligations as set forth in the Section titled
"WARRANTY" or as elsewhere provided for in this Agreement. BBT's technical
support via telephone as well as field service technical support shall be
provided to Bell Atlantic without charge.
[*************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
**************************************************************************
************************************************************************].
TESTING. All Material shipped shall receive testing to demonstrate functionality
and quality levels at least equivalent to Material embedded in systems. Testing
and burn-in intervals should be of sufficient duration so that infant mortality
failure rate of Material shipped is no greater than [*******] the predicted
steady-state failure rate. Testing performed should provide verification of
operability as completely as possible with current manufacturing test
capabilities. This should include verification of performance over ranges of
design limits to assure operation in all possible field applications. Testing in
a simulated use environment (test bed) should normally be included as one of the
test steps. Material returned for repair must be tested in a simulated use
environment as part of the repair process. Returned Material which are found to
be operational upon their receipt should be tested under [******************] to
identify thermostatic devices which may have been the cause for return. Return
and repair results data shall be made available to Bell Atlantic or Bell
Atlantic's agent.
TITLE AND RISK OF LOSS. Title and risk of loss to the Material purchased by the
Bell Atlantic under this Agreement shall vest in the Bell Atlantic when the
Material has been delivered at the F.O.B. point. If this Agreement calls for
additional Services such as unloading, installation, or the like to be performed
after delivery, BBT shall retain risk of loss and damage to the Material until
the additional Services have been performed. Notwithstanding the above, if BBT
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is expressly authorized to invoice Bell Atlantic for stocks prior to shipment,
title to those stocks shall vest in Bell Atlantic upon payment of the invoices.
TRAINING. BBT will support the training program and the arrangements agreed to
by Lucent Technologies, Inc. and Bell Atlantic in support of the Material. In
addition, if requested by Bell Atlantic: (a) provide instructors and the
necessary instructional material of BBT's standard format to train Bell
Atlantic's personnel in the installation, planning and practices, operation,
maintenance, repair and marketing of Material furnished hereunder. These classes
shall be conducted at reasonable intervals at locations agreed upon by BBT and
Bell Atlantic and at costs agree upon by both parties; or, at the option of Bell
Atlantic, (b) provide Bell Atlantic with training modules or manuals and any
necessary assistance, covering those areas of interest outlined in (a) of this
Section, sufficient in detail, format and quantity to allow Bell Atlantic to
develop and conduct a training program
TRANSPORTATION. Material ordered by Bell Atlantic shall be shipped by BBT,
F.O.B. origin, Durham, North Carolina, Freight Collect, with instruction to the
carrier to forward the original freight bill to the Bell Atlantic's designated
agent as specified on the Carrier Routing Provisions described in Appendix D.
Deviation from these instructions must be authorized by Bell Atlantic's
Transportation Organization. Excess transportation charges resulting from the
BBT's failure to comply with these instructions will be billed back to the BBT.
With respect to Material ordered F.O.B. Origin prepaid, i.e., RPS, BBT agrees to
add freight charges as a separate line item on BBT's invoice for Material, and
further agrees, if requested, to substantiate such charges by providing Bell
Atlantic with the original freight bill, RPS shipping list or a copy thereof.
WARRANTY. BBT warrants to Bell Atlantic that Material furnished will be new,
safe, free from defects in design, material and workmanship.
[*****************************************************************************
*****************************************************************************
*************]. At the time of delivery such Material shall be free of any
security, interest or other lien or any other encumbrance whatsoever.
Inspection, examination, testing, acceptance, or use of Material hereunder shall
not affect BBT's obligation under this Section "WARRANTY", and such warranty
shall survive inspection, examination, testing, acceptance, and use. Defective
Material will, at Bell Atlantic's option either be returned to BBT for repair or
replacement with risk of in-transit loss and damage borne by Bell Atlantic and
transportation charges paid by Bell Atlantic, or be repaired or replaced by BBT
on site. Unless otherwise agreed upon by BBT and Bell Atlantic, BBT shall
complete repairs and ship the
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repaired Material within thirty (30) days of receipt of defective Material or at
the option of Bell Atlantic, ship replacement Material within fifteen (15) days
after verbal notification is given BBT by Bell Atlantic. BBT shall bear the risk
of in-transit loss and damage and shall prepay and bear the cost of
transportation charges for shipments to Bell Atlantic of repaired or replaced
Material. If requested by Bell Atlantic, BBT shall begin on-site repairs within
fifteen (15) days after verbal notification is given BBT by Bell Atlantic. BBT's
obligations as set forth in the Section "PRODUCT CHANGES" shall be in addition
to BBT's obligations hereunder. If Material returned to BBT or made available to
BBT on site for repair, as provided for in this Section, is determined to be
beyond repair, BBT shall promptly so notify Bell Atlantic and, unless otherwise
agreed to by BBT and Bell Atlantic, ship replacement Material without charge
within fifteen (15) days of such notification. Any replacement, repair,
modification, installation or other service performed by BBT shall be warranted
for a period of six (6) months or for the remainder of the unexpired period of
the warranty whichever is longer based upon the date performance of the service
is completed and accepted by Bell Atlantic. BELL ATLANTIC'S SOLE AND EXCLUSIVE
REMEDIES FOR BREACH OF WARRANTY ARE SET FORTH ABOVE IN THIS SECTION, EXCEPT AS
PROVIDED IN THE SECTION LIABILITY, INSURANCE, AND INDEMNITY. THE ABOVE WARRANTY
IS IN LIEU OF ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTIBILITY AND
FITNESS FOR A PARTICULAR PURPOSE, WHICH ARE HEREBY EXPRESSLY EXCLUDED.
WORK HEREUNDER. It is understood that visits by BBT's representatives or BBT's
suppliers' representatives for inspection, adjustment or other similar purposes
in connection with Material and/or Services purchased hereunder shall for all
purposes be deemed "work hereunder" and shall be at no charge to Bell Atlantic
unless otherwise agreed in writing with Bell Atlantic.
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EXECUTION. Authorized representatives of the Bell Atlantic and BBT hereby
execute this Agreement including the additional Appendices attached hereto and
made a part hereof.
BELL ATLANTIC NETWORK BROADBAND TECHNOLOGIES, INC.
SERVICES, INC.
/s/ Stewart Verge /s/ Robert W. Henry
(signature) (signature)
Stewart Verge Robert W. Henry
(printed name) (printed name)
Vice President - Chief Engineer Vice President, Sales & Marketing
(title) (title)
July 12, 1996 July 16, 1996
- ------------- -------------
(date) (date)
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<TABLE>
<CAPTION>
MATERIAL APPENDIX A
PRICING SECTION A
ATTACHED FOR AGREEMENT
BA14494
PAGE 1 OF 1
===================================================================================================================================
DESCRIPTION/PRODUCT ID PRODUCT ID CLEI UNIT CAPACITY SERVICES
PRICE PROVIDED
T-TELEPHONE
V-VIDEO
B-BOTH
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
[**************************]
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
[****************************] [************] [*****] [***********] [************] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
[****************************] [************] [*****] [***********] [********] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
[****************************] [************] [*****] [***********] [********] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
[****************************] [************] [*****] [***********] [************] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
[****************************] [************] [*****] [***********] [************] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
[****************************] [************] [*****] [***********] [************] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
[****************************] [*******] [*****] [***********] [************] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
[***************]
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
[*******]
- -----------------------------------------------------------------------------------------------------------------------------------
[*******************************************************************************************************]
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
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APPENDIX A
SECTION B
ATTACHED TO AGREEMENT
BA14494
SECTION B
SERVICES PRICING
[*********************]
[***************************]
[***************************]
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[**********************************************************************
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[*********************]
[**********************************************************************
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[*******************************************************************]
[**********************************************************************
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[************************************]
[**********************************************************************
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[*******************************]
[******************************************************]
[***************************************]
[******************************************]
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APPENDIX B
ATTACHED TO AGREEMENT
BA14494
GOVERNMENT REQUIREMENTS
To the extent that this Agreement is subject to them, Seller shall comply with
the applicable provisions of the following Exec. Order No. 11246, Exec. Order
No. 11825, Exec. Order No. 15138, Exec. Order No. 11701, Exec Order No. 11758,
Section 503 of the Rehabilitation Act of 1973 as amended by PL93-515 and
PL102-569, Vietnam Era Veteran's Readjustment Assistance Act of 1974, Veteran's
Compensation, Education and Employment Amendments of 1982, and the rules,
regulations and relevant orders of the Secretary of Labor pertaining to the
Executive Orders and Statutes listed above. The following table describes the
causes which are included in the Agreement.
Annual Contract Value Causes
Under $10,000 5
$10,000 - $50,000 1, 2, 3, 5*, 7, 8, 9
$50,000 - $500,000 1, 2, 3**, 4**, 5, 7, 8, 9
Over $500,000 1, 2, 3**, 4**, 5, 6, 7, 8***, 9
1. Equal Employment Opportunity Provisions
In accordance with Executive Order 11246, dated September 24, 1966 and
Subpart 22.8 of Subchapter D of Chapter 1 at Title 48 of the Code of
Federal Regulations as may be amended from time to time, the parties
incorporate herein by this reference the regulations and causes
required by those provisions to be made a part of government contracts
and subcontracts.
2. Certification of Non-Segregated Facilities
The Seller certifies that is does not and will not maintain any
facilities it provides for its employees in a segregated manner, or
permit its employees to perform their services at any location under
its control, where segregated facilities are maintained; and that it
will obtain a similar certification, prior to the award of any
nonexempt subcontract.
3. Certification of Affirmative Action Program
The Seller affirms that it has developed and is maintaining an
Affirmative Action Plan as required by Subpart 22.8 of Subchapter D of
Chapter 1 of Title 48 of the Code of Federal Regulations.
4. Certification of Filing of Employer's Information Reports
The Seller agrees to file annually on or before the 31st day of March
complete and accurate reports on Standard Form 100 (EEO-11) or such
forms as may be promulgated in its place.
5. Utilization of Small Business Concerns and Small Disadvantaged
Business Concerns
(a) It is the policy of the United Sates that small business
concerns and small business concerns owned and controlled by
socially and economically disadvantaged individuals shall have
the maximum practicable opportunity to participate in
performing contracts let by any Federal agency.
(b) The Seller hereby agrees to carry out this policy in the
awarding of subcontracts to the fullest extent consistent with
efficient contract performance. The Seller further agrees to
cooperate in any studies or surveys as may be conducted by the
United States Small Business Administration or the awarding
agency of the United States as may be necessary to determine
the extent of the Seller's compliance with this clause.
(c) As used in this contract, the term "Small Business Concern"
shall mean a small business as defined pursuant to section 3
of the Small Business Act and relevant regulations promulgated
pursuant thereto. The term "Small Business Concern" owned and
controlled by socially and economically disadvantaged
individuals" shall mean a small business concern.
* Applies only if this Agreement has further subcontracting opportunities
** Applies only to businesses with 50 or more employees.
*** Seller must also adopt and comply with a small business and small
disadvantaged business subcontracting plan pursuant to Title 448 of the
Code of Federal Regulations.
NOTICE
Not for use as disclosure outside the
East Atlantic Network Services, Inc. and its affiliated companies
without express written authorization of the Purchasing Organization.
30
<PAGE>
(1) Which is at least fifty-one percent (51%) owned by
one or more socially and economically disadvantaged
individuals; or, in the case of any publicly owned
business, at least fifty-one percent (51%) of the
stock of which is owned by one or more socially and
economically disadvantaged individuals; and
(2) Whose management and daily business operations are
controlled by one or more of such individuals. The
Seller shall presume that socially and economically
disadvantaged individuals include Black Americans,
Hispanic Americans, Native Americans, Asian-Pacific
Americans, Asian- Indian Americans and other
minorities, or any other individual found to be
disadvantaged by the Administration pursuant to
section 3(a) of the Small Business Act.
(d) Sellers acting in good faith may rely on written
representations by their subcontractors regarding their status
as either a Small Business Concern or a Small Business Concern
owned and controlled by socially and economically
disadvantaged individuals.
6. Utilization of Women-Owned Small Businesses
(a) "Woman-owned small businesses," as used in this clause, means
businesses that are at least 51 percent owned by women who are
United States citizens and who also control and operate the
business. "Control," as used in this clause, means exercising
the power to make policy decisions. "Operate," as used in this
clause, means being actively involved in the day-to-day
management of the business.
(b) It is the policy of the United States that women-owned small
businesses shall have the maximum practicable opportunity to
participate in performing contracts awarded by any Federal
agency.
(c) The Seller agrees to use its best efforts to give women-owned
small businesses the maximum practicable opportunity to
participate in the subcontracts it awards to the fullest
extent consistent with the efficient performance of its
contract.
7. Affirmative Action for Disabled Veterans and Veterans of the Vietnam
Era. In accordance with Exec. Order 11701, dated January 24, 1973, and
Subpart 22.13 of Subchapter D at Chapter 1 of Title 48 of the Code of
Federal Regulations, as may be amended from time to time, the parties
incorporate herein by this reference the regulations and contract
clauses required by those provisions to be made a part of Government
contracts and subcontracts.
8. Affirmative Action for Handicapped Workers
In accordance with Exec. Order 11758, dated January 14, 1974, and
Subpart 22.14 of Subchapter D of Chapter 1 of Title 48 of the Code of
Federal Regulations as may be amended from time to time, the parties
incorporate herein by this reference the regulations and contract
clauses required by those provisions to be made a part of Government
contracts and subcontracts. reference
9. Employment Reports on Special Disabled Veterans and Veterans of the
Vietnam Era
(a) The Seller agrees to report at least annually, as required
by the Secretary of Labor, on:
(1) The number of special disabled veterans and the
number of veterans of the Vietnam era in the work
area of the Seller by job category and hiring
location; and
(2) The total number of new employees hired during the
period covered by the report, and of that total, the
number of special disabled veterans, and the number
of veterans of the Vietnam era.
(b) The above items shall be reported by completing the form
entitled "Federal Contractor Veterans' Employment Report,
VETS-100".
(c) Reports shall be submitted no later than March 31 to each
year.
NOTICE
Not for use as disclosure outside the
East Atlantic Network Services, Inc. and its affiliated companies
without express written authorization of the Purchasing Organization.
31
<PAGE>
(d) The employment activity report required by paragraph (a)(2) of
this section shall reflect total hires during the most recent
12-month period as of the ending data selected for the
employment profile report required by paragraph (a) (1) of
this section. The Seller may select an ending date: (1) As of
the end of any pay period January through March 1st of the
year the report is due, or (2) as of December 31, if the
seller has previous written approval from the Equal Employment
Opportunity Commission to do so for purposes of submitting the
Employer Information Report EEO-1 (Standard Form 100).
(e) The count of veterans reported according to paragraphs (a)
above shall be based on voluntary disclosure. Each Seller
subject to the reporting requirements at 1 U.S.C. 2012(d)
shall invite all special disabled veterans and veterans of the
Vietnam Era who wish to benefit under the affirmative action
program at 38 U.S.C. 2012 to identify themselves to the
Seller. The invitation shall state that the information is
voluntarily provided, that the information will be kept
confidential, that disclosure or refusal to provide the
information will not subject the applicant or employee to any
adverse treatment and that the information will be used only
in accordance with the regulations promulgated under 38 U.S.C.
2012. Nothing in this paragraph (e) shall preclude an employee
from informing the Seller at a future time of his or her
desire to benefit from this program. Nothing in this paragraph
(e) shall relieve the Seller from liability from dissemination
under 38 U.S.C. 2012.
NOTICE
Not for use as disclosure outside the
East Atlantic Network Services, Inc. and its affiliated companies
without express written authorization of the Purchasing Organization.
32
<PAGE>
APPENDIX C
ATTACHED TO AGREEMENT
BA14494
PAGE 1 OF 2
SCHEDULE INTENTIONALLY OMITTED.
33
<PAGE>
APPENDIX C
ATTACHED TO AGREEMENT
BA14494
PAGE 2 OF 2
IMPORTANT: SUPPLIERS PLEASE FOLLOW THESE INSTRUCTIONS
o Shipments under 200 lbs. - Use UPS wherever possible and bill PREPAID
Transportation costs as a separate item on your invoice. Note: Each
parcel must weight LESS than 70 lbs.
o Shipments under 10,000 lbs. - Select appropriate carrier from the
matrix and ship FOB ORIGIN - FREIGHT COLLECT. Instruct the carrier to
send freight bill to:
Bell Atlantic
Transportation - Fifth Floor
1320 N. Court House Road
Arlington, VA 22201
- Consolidate all orders shipped to the same consignee on the
same day on ONE Bill of Lading.
- Purchase order numbers must be shown in the "Ship To" address
of the Bill of Lading.
- Material must be described per the appropriate NMFC
description.
- Pallets must be 42" x 42" and stacked no higher than 46" in
overall height.
CONTACT A BELL ATLANTIC TRANSPORTATION REPRESENTATIVE FOR:
- ----------------------------------------------------------------------
o Shipments valued in excess of $500,000
o Shipments in excess of 10,000 lbs.
o Full Truckload Shipments
o Premium Transportation Shipments
o Specialty Transportation Shipments
o Expedited Shipments
- ----------------------------------------------------------------------
ANY QUESTIONS CONCERNING THESE INSTRUCTIONS OR PROBLEMS ARISING FROM THE USE OF
THESE CARRIERS SHOULD BE REFERRED TO OUR TRANSPORTATION ORGANIZATION:
Pennsylvania Tel # 215-466-6426
Delaware Tel # 215-466-6426
New Jersey Tel # 201-414-7733
Maryland Tel # 703-974-2413
Virginia Tel # 703-974-2413
West Virginia Tel # 703-974-2413
Washington, DC Tel # 703-974-2413
Network Services, Inc. Tel # 703-974-3496
NOTICE
o The Shipper is responsible for complying with the guidelines of the
matrix. Deviations from these Routing Provisions must receive
authorization from Bell Atlantic's Transportation Organization, be
part of the Purchase Order or be in the existing contract between the
Buyer and Seller. Bell Atlantic reserves the right to refuse or reduce
reimbursements for freight charges or charge back to the shipper
excess freight charges incurred due to non-compliance with these
instructions and/or matrix.
34
<PAGE>
APPENDIX D
ATTACHED TO AGREEMENT
BA14494
<TABLE>
<CAPTION>
QUALITY & RELIABILITY SPECIFICATIONS
TECHNICAL REFERENCES
Number Date Title
<S> <C> <C>
TR-TSY-000018 11/85 Bellcore-Standard-100 and Bellcore-issue 1 Standard-200
TR-NWT-000063 09/93 Network Equipment Building System (NEBS) Generic Equipment Equipment
Issue 5 Requirements
TR-NWT-000078 12/91 Generic Physical Design Requirements for Telecommunications Products and
Issue 3 Equipment
TR-NWT-000179 08/93 Quality System Generic Requirements for Software
Issue 2
GR-209-CCRE 08/94 Requirements for Product Change Notices
Issue 1
GR-282-CORE 12/94 Software Reliability and Quality Acceptance Criteria (SRQAC)
Issue 1
TR-NWT-000332 09/92 Reliability Prediction Procedures for Electronic Equipment
Issue 4
TR-NWT-000357 10/93 Component Reliability Assurance Requirements for Telecommunications
Issue 2 Equipment
TR-STS-000383 01/91 Generic Requirements for Common Language Bar Code Labels
Issue 5
TR-NWT-000418 12/92 Generic Reliability Assurance Requirements for Fiber Optic Transport
Issue 2 Systems
GR-485-CORE 06/94 Common Language Equipment Coding Processes and Guidelines
Issue 1
TR-NWT-000488 12/91 Reliability Assurance Practices for Optoelectric Devices in Central Central
Issue 1 Office Applications
TR-NWT-000840 12/91 Supplier Support Generic Requirements (SSGR)
Issue 1
TR-NWT-000870 02/91 Electrostatic Discharge Control in the Manufacture of Telecommunications
Issue 1 Equipment
GR-929-CORE 12/94 Reliability and Quality Measurements for Telecommunications Systems
Issue 1 (RQMS)
TR-NWT-000930 09/93 Generic Requirements for Hybrid Microcircuits Used in Telecommunications
Issue 2 Equipment
GR-1089-CORE 11/94 ElectroMagnetic Compatibility and Electrical Safety Generic Criteria for
Issue 1 Network Telecommunications Equipment
GR-1252-CORE 05/95 Quality System Generic Requirements for Hardware
Issue 1
GR-1221-CORE 10/94 Generic Reliability Assurance Requirements for Fiber Optic Branching
Issue 1 Components
TR-NWT-001323 11/93 Supplier Data Comprehensive Requirements
Issue 1
GR-1421-CORE 06/95 Generic Requirements for ESD Protective Circuit Pack Containers
Issue 2
35
<PAGE>
APPENDIX D
ATTACHED TO AGREEMENT
BA14494
SR-NWT-2759 01/95 A View of Packaging, Packing, Palletization and Marking Requirements
Issue 3
TECHNICAL ADVISORIES
TA-NWT-000983 12/93 Reliability Assurance Practices for Optoelectric Devices in Loop Applications
Issue 2
QUALITY PROGRAM
SPECIFICATIONS
70.001 11/25/87 Quality Assurance Related Buyer - Supplier Understanding/ Agreements
Issue 3
70.002 11/02/87 Process Quality Audit (General)
Issue 6
70.003 07/16/90 Quality Program Specification for Surveillance Management Process
Issue 1 (General)
74.308 12/09/87 Audit/Inspection of Packing
Issue 4
74.310 12/23/87 In-Process Inspection
Issue 5
77.101 09/10/87 Sampling Inspection By Attributes Lot Tolerances Plans (LTPD)
Issue 3
77.105 01/13/89 Skip Lot Inspection
Issue 4
77.204 11/11/87 Bellcore Quality Assurance Surveillance (General)
Issue 3
77.205 09/28/90 Use of Supplier Provided Data in Bellcore Quality Assurance Surveillance
Issue 7 (General)
77.207 02/23/94 Validation of Supplier Provided Data: Statistical Methods (General)
Issue 4
82.040 03/10/86 Transmission Products (General)
Issue 4
82.052 12/05/85 Quality Specifications for Inspection of Wired Equipment
Issue 1
82.061 03/12/85 Quality Program Specification for Repair and return Operations of
Issue 2 Telecommunications Products
85.340 09/05/85 Inspection of Electrical and Mechanical Components, Assemblies and Piece
Issue 4 Parts
88.001 12/19/94 Quality Program Specification for Surveillance Management Process (SMP) -
Issue 2 Software (General)
88.010 11/19/91 Quality Program Specification for Software Surveillance (General)
Issue 8
92.039 02/11/87 Fiber Optic Transmission Systems and Electronic Fiber Optic Equipment
Issue 3
92.090 06/28/91 Quality Program Specification for Interoffice Transmission Systems
Issue 3 (Equipment) including Associated and Ancillary Equipment
92.094 01/13/89 Process Quality Audit for Interoffice and Loop Electronics Transmission
Issue 2 Systems (Equipment) Including Associated and Ancillary Equipment
36
<PAGE>
94.890 02/12/90 Quality Program Specification for Common Language Equipment
Issue 4 Identification (CLEI) Bar Code Labels
</TABLE>
37
<PAGE>
APPENDIX E
ATTACHED TO AGREEMENT
BA14494
PAGE 1 OF 1
SCHEDULE INTENTIONALLY OMITTED.
38
<PAGE>
Exhibit 10.2
[**] - Certain information omitted and filed separately
with the Commission pursuant to a
confidential treatment request under Rule 24b-2 of the Commission.
FIRST AMENDMENT TO AGREEMENT LGC-A65-D
This First Amendment to Agreement LGC-A65-D ("Amendment") is made
effective as of the 12th day of July, 1996 ("Effective Date") by and between
Lucent Technologies Inc., a Delaware corporation, having an address at 600
Mountain Avenue, Murray Hill, New Jersey 07974 ("Company") and BroadBand
Technologies, Inc., a Delaware corporation, having an address at 4024 Stirrup
Creek Drive, Durham, North Carolina 27709-3737 ("Supplier").
W I T N E S S E T H:
WHEREAS, Supplier and Company's predecessor-in-interest, AT&T Corp.,
entered into a certain Agreement LGC-A65-D dated as of November 1, 1995 (the
"Agreement") which sets forth terms and conditions governing the purchase and
sale of Supplier's products and services between the parties; and
WHEREAS, by Notice of Assignment dated February 5, 1996, AT&T Corp. has
assigned to Company all of its right, title and interest in and to the Agreement
effective as of February 1, 1996; and
WHEREAS, Company and Bell Atlantic Network Services, Inc. ("Bell
Atlantic") have entered into a certain FSN Procurement Agreement, BC13760, dated
as of the Effective Date (the "FSN Agreement"), whereby Company agrees to
provide to Bell Atlantic and its affiliated entities certain products and
services for a switched digital video system to be deployed by Bell Atlantic;
and
WHEREAS, the products and services to be furnished by Company to
Supplier under the FSN Agreement include, without limitation, certain products
[and services] to be provided by Supplier to Company; and
WHEREAS, the parties desire to modify the Agreement and set forth in
this Amendment terms and conditions under which Supplier shall sell to Company
and Company may purchase from Supplier those products [and services] which are
to be furnished to Bell Atlantic under the FSN Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties, Supplier and Company agree as
follows:
<PAGE>
1. Scope of Amendment
1.1 Except as mutually agreed by the parties in writing, this Amendment
shall apply only to transactions between Supplier and Company for the purchase
and sale of Material (as defined in Section 2 below) and related services to be
provided to Bell Atlantic or the Bell Atlantic Affiliates under the FSN
Agreement. Such Material and related services are hereby offered for sale by
Supplier and may be purchased by Company as required for the FSN Agreement in
accordance with the terms, conditions, and specifications of the Agreement, as
modified and amended by this Agreement. In the event of a conflict between the
terms and conditions of the Agreement and the terms and conditions of this
Amendment, the parties agree that the terms and conditions of this Amendment
shall supersede and prevail.
1.2 Except to the extent provided in Article 4, this Amendment is a
non-commitment agreement and Materials shall be furnished by Supplier on an
as-ordered basis. Except as provided in Article 4 of this Amendment, the parties
agree that nothing contained in this Amendment shall be deemed a commitment on
behalf of Company to purchase from supplier any minimum quantities or dollar
value of Materials; it being expressly understood and agreed that any obligation
of Company to purchase Materials under this Agreement shall be contingent upon
the corresponding purchase by Bell Atlantic of such Materials from Company under
the FSN Agreement.
1.3 Supplier agrees that all Material to be sold to Company under this
Amendment shall comply in all respects with the specifications attached to the
Agreement as Attachment A.
1.4 The parties acknowledge that Company has delivered to Supplier a
full and complete copy of the FSN Agreement. Supplier agrees to treat such copy
in accordance with the confidentiality and non-disclosure provisions of this
Amendment.
2.0 Definitions
2.1 Except as expressly defined in this Amendment, all capitalized
terms shall have the meaning ascribed to them in the Agreement. For all purposes
of this Amendment, the term "Material" shall mean "MATERIAL" under the
Agreement.
2.2 For purposes of this Amendment, the following definitions shall
apply:
2
<PAGE>
(a) "Access Subnetwork Equipment" or "ASE" means the SLC(R)-2000 Access
System with FLX1* Switched Digital Video to be supplied by Company with the
capability for switched digital video under the FSN Agreement.
(b) "Additional Software" means all Software to be provided under
this Amendment beyond Release 2.1.
(c) "Alternative Performance Payment" means the amount payable by Bell
Atlantic to Company under the FSN Agreement if Bell Atlantic fails to fulfill
its purchase commitment to Company thereunder or if Bell Atlantic terminates the
FSN Agreement under certain circumstances.
(d) "Bell Atlantic Affiliate" means an entity that owns, directly or
indirectly, a greater than fifty percent (50%) voting interest in Bell Atlantic
("Parent"), or any entity in which Bell Atlantic or its Parent owns, directly or
indirectly, at least a fifty percent (50%) voting interest. The term shall also
include those entities in which Bell Atlantic or its Parent own, directly or
indirectly, a less than fifty percent (50%) but more than twenty percent (20%)
voting interest ("Minority Owned Affiliates") and that are listed in Appendix J
to the FSN Agreement, as modified and amended from time to time.
(e) "Bell Atlantic Region" means any and all of the areas of New
Jersey, Delaware, Pennsylvania, Maryland, West Virginia, Virginia, and the
District of Columbia in which Bell Atlantic or any Bell Atlantic Affiliate
provides service at any time during the Term.
(f) "Beta Test Date" means Bell Atlantic's initial deployment of
hardware and software under the FSN Agreement to a limited number of subscribers
to test the FSN. The Beta Test Date is targeted for April 1997, although this
date may be postponed by Bell Atlantic in its sole discretion.
(g) "Circuit Packs" means any or all of the SPQ - 909 Quad POTS Channel
Units, VTR-4 or Extended Range VTR-4 Video Cards, VTR-8 or Extended Range VTR-8
Video Cards, SPQ - 494 Quad ISDN Channel Units, and SPQ - 442 Quad ESPOTS
Channel Units identified in Appendix A of the FSN Agreement.
(h) "Code Corrections" means corrections to Software malfunctions to
bring Software into conformance with its specifications.
(i) "Companion Agreement" means that certain Procurement Agreement
dated as of July 1, 1996 between Bell Atlantic and Supplier for the purchase and
sale of any DBP 2515 Digital Broadcast Processors, ANI 2514
- --------
1* FLX is a registered trademark of Supplier.
3
<PAGE>
ATM Network Interface Quad 3 UNI-Directional and 1 Bi-Directional cards, ANI
2514 ATM Network Interface Quad Uni-Directional cards, VTR-4 2542 Video
Transmitters/Receivers, VTR-8 2542 Video Transmitters/Receivers, VCF 2543 Filler
Cards, and Baluns (and any successor equipment) that Bell Atlantic the Bell
Atlantic Affiliates may require.
(j) "Designated Processor" means hardware platforms used in the
FSN with which Software is compatible.
(k) "Event" means (i) actual failures or adverse functioning of
products resulting in the disruption of network access and/or the services
provided by an ASE or equivalent system, to customers of Bell Atlantic, Company,
Supplier, or any other purchaser or user of the products in the United States of
America, for a period of thirty (30) uninterrupted minutes per occurrence; or
(ii) actual defects in design and/or manufacturing of the products which are
known by Company and/or Supplier regardless of whether such actual defects in
design and/or manufacturing have resulted in any actual malfunctions or failures
of the products, and which have the ability of causing the disruption of network
access and/or the services provided by an ASE, or equivalent system, to
customers of Bell Atlantic, Company, Supplier, or any other purchaser or user of
the products in the United States of America for a minimum period of thirty (30)
uninterrupted minutes per occurrence. For purposes of this definition,
"products" means hardware and software sold by Company and Supplier under the
FSN Agreement and this Amendment, respectively, and other items that are
manufactured and/or sold by Company or Supplier which are the same as, or
functionally or operationally similar to, such hardware and software.
(l) "FSA Date" or "First Service Application Date" means Bell
Atlantic's initial commercial deployment of hardware and software to provide
telephony and/or video services over the FSN. The FSN date is targeted for two
(2) months after the Beta Test Date.
(m) "HDT" means a host digital terminal as diagrammed in Appendix
B of the FSN Agreement.
(n) "Headcount Year" is a measure of services provided by one or more
engineers or programmers that are in the aggregate equivalent to those that
would be provided by a dedicated full-time programmer or engineer working two
hundred twenty (220) days.
(o) "Homes Passed" shall have the meaning set forth in Section 4.5.
(p) "Licensed Materials" means the Software and Related Documentation
for which licensed are granted by Supplier to Company under this Amendment.
4
<PAGE>
(q) "NYNEX Region" means any and all of the areas of New York,
Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, and Maine.
(r) "ONU" means an optical network unit as diagrammed in Appendix
B of the FSN Agreement.
(s) "Related Documentation" means materials useful in connection with
Software and materials required to engineer, operate, maintain, and install
Software such as, but not limited to, programs, translations and parameters,
listings, user manuals, methods, practices, job aides, flow charts, installation
and other instructions, logic diagrams and listings, program descriptions and
specifications.
(t) "Software" means computer programs, procedures, and rules designed
to make use of and to extend the capabilities of hardware (including, but not
limited to, control programs, operating system programs, processing programs,
diagnostic programs, audit programs, system measurement programs and tools,
special system programs, authoring tools, and documentation used to maintain,
describe and use all such programs) offered for license by Supplier hereunder.
The term shall not include Source Code format unless otherwise specified herein.
The term includes "Additional Software."
(u) "Software Enhancement" means any change in Software that improves
the basic function of the Software.
(v) "Software Upgrade" means improvements in Software that relate to
operating performance but do not change the basic function of the Software.
(w) "Source Code" means any version of Software incorporating high
level or assembly language that generally is not directly executable by a
processor.
(x) "Technical Information" shall include all Source Code, object code,
and Related Documentation for the operating system and any other Software used
in the Material or Parts, and all design drawings, materials/parts lists, and
specifications used in the design and manufacture of Material or Parts, as well
as all corrections, updates, and enhancements to such Software and other
information. "Technical Information" shall also include: (i) manufacturing
drawings and specifications including Circuit Pack schematics; (ii)
manufacturing drawings and specifications covering special tooling and operation
thereof; (iii) a detailed list of all commercially available Parts and
components purchased by Supplier on the open market disclosing the part number,
name and location of the supplier; and (iv) repair specifications and test
procedures, as available.
5
<PAGE>
(y) "Term" shall have the meaning set forth in Section 3.1.
(z) "Video Equipped HDTs" means that at least one or more of each of
the following has been shipped to Bell Atlantic by Lucent or BBT for use with an
HDT: DBP 2515 Digital Broadcast Processor, ANI 2514 ATM Network Interface Quad 3
UNI-Directional and 1 Bi-Directional card, ANI 2514 ATM Network Interface Quad
Uni-Directional card and SCP 2521 Shelf Control Processor, or any successor
equipment.
3.0 Term of Amendment and Agreement
3.1 This term ("Term") of this Amendment shall commence as of the
Effective Date
[********************************************************************
***************************************]. For purposes of this Amendment only,
the parties agree that the term of the Agreement as stated in the clause
entitled "Agreement Effective Period" thereof, shall be extended to be
coterminous with the FSN Agreement; it being the intent of the parties that the
Agreement and this Amendment remain in effect for so long as the FSN Agreement
is in effect.
[*******************************************************************************
*********************], this Amendment and the Agreement shall be
correspondingly extended upon the mutual written agreement of the parties;
provided, however, that any such extension of the Agreement shall only be for
purposes of the transactions contemplated in this Amendment.
3.2 Notwithstanding anything contained in Section 3.1 to the contrary,
this Amendment shall terminate (a) upon the expiration or earlier termination of
the FSN Agreement for any cause or reason, or (b) in accordance with the
provisions of Section 6.1 of this Amendment. In the event this Amendment
terminates pursuant to the preceding sentence, the term of Agreement shall be as
originally stated in the clause entitled "Agreement Effective Period" and the
Agreement may remain in effect in accordance with the terms and conditions set
forth therein.
4.0 Purchase Objectives
4.1 [*********************************], Bell Atlantic has committed to
purchase during the Term, through itself and the Bell Atlantic Affiliates,
certain hardware and software that includes Video Equipped HDTs
[*******************************************************************************
********************************************************************************
************************************].
6
<PAGE>
4.2 Subject to the terms and conditions of the FSN Agreement, Bell
Atlantic has agreed that
[*******************************************************************************
*****] within the Bell Atlantic Region (the "Requirement Date"), Bell Atlantic
and the Bell Atlantic Affiliates will purchase from Company under the FSN
Agreement and/or Supplier under the Companion Agreement all Circuit Packs
required by Bell Atlantic and the Bell Atlantic Affiliates for deployment of the
ASE in the Bell Atlantic Region.
4.3 Subject to the provisions of Article 6, to the extent (a) the
commitment and agreement of Bell Atlantic referenced is Sections 4.1 and 4.2
above includes Material, and (b) Bell Atlantic actually purchases such Material
from Company under the FSN Agreement, Company agrees to purchase all such
Material from Supplier under this Amendment. To the extent Bell Atlantic or the
Bell Atlantic Affiliates actually purchase Circuit Packs from Company after the
Requirement Date under the FSN Agreement and subject to the provisions of
Article 6, Company also agrees to purchase such Circuit Packs from Supplier
under this Amendment.
4.4 In the event Bell Atlantic terminates the FSN Agreement and pays to
Company the Alternative Performance Payment required under the FSN Agreement,
[**********************************************************************
********************************************************************************
********************************************************************************
***********]. Such payment to Supplier shall be made by Company within thirty
(30) days after Company's receipt of the Alternative Performance Payment from
Bell Atlantic.
4.5 With respect to purchases of Material, it is understood and agreed
that each HDT is designed to service multiple ONUs, and that each ONU, when
deployed and equipped with the appropriate Circuit Packs, has the capability to
provide telephone, video, telephone and video or other telecommunications
services to living units made up of single family dwellings, single residences
in multi-family dwellings, and single business locations.
[*******************************************************************************
********************************************************************************
********************************************************************************
*************].
7
<PAGE>
5.0 License Grants
5.1 Subject to Company's payment of the applicable fees and charges
required under this Amendment, Supplier grants to Company a nonexclusive,
perpetual, fully paid-up, royalty-free license to reproduce and use the Licensed
Materials, and to sub-license and authorize Bell Atlantic, Bell Atlantic
Affiliates, other entities purchasing Material under the FSN Agreement, and
their end-users of the Materials to use the Licensed Materials. Software
provided in object code form shall not be modified, decompiled, disassembled,
reverse-engineered. Supplier shall provide with each copy of the Software
specific installation and applications guidelines describing the procedures
necessary to create additional authorized implementations on a new Designated
Processor to increase the capacity of Designated Processors on multi-processor
computer systems. Supplier will exert reasonable efforts to ensure that all
Software provided by Supplier is delivered to Company with an appropriate
proprietary legend so as to assist Bell Atlantic in the protection of such
Software.
5.2 Notwithstanding anything contained in the Agreement or this
Amendment to the contrary, Supplier, on behalf of itself, its successors, and
assigns, grants to Company, an irrevocable, perpetual, nontransferable, and
nonexclusive:
(a) right to use Technical Information for the design, development,
manufacture, or maintenance of Material and Parts;
(b) license under its copyrights to create derivative works, and to
use, copy, and distribute Technical Information and any derivative
works, but only in connection with the design, development,
manufacture, or maintenance of Material and Parts;
(c) right to grant to any third party rights of the scope granted to
Company under subsections (a) and (b) above, to the extent reasonably
necessary to carryout activities of supplying Company with Material and
Parts or components thereof;
(d) license under its copyrights to copy, use, and distribute object
code versions of Software included in the Material or Parts, but only
in connection with the sale, lease or distribution of such Material or
Parts; and
(e) license under its patents and patent applications to make, have
made, use, offer to sell, sell, and import Material and Parts or
components thereof.
8
<PAGE>
5.3 The rights granted in Section 5.2 shall apply to Material and Parts
which are to be supplied by Company to Bell Atlantic pursuant to the FSN
Agreement and/or the Companion Agreement. Company agrees not to exercise the
rights granted in Section 5.2 prior to a material failure by Supplier to supply
Materials or Parts and the expiration of any applicable cure period, and only
for those Materials or Parts which Supplier fails to supply. The rights granted
in Section 5.2 shall terminate five years after Company first ships to a
customer any Materials or Parts manufactured by Company pursuant to Section 5.2,
however, Company shall retain rights under Section 5.2 for as long as necessary
to provide maintenance, replacement or repair parts to customers as required
under the FSN Agreement and the Companion Agreement. In the event that the
Supplier should file a petition under the federal bankruptcy laws, or that an
involuntary petition shall be filed against the Supplier, the parties intend
that Company shall be protected in the continued enjoyment of its rights under
Section 5.2, including, if it so elects, the protection conferred upon licensees
under 11 U.S.C. Section 365(n).
5.4 Within five business days after the Effective Date, the parties
shall execute and deliver an escrow agreement between Supplier and Company for
the delivery of Technical Information used in the development and manufacture of
Materials and Parts, for use by Company in accordance with the rights granted in
Section 5.2.
5.5 In the event Company elects to exercise the rights granted in
Section 5.2, Company shall have no obligation to pay Supplier any additional
compensation for the exercise of such rights prior to or during the six (6)
month period beginning when Company first furnishes Materials or Parts
manufactured pursuant to Section 5.2 under the FSN Agreement or the Companion
Agreement. Thereafter, for a period not to exceed five (5) years from such first
furnishing by Company, Company shall pay to Supplier a royalty fee on each
Material or Part manufactured pursuant to Section 5.2 which Company furnishes
under the FSN Agreement or the Companion Agreement.
[*******************************************************************************
********************************************************************************
********************************************************************************
******].
5.6 In the event Company elects to exercise the rights granted in
Section 5.2 following a failure by Supplier to materially supply Materials and
Parts, and within two (2) years after such failure Supplier again wishes to
supply Materials and Parts to Company, Company agrees to negotiate with Supplier
the terms under which Supplier shall resume such supply. Such negotiations may
include, without limitation, reimbursement by Supplier of Company's costs.
5.7 Within thirty (30) days following the Effective Date, the parties
shall enter into a Second Amendment to Agreement LGC-A65-D restating the
9
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provisions of Sections 5.2 through and including 5.6 for purposes of any other
agreement under which Company will provide to a customer of Company Materials
and/or Parts.
6.0 Default and Termination
6.1 Time is of the essence to this Agreement. In the event either party
is in breach of any of the terms, conditions or covenants of this Amendment or
any orders under this Amendment, the defaulting party shall initiate corrective
action to remedy such breach or default or provide the affected party a schedule
acceptable to the nonbreaching party for correcting such breach or default
within ten (10) days after the giving of written notice to the defaulting party
thereof by the nonbreaching party. In the event the breach or default is not
corrected within thirty (30) days after the giving of written notice to the
defaulting party thereof by the nonbreaching party or within the agreed upon
schedule, whichever is later, then, in addition to its right to pursue all other
rights and remedies at law, equity or otherwise, the nonbreaching party shall
have the right to cancel this Amendment and/or any such orders in whole or in
part without charge, obligation or liability whatsoever, except as to payment
for Material already accepted by Bell Atlantic prior to such notice pursuant to
the FSN Agreement.
6.2 The parties agree that the clause in the Agreement entitled
"Termination of Purchase Order" shall apply only to purchase orders terminated
by Company for convenience and without cause.
6.3 In the event this Amendment is terminated due to the termination of
the FSN Agreement and the FSN Agreement is terminated for cause or reasons not
attributable to Supplier, Company shall pay to Supplier as its sole liability:
(a) The invoiced amount for any Material ordered and shipped to
Company prior to the date of notice of termination;
(b) The invoiced amount for any [Services] ordered by and performed for
Company prior to the date of notice of termination;
(c) The invoiced amount for the remaining portion of the
[*************************************************************************]
(d) Amounts required to be paid under Section 4.4.
6.4 Notwithstanding anything contained in Section 6.3 to the contrary,
Company shall not be liable to pay for any Material or Services under Sections
6.3(a), 6.3(b), or 6.3(c) that are not accepted by Bell Atlantic in accordance
with the acceptance procedures set forth in the FSN Agreement.
10
<PAGE>
6.5 The parties acknowledge that there are several clauses in the
Agreement which require matters to be referred to the Executive Team for
resolution before a party can exercise rights under such clause. Such clauses
include, by example and not limitation, "Later Delivery/Liquidated Damages and
Cancellations." Notwithstanding anything contained in the Agreement to the
contrary, the parties agree that, except as expressly required in this
Amendment, referral to the Executive Team shall not be required for either party
to exercise any right or remedy set forth in this Amendment; it being the intent
that the only prerequisites to the exercise by either party of any right or
remedy under this Amendment shall be the express notice, cure period, or other
conditions or requirements set forth in this Amendment.
6.6 In the event either party shall be in default or breach of this
Amendment, the parties agree that they will cause the Executive Team to attempt,
in good faith, to resolve the situation within a reasonable period of time given
the circumstances (however, in no event to exceed ten (10) calendar days). In
the event the Executive Team is unable to resolve the situation within such
period of time, the parties will retain all legal rights and remedies.
6.7 Nothing in this Article 6 shall entitle Company to manufacture
Material or Parts or to purchase Material or Parts from any source other than
Supplier, except as provided in the Agreement or Article 5 of this Amendment.
7.0 Forecasts and Delivery Intervals
7.1 Company will provide Supplier with forecasts of its requirements
for Material as set forth in the clauses "Forecast of Material" and "Shipping
Interval" in the Agreement, except that: (a) in the event Bell Atlantic reduces
the amount of its commitment forecast to Company in accordance with Section 3.3
of the FSN Agreement, then Company shall have the right to correspondingly
reduce the amount of its commitment forecast to Supplier under this Amendment;
and (b) Company shall have no obligation to order the quantity of Material under
any commitment forecast delivered to Supplier in the event Supplier shall be in
default or breach of this Amendment in any material respect.
7.2 Notwithstanding anything contained in the Agreement to the
contrary, all furnish only orders placed by Company under this Amendment shall
[**************************************] and all "engineered, furnish, and
install" orders shall be delivered within the delivery interval agreed to by the
parties for that order, however, consistent with the provisions of Appendix A of
the FSN Agreement.
11
<PAGE>
8.0[*****************]
8.1[****************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
**********************************************************************].
8.2[****************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
*************************************************************************].
8.3[****************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
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****************************************************************************]
12
<PAGE>
[*******************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
******************************************************************************]
9.0 Pricing
9.1 Prices for Material and Services ordered under this Amendment shall
be those set forth in Exhibit B [**************************************
********************************************************]. To the extent
required as part of the agreement between Bell Atlantic and Company to identify
areas where Bell Atlantic can reduce FSN costs, Supplier agrees to work in good
faith with Company to identify areas where Bell Atlantic can reduce FSN costs,
including ways to reduce Material and Services prices after April 1, 1997, and
the parties may implement such reductions.
9.2 In addition to the price modifications described in Article 10 of
this Amendment, the pricing set forth in Exhibit B has been modified to reflect
the following effective immediately:
(a) Applicable only to purchases by Company for resale to Bell
Atlantic, Bell Atlantic Affiliates, NYNEX, and any other entities entitled to
purchase from Company under the FSN Agreement, Supplier agrees to extend the VAM
Basic Software License for applications from one hundred twenty (120) digital
broadcast channels up to and including one hundred eighty eight (188) digital
broadcast channels, [**************************].
(b) Applicable only to purchases by Company for resale to Bell
Atlantic, Bell Atlantic Affiliates, NYNEX, and any other entities entitled to
purchase from Company under the FSN Agreement, Supplier agrees to extend the
Basic Digital Broadcast Software License for applications from one hundred
13
<PAGE>
twenty (120) digital broadcast channels up to and including one hundred eighty
eight (188) digital broadcast channels, [****************************].
(c) Applicable only to purchases by Company for resale to Bell
Atlantic, Bell Atlantic Affiliates, NYNEX, and any other entities entitled to
purchase from Company under the FSN Agreement, Supplier agrees to extend the
Interactive Video Software - Low Penetration License to include applications
from [***********************************] up to and including
[***************************************].
9.3 (a) [********************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
*******************************************************************************]
(b) [*************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
14
<PAGE>
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
*****************************************************************************].
10.0 Price Modification to Achieve Model Price Per Home Passed
10.1 To achieve the Bell Atlantic model price level [***********
************************], with Flexterm, per Home Passed at [*************
**************], the prices set forth in Exhibit B [***********************
********************************************************] and shall be effective
immediately.
10.2 To accommodate Bell Atlantic's FSN model for higher video traffic
requirements (known as Case Y), [**********************************************
*****************************************], a new item has been added to Exhibit
B which combines three (3) Software licenses into one (1) license. The three (3)
licenses are:
(a) the High Bandwidth Software License (1 Mbps/Drop) R1.0, 1.1,
2.0;
(b) the Extended Digital Broadcast Software License (>188
Channels) R1.0, 1.1, 2.0; and;
(c) the VAM Extended Software License (>188 Channels) R1.0, 1.1,
2.0.
These three (3) licenses are consolidated into one (1) license; the Bell
Atlantic Enhanced Broadcast / Signaling Software R1.0, 1.1, 2.0, and is offered
to Company under this Amendment only.
[********************************************
***************************************************************]. This Bell
Atlantic Enhanced Broadcast / Signaling Software R1.0, 1.1, 2.0
[*************************
********************************************************************************
********************************************************************************
********************************************************************************
**************************************************].
10.3 For the aggregate levels of Homes Passed by Bell Atlantic and the
Bell Atlantic Affiliates as indicated in the first column of the table set forth
below, Supplier will apply to purchases under this Amendment the corresponding
discounts set forth in the second column of said table. Said
15
<PAGE>
discounts shall be applied against the prices set forth in Exhibit B. All price
and cost reductions will be calculated using the standard Bell Atlantic FSN
model set forth in Appendix B to the FSN Agreement. Supplier and Company will
mutually determine the specific unit prices to adjust to achieve the required
price levels when calculated according to the Bell Atlantic FSN Model and
Exhibit B shall be revised accordingly.
- -------------------------------------------------------------------
# Homes Passed Supplier $
per HP
Reduction
- -------------------------------------------------------------------
- -------------------------------------------------------------------
[********************] [******]
- -------------------------------------------------------------------
- -------------------------------------------------------------------
[********************] [******]
- -------------------------------------------------------------------
- -------------------------------------------------------------------
[********************] [******]
- -------------------------------------------------------------------
- -------------------------------------------------------------------
[********************] [******]
- -------------------------------------------------------------------
- -------------------------------------------------------------------
[********************] [******]
- -------------------------------------------------------------------
- -------------------------------------------------------------------
[********************] [******]
- -------------------------------------------------------------------
10.4 In return for Supplier's agreement to provide the discounts set
forth in Section 10.3, the parties agree that the cost reduction benefits set
forth in the clause "Value Analysis-Engineering and Cost Reduction" of the
Agreement shall not apply to purchases of Material under this Amendment;
provided, however, that Supplier does agree to count any such purchases of
Material by Company under this Amendment, towards the cost reduction volume
thresholds defined in said clause for purposes of determining the cost
reductions available to Company for purchases of Material not made under this
Amendment.
10.5 If during the term of the Agreement, Company is provided more
favorable pricing from Supplier due to cost reduction efforts, or for any other
reason, Supplier acknowledges that Company will receive this pricing for
Material supplied by Company under this Amendment, subject to prior Executive
Team review and approval. However, in the event that the pricing set forth in
this Amendment is the most favorable, Company will not extend this pricing to
any other customer without prior written approval from Supplier.
16
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11.0 [******************]
11.1 In order to motivate Company to maximize the selling price of
Supplier Software, Supplier agrees to provide to Company [********] described in
Section 11.2 below on all Software licensed by Company under this Amendment
during the Term. This includes all Software currently listed in Attachment C of
the Agreement, and any Additional Software that may be offered for sale by
Supplier to Company over the term of the Agreement, with the limited exception
of that of Supplier's Software which is noted with an asterisk (*) on Exhibit B
to this Amendment.
11.2 For all eligible Software under Section 11.1, [***************
********************************************************************************
**************************************************************] (as in effect at
the time of the purchase by Company), including any modifications to such
Exhibit B prices that are mutually agreed to by Company and Supplier. Supplier
shall pay the foregoing [**********] Company by the fifteenth (15) day of the
month following the end of each calendar quarter that this incentive is in
effect. Supplier shall then [****************] Company for all shipments made by
Supplier to Company during said quarter.
11.3 [******************************] provided for in the Agreement
shall be calculated on [*****] resulting from a Company markup over the Exhibit
B prices, without including the Software sales incentive set forth in Section
11.2 (i.e., prior to the calculation of the Software incentive).
12.0 Custom Software
12.1 Mandatory Requests. (a) Supplier acknowledges that Bell Atlantic
shall be entitled to fund annually up to [**********************************] of
custom Software development for access products or applications ("Custom
Software") and that Bell Atlantic may require Company to develop Custom Software
for up to this limit. Company agrees to immediately provide written notification
to Supplier if any such development work requires the resources of Supplier.
Bell Atlantic, Company, Supplier and Bell Atlantic shall mutually agree on the
requirements, Headcount Years, and delivery schedule of such development, with
the goal being to commence such development work within [****************] of
Bell Atlantic's request. Also depending on the scope and nature of such
development work, Supplier's goal will be to complete such development work
[*********************] of Bell Atlantic's request and shall, in all events,
seek to finish such development work within a commercially reasonably time
period.
17
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(b) Prior to Supplier commencing to such development work, Company and
Supplier will negotiate in good faith the fees to be paid to Supplier. Such fees
shall be based on the agreed to scope and nature of the required development
work and the desired schedule. In no event, however, shall the fees payable to
Supplier for any such work
[*******************************************************************************
*************************************] may be adjusted in December of each
calendar year up to the amount of any change in the Producer Price Index for
Telecommunications Systems, Custom Software Development during the
preceding twelve (12) month period.
12.2 Discretionary Requests. Supplier acknowledges that Bell Atlantic
may also make discretionary requests for Custom Software in addition to the
mandatory development work cited above. Any such development work to be
performed by Supplier to meet Bell Atlantic discretionary requests shall be
subject to prior negotiation between Company and Supplier regarding the
requirements, delivery schedule, and the fees payable to Supplier for such
development work.
12.3 Reservation of Rights. For mandatory Software development
requests, Company reserves the right to perform the development work itself, or
contract with other third parties to perform such development work, or at its
sole discretion, pass the requirement to Supplier. In addition, Company agrees
that Supplier shall have the right of first refusal prior to Company having any
such development work performed by any third party.
12.4 Ownership of Custom Software. All rights in and title to Custom
Software that is not embedded into existing Software or a derivative of
pre-existing work shall vest in the developing party. Supplier will grant to
Company, Bell Atlantic and Bell Atlantic's Affiliates, a perpetual, fully paid,
exclusive license to use such Custom Software with the FSN, unless Bell
Atlantic, in its sole discretion, agrees to allow such Custom Software to be
licensed to others. In the event that any such Custom Software should be
licensed to others, compensation to Bell Atlantic will be negotiated on a case
by case basis.
13.0 Controlled Introduction of Software
13.1 Supplier agrees to notify Company prior to placing any Software
Upgrades or Software Enhancements on any Material covered under this Amendment
or accepting any orders for delivery of Software Upgrades or Software
Enhancements for any Material covered under this Amendment. Supplier will submit
to Company, for Bell Atlantic testing purposes, one (1) pre-purchase copy of any
proposed Software Upgrade or Software
18
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Enhancement at least [****************] prior to the proposed general
availability or proposed service date of such Software Upgrade or Software
Enhancement. In the event that Bell Atlantic notifies Company that any Software
Upgrade or Software Enhancement is unacceptable, Company shall immediately
provide written notification to Supplier of same. Supplier agrees that it will
not be providing any Software Upgrade or Software Enhancement on any of
Company's orders during the evaluation period without prior written approval of
Company and Bell Atlantic. Supplier also agrees that Company it will not furnish
any Software Upgrade or Software Enhancement following Bell Atlantic's
evaluation until written approval has been received by Company from Bell
Atlantic. Supplier will not charge Company any fees associated with the Software
evaluation copy which Company submits to Bell Atlantic and such evaluation shall
in no way obligate Company to subsequent charges or contingencies regardless of
the results of the evaluation.
14.0 Software Support
14.1 During the Software warranty period set forth in the Agreement,
Supplier will promptly provide, at no additional charge, procedures, as
determined by Supplier for particular Software, to keep Software operating
consistently with it specifications. Such procedures shall include diagnostic
service using on-site or remote techniques to analyze a problem and prescribe
remedial action. Further, throughout the Term, Supplier will provide all Code
Corrections at no charge. Supplier may provide [*****************************
*******] included with a Software Upgrade or Enhancement, on the condition that
[********] does not delay prompt release of the Code Corrections to Company and
Bell Atlantic.
14.2 Unless otherwise agreed to in writing, Supplier shall furnish to
Company, at no additional charge, and on a non-proprietary basis, no less than
one copy of Related Documentation, and any amendments or revisions made by or on
behalf of Supplier during the Term, as is sufficient for Company to plan,
engineer, procure, install, operate and maintain the Material. Such Related
Documentation shall be furnished to Company together with the Material to which
it relates or at such time as any amendments or revisions are made thereto,
whichever is earlier. Company may reproduce and distribute such Related
Documentation to third parties for the purposes described and shall include in
any such reproductions any copyright notices contained in the original of the
items being re produced.
19
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15.0 Warranty
15.1 Material purchased under this Amendment shall be warranted in
accordance with the clause of the Agreement entitled "Warranty" except that
repaired, modified, and/or serviced Material shall
[*********************************************************************].
15.2 For all purposes of this Amendment, the clause "Warranty" in the
Agreement is hereby amended as follows:
(a) The last sentence of the second paragraph is amended to provide,
"If requested by Company, Supplier shall begin on-site repairs within an average
of three (3) days after verbal notification is given Supplier by Company."
(b) Supplier warrants that Supplier has the right to grant to Company
the Software and other licenses granted under this Amendment. Supplier further
warrants to Company that the furnished Software shall be free from defects in
design, that it will conform to the applicable specifications, and that it will
operate satisfactorily in the system environment in which it is initially
installed. Defective Software will be corrected or replaced after notification
is given to Supplier by Company. Supplier, at its option, will undertake to
either correct or replace the defective Software without charge at the location
where it is installed in accordance with corrective action prescribed for the
applicable Severity Code (per Appendix C to the General Purchase Agreement in
effect between Bell Atlantic and Company), or, at Supplier's option, provide a
refund or credit of the original license fee; provided, however, that Supplier
may elect to provide a credit to Company only where Company reasonably
determines the credit to be of value.
16.0 Change Control Process
16.1 Supplier acknowledges that Bell Atlantic may submit written
requests to Company to request changes or revisions to hardware and software to
be furnished under the FSN Agreement and, to the extent Bell Atlantic's request
involves Material, Company shall immediately notify Supplier (a "Change Control
Request"). Change Control Requests requiring [***************************] will
be handled in the normal change control process. Change Control Requests
[**************************************] will be negotiated by the parties and
will be performed under this process provided that the parties reach mutually
satisfactory agreement on requirements, Headcount Years, price and delivery
schedule. Any resulting Software shall be licensed to Company under the
provisions of Article 5 without payment of any additional license fees or
charges other than charges for the development work as provided herein.
20
<PAGE>
16.2 Within fifteen (15) days (or a different period if mutually agreed
to by the parties) following receipt of a Change Control Request from Company,
Supplier shall provide a written response to Company specifying: (i) the
specifications for the work to be performed; (ii) the work schedule for the
proposed work; (iii) a firm price quote for the work, and associated new
hardware unit prices (if any) for the new Material, (iv) the number of Headcount
Years required, and (v) the impact, if any, on the delivery date of the Material
to be modified; provided, however, that (x) the fees payable by Company for any
such Change Control Request [*************************************************
********************************************************************************
*****************] may be adjusted by Company in December of each calendar year
up to the amount of any change in the Producer Price Index for
Telecommunications Systems, [*********************] during the preceding twelve
(12) month period. This limitation shall not, however, apply to Major Changes.
16.3 If Supplier's response is approved in wring, Supplier will proceed
with the work. Supplier shall not be obligated to perform any requested changes
or revision to Material in advance of written approval from Company. In the
event that Supplier commits resources to the implementation of a Change Control
Request without prior written authorization, Company shall not be charged for
such work and such work shall not relieve Supplier of its obligations to meet
previously agreed upon schedules. For purposes of this Amendment, each Change
Control Request response approved in writing by Company shall constitute a
formal change to this Amendment modifying the prices, functionality and/or
schedules as addressed therein, and any hardware or Software developed pursuant
to such a request shall fall within the definition of the term "Material."
16.5 [*************************************************************
********************************************************************************
********************************************************************************
*****************************************************************].
17.0 Additional Software
17.1 The parties enter into this Amendment with the mutual
understanding that it is Company's intention to continue feature and function
development beyond Release 2.1. As Supplier develops Additional Software,
21
<PAGE>
Supplier will seek and utilize input from Bell Atlantic and Company other
customers.
17.2 Supplier will make available to Company any generally available
Additional Software upon mutually agreeable prices and terms and conditions.
[*******************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
****************************************************************].
17.3 Additional Software shall be licensed to Company at fees no less
favorable than those extended to any other Supplier customer, under comparable
terms and conditions (i.e., comparable scope of license and usage rights).
18.0 Late Delivery
18.1 [*************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
****************************************************************].
18.2 Company and Supplier acknowledge that as a result of the means by
which the parties will be working together to deliver products to Bell Atlantic,
that it may be extremely difficult to determine which party is at fault for late
deliveries to Bell Atlantic prior to general availability of hardware and
software. Accordingly, if Bell Atlantic notifies Company of its assessment of
[********** ********] for late delivery, Company shall promptly notify Supplier
thereof.
22
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Supplier agrees to share with Company
[****************************************** *****] by Bell Atlantic for late
deliveries under the FSN Agreement as follows: (a) if Company is
[***************] for late delivery for any hardware and/or software (whether or
not such hardware or software includes Material to be furnished by Supplier
hereunder) and the agreed upon delivery date is prior to the general
availability date of such hardware and/or software, [******************
********************************************************************************
*******************], regardless of which party caused the late delivery; (b) if
Company is
[*************************************************************************] as a
result of late delivery of Material by Supplier hereunder and the agreed upon
delivery date for such Material is after the general availability date of such
Material, all such [************] shall be borne solely by Supplier and Supplier
agrees to pay to Company any and all such [************]. After the general
availability date of Material, Supplier shall not be held accountable for
[******************] assessed by Bell Atlantic to Company if Supplier has
delivered the Material on or before the agreed upon delivery date for the
applicable Company purchase order.
18.3 Company shall invoice Supplier for [**********] due and owed by
Supplier under Section 18.2 within a commercially reasonable period of time and
Supplier agrees to pay all such invoices in full within thirty (30) days from
the date of such invoices. At Company's option, Company may withhold against any
Supplier invoices then outstanding payment in an amount equal to any accrued and
due but unpaid [***********] under Section 18.2, until such time as said
[**************] are paid by Supplier.
18.4 Bell Atlantic may cancel any purchase order, in whole or in part,
[*******************************************************************************
******]. In the event that Bell Atlantic cancels any or all of such purchase
orders, Company may cancel any related purchase orders placed under this
Amendment. Upon such cancellation, Supplier shall pay Company any
[*****************] under Section 18.2 but unpaid as of the date of
cancellation. The amount of any canceled purchase orders shall be credited
against any unfulfilled commitment forecasts or other committed purchases of
Supplier under this Amendment.
18.5 In the event Bell Atlantic exercises its rights under the FSN
Agreement to defer or cancel delivery of all or any portion of a purchase order
for failure to obtain required regulatory approvals, Company shall have the
corresponding right to defer or cancel delivery of all or any portion of related
purchase orders for Material upon notice to Supplier. Upon such notice, Supplier
will not ship any Material covered by such orders until Company is authorized by
Bell Atlantic and Company instructs Supplier to do so. Supplier shall have no
liability under Section 18.2 for shipments delayed under this Section 18.5.
23
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18.6 The foregoing provisions of this Article 18 shall supersede and be
in lieu of the clause
[*****************************************************************
*****************].
19.0 [****************]
19.1 Company and Supplier acknowledge that Bell Atlantic may assess
[******************] under the FSN Agreement for any Software release set forth
in Exhibit D to this Amendment which is not delivered
[*******************************************************************************
************************************************************] in Exhibit D
("Nonconformance"). In the event Bell Atlantic notifies Company of any
Nonconformance ("Notice of Nonconformance"), Company shall promptly provide
notice thereof to Supplier. If a Nonconformance is not remedied within
[***********************] set forth in Exhibit D ("Event of Nonconformance"),
Company [*********************] to Bell Atlantic for such delay for each Event
of Nonconformance in accordance with Exhibit D for each day of Nonconformance
following the Notice of Nonconformance.
19.2 Supplier and Company agree to jointly work all aspects of
development and deployment to deliver conforming Software releases to Bell
Atlantic on a timely basis. Supplier agrees to share with Company any
[**********] assessed by Bell Atlantic under the FSN Agreement as follows: (a)
[*****************************************************************************
********************************************].
19.3 Company shall invoice Supplier for [***********] due and owed by
Supplier under Section 19.2 within a commercially reasonable period of time and
Supplier agrees to pay all such invoices in full within thirty (30) days from
the date of such invoices. At Company's option, Company may withhold against any
Supplier invoices then outstanding payment in an amount equal to any accrued and
due but unpaid [***********] under Section 19.2, until such time as said
[*******************] are paid by Supplier.
19.4 In addition to its right to recover [***************], Bell
Atlantic may terminate the FSN Agreement for default if (a) either
[******************************] or [************************************] which
Bell Atlantic believes to be material to the functioning of the ASE is subject
to an Event of Nonconformance; and (b) such Nonconformance continues for ninety
(90) days or more. If Bell Atlantic exercises its right to terminate the FSN
Agreement in accordance with the preceding sentence,
24
<PAGE>
Company may terminate this Amendment. Upon such termination, Supplier shall pay
Company any Performance Fees accrued under Section 19.2 but unpaid as of the
date of termination and Supplier will allow Company to adjust any commitment
forecasts and purchase order commitments accordingly.
20.0 Disclosure of Defects
20.1 Supplier acknowledges that in addition to all other rights and
remedies available to Bell Atlantic at law, in equity or under the FSN
Agreement, Bell Atlantic may assess against Company under the FSN Agreement
[*************************************************************************
************]: (a) that results in the disruption of Bell Atlantic's network
access and/or the services provided by an ASE, or equivalent system, to customer
of Bell Atlantic for a period of thirty (30) uninterrupted minutes per
occurrence, and (b) for which Company does not fulfill its notification
obligations under the FSN Agreement which include notifying Bell Atlantic of the
occurrence of an Event within [************] of Company's first knowledge of the
same and, within [******************] thereafter, providing a detailed written
description of the following: (i) activities which led up to or preceded the
Event, (ii) the cause or causes of, including any and all known contributing
factors to, the Event, (iii) any and all actions taken by Company, its agents,
and contractors, and by the owner or user of the products which are subject to
the Event, to correct it, (iv) the date the Event will be resolved, and (v) any
and all measures which can be reasonably taken to avoid the occurrence of the
Event in Bell Atlantic's products. Company is further obligated to continue to
provide these written descriptions to Bell Atlantic every [********************]
until such time as the Event has been successfully resolved or until Company and
Bell Atlantic agree on their discontinuance. For purposes of this Section,
"products" means hardware and software sold by Company and Supplier under the
FSN Agreement and this Amendment, respectively, and other items that are
manufactured and/or sold by Company or Supplier which are the same as, or
functionally or operationally similar to, such hardware and software.
20.2 Supplier agrees to cooperate with Company and to provide to
Company under this Amendment the notifications and other information required
under Section 20.1(b) above with respect to the Material and other items that
are manufactured and/or sold by Supplier which are the same as, or functionally
or operationally similar to, such Material. In the event that Bell Atlantic
assesses [******************] against Company as described in Section 20.1
above, Company shall promptly provide written notification to Supplier of same.
Supplier agrees to share with Company any such [******************] assessed by
Bell Atlantic as follows: (a) [************************]; and (b) [*****
**********************************].
25
<PAGE>
20.3 Company shall invoice Supplier for any [**********] due and owed
by Supplier under Section 20.2 within a commercially reasonable period of time
and Supplier agrees to pay all such invoices in full within thirty (30) days
from the date of such invoices. At Company's option, Company may withhold
against any Supplier invoices then outstanding payment in an amount equal to any
accrued and due but unpaid [********] under Section 20.2, until such time as
said [***************] are paid by Supplier.
21.0 Limitation of Nonconformance [*****************]
21.1 Supplier's total liability for [***********************] under
Article 18 Late Delivery, Article 19 - [***********], and Article 20 -
Disclosure of Defects, shall be limited as follows.
(a) Supplier's total liability resulting from the cumulative impact of
the above [************] shall be capped
[*********************************************** ****] under this Amendment and
the Companion Agreement.
(b) Payment to Company by Supplier of Nonperformance
[****************************************] under these [******] Articles shall
occur only upon the assessment of such
[**************************************************
*****************************] by Bell Atlantic to Company.
(c) Payment to Company by Supplier of Nonperformance
[****************************************] under these [*********] Articles
shall not [****************************************] during each of the 1996 and
1997 calendar years. For each of the calendar years 1998 through 2002,
Supplier's payment to Company of
[********************************************************] under these
[*********] Articles shall not [*************************************
******************] of Company's purchases from Supplier under this Amendment
during the immediately preceding calendar year, whichever is lower.
21.2 In the event that Supplier's payment of Nonperformance
[***************] reach the annual cap set forth in Section 21.1(c) for any
calendar year during the Term, Supplier shall notify Company of such, and
further payments to Company shall not be required in that calendar year, but
shall continue to accrue and shall be payable in the next following calendar
year. Following the close of each calendar year, Supplier and Company agree to
conduct an annual reconciliation of the Nonperformance [************] paid by
Supplier to Company for each preceding year and to determine the amount of
26
<PAGE>
Nonperformance [************************], if any, to be carried over into the
current calendar year, as described herein.
[**********************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
********************************************************************************
*************************************************************].
21.3 At the expiration or earlier termination of this Amendment,
Company and Supplier will perform a final
[**************************************** ***********************] payable by
Supplier under Articles 18, 19, and 20 of this Amendment and, subject to the
[***************************************************** **************] provided
in Section 21.1(a), any and all outstanding amounts will be paid by Supplier to
Company within thirty (30) days after the date of such expiration or
termination, as applicable. Upon such payment, if any, Supplier shall have no
further liability for Nonperformance [***********************] under said
Articles.
22.0 Manufacturing Capacity
22.1 Supplier warrants that it has established and covenants that it
will maintain during the Term, sufficient manufacturing capacity for Material to
ensure that Bell Atlantic's Beta Test Date, its FSA Date, and any commercial FSN
deployment will not be jeopardized due to Supplier delivery delays.
23.0 Joint Cost Reduction Commitment
23.1 This Section 23.1 is included as explanation of the Company and
Supplier cost reduction commitments, and should not be viewed as further
reductions to the price modifications as defined in the Article 17, Price
Modification to Achieve Model Price Per Home Passed, of this Amendment.
27
<PAGE>
23.2 Supplier agrees to work with Company to jointly achieve the
required cost reduction that will support a price reduction to Bell Atlantic of
[**********************************], when using the standard Bell Atlantic FSN
model. This required cost reduction will entail a commitment by both Supplier
and Company to enter into joint design work to achieve this cost reduction,
regardless of the volume level projections. It is the goal of the cost reduction
efforts that this cost reduction will be achieved by [***********].
23.3 Both Company and Supplier agree to a baseline view of the cost
reduction impact on price. This view, using the Bell Atlantic FSN model,
supports the following reductions in price / HP as the baseline:
(a) [**********************************]
(b) [*************************************************************
***************************************].
The ONU cost reduction and resultant price impact baseline view is
allocated between Company and Supplier proportional to each parties share of
components in the current ONU, evaluated with the current ONU pricing. Both
Company and Supplier agree to update this baseline view and the contribution
required from each party as the joint design work progresses and becomes better
defined.
23.4 The new Integrated ONU will require both Company and Supplier to
commit resources to a single design. To accomplish this goal, both Company and
Supplier accept the concept of an integrated joint design team. This effort will
lead to some circuit packs and other equipment having design contributions from
both parties. Both Company and Supplier commit their commercially reasonable
best efforts to establish and complete appropriate commercial arrangements in
support of this mutual effort within three (3) months from the Effective Date of
this Amendment. Company and Supplier acknowledge that the level of integration
required to meet these cost reduction targets integrates intellectual property
and manufacturing rights of both parties and it is the intent of Company and
Supplier to assign such rights prior to the commencement of development
activities. Any disputes arising from this integration will be resolved by the
Executive Team prior to any assignment of such rights.
24.0 [Intentionally Deleted]
28
<PAGE>
25.0 Training/Lab Material
25.1 Supplier acknowledges that Bell Atlantic requires the delivery and
installation of [********************] by the dates set forth in Exhibit D to
this Amendment. Company agrees to provide Supplier with a forecast and purchase
orders for Material required for such systems, and Supplier agrees to accept
such purchase orders and ship such Material in sufficient time to enable Company
to deliver and install the laboratory test systems on time.
25.2 Supplier will provide to Company [***************] as described as
"Lab System 1" in Appendix D to the FSN Agreement, free of charge, which Company
shall supply to Bell Atlantic, at Company's sole discretion, for either training
or laboratory testing purposes. The configuration of the system shall be
mutually agreed to by all the parties and shall be sufficient to meet the
requirements of Bell Atlantic. Supplier agrees to upgrade this system and will
provide new features and functionalities as each becomes available up through
Release 2.1.
[*************************************************************************
**************************************************************************].
26.0 Public Interfaces
26.1 Supplier agrees to provide Company and Bell Atlantic with any
public interface specification documentation and reasonable amounts of support
to resolve any questions Company or Bell Atlantic may have regarding these
interface specifications as they pertain to Bell Atlantic's FSN deployment or
the ASE.
27.0 Testing and Quality
27.1 Supplier will perform a factory systems test in accordance with
the following criteria:
(a) The term "system" is meant to describe a complete ASE transport
system including all standard subsystems. For normal production, it is
acceptable to test subsystems in a "system configuration" test environment
consisting of a captive test bed to which the specific subsystem under test is
connected. These arrangements are acceptable if the periodic qualification
testing is used to revalidate such test configurations. This can be accomplished
by first testing a defined system in the production manner followed by
qualification testing of the same system (using a full system environment).
29
<PAGE>
(b) Correction of any production testing program deficiencies
identified will be made immediately. System configuration testing will be
conducted on Materials to demonstrate the ability to achieve stable, fault free
operation for a reasonable period of time while running operational exercises
and diagnostic routines at [**********************]. The testing duration will
be such that adherence to reliability requirements can be demonstrated.
Manufacturing testing burn-in intervals will be of sufficient duration, so that
when coupled with normal installation and turnover intervals, early-life
reliability performance at cut over will be at or below [***************] the
steady-state reliability level. That is, the instantaneous failure rate at cut
over shall be less than or equal to [*********************] the expected
steady-state instantaneous failure rate.
(c) Periodically, an entire system will be subjected to qualification
testing to assure that product and manufacturing processes continue to
demonstrate conformance to design intent. All Material shipped loose and not in
a complete system configuration, such as spares and additions for growth, shall
receive testing to demonstrate functionality and quality levels at least
equivalent to Material embedded in systems. Manufacturing testing and burn-in
intervals will be of sufficient duration so that infant mortality failure rate
of Material shipped is no greater than
[******************************************* ***********************] the
predicted steady-state failure rate.
(d) Testing performed will provide verification of operability as
completely as possible with current manufacturing test capabilities. This will
include verification of performance over ranges of design limits to assure
operation in all possible field applications. Testing in a simulated use
environment (test bed) will normally be included as one of the test steps. Bell
Atlantic owned circuit packs returned for repair must be tested in a simulated
use environment as part of the repair process. Returned circuit packs which are
found to be operational upon their receipt will be tested under [*************]
to identify thermostatic devices which may have been the cause for return.
Return and repair results data shall be made available to Bell Atlantic or Bell
Atlantic's agent. The effectiveness of simulated use environments or the manner
of subsystem testing employed must have been verified as consistent with a full
level system test. This verification must have been conducted initially and at
periodic intervals as part of the periodic qualification discussed above. When
internal machine diagnostics are used in the testing of systems, subsystems or
Material shipped loose, the effectiveness of those diagnostics in the
identification of defective Material must be verified initially and again as
part of the periodic product qualification test.
27.2 Unless Company gives Supplier written notice to the contrary,
Supplier shall notify Company when each installment of Material is ready for
inspection and Company and Bell Atlantic (or its agent) shall be given
30
<PAGE>
reasonable opportunity to inspect the Material at any time prior to shipment
under agreed upon Quality Program Specifications listed in Appendix I to the FSN
Agreement, as may be changed from time to time with Supplier's written
concurrence. Inspection or failure to inspect on any occasion shall not affect
Company's rights under warranty or other provisions of this Amendment. Supplier
shall make available at no additional cost to Company, such production testing
facilities, labor, data, specifications, procedures and such other documents,
and assistance as necessary for Company and Bell Atlantic or Bell Atlantic's
agent to perform the inspection. In addition, Supplier shall make available to
Company and Bell Atlantic or Bell Atlantic's agent, at no additional charge,
data obtained through Supplier's normal routines which show results of
Supplier's inspection, tests and audits of Material as specified in the agreed
upon Quality Program Specifications. Such data shall be sufficient to
demonstrate that the Material meets all quality and reliability requirements.
27.3 Commitment to quality is a primary requirement of this Amendment
and as used herein shall mean conformance to the terms, conditions and
specifications of this Amendment. Supplier will ensure continued quality
improvement in the Materials covered in this Amendment. Supplier will
demonstrate commitment to a "Quality Improvement Process" by providing (i) a
published statement of its quality policy signed by an officer of the company;
(ii) an established means of measuring and reporting customer satisfaction;
(iii) a quality training and awareness program; (iv) a continuous Quality
Improvement Process; (v) an established means of monitoring conformance to
requirements for Material and/or Services; and (vi) an established in-coming
"Material Quality Inspection Program." Further, Supplier shall implement and
document a quality system(s) that meets the requirements in ISO 9000 and
Bellcore documents, GR-1252-CORE, "Quality System Generic Requirements for
Hardware," and TR-NWT-000179, "Quality System Generic Requirements for
Software." Upon Company's written request, Supplier agrees to allow Company and
Bell Atlantic or Bell Atlantic's agent to conduct on-site reviews at the
Supplier's hardware manufacturing and software development facility(s) to verify
compliance with requirements. Supplier also agrees to develop corrective action
plans for any quality system deficiencies that may be detected during these
periodic on-site reviews, and submit these to the Company and Bell Atlantic or
Bell Atlantic's agent within thirty (30) days after the review. Further,
Supplier agrees to use its commercially reasonable best efforts to implement
these corrective action plans within six (6) months after the review.
27.4 Supplier agrees to abide by and meet all applicable provisions of
the Quality and Reliability Specifications in Appendix I to the FSN Agreement.
Any existing or anticipated noncompliance by Supplier with such Specifications
will be disclosed by Supplier to Company in writing on or before July 26, 1996
to enable Company to notify Bell Atlantic thereof pursuant to the FSN Agreement.
Such notice from Supplier shall include a written schedule
31
<PAGE>
pursuant to which Supplier shall cure such instances of noncompliance. To the
extent Bell Atlantic waives any obligation of Company to comply with such
Specifications for a stated period of time under this FSN Agreement, Company
agrees to waive such obligation for Supplier to comply under this Amendment for
the corresponding period of time. The parties acknowledge that Bell Atlantic's
acquiescence in or agreement to a schedule under which Supplier or Company shall
cure any noncompliance shall not constitute a waiver by Bell Atlantic.
28.0 Trouble Reports
28.1 Supplier acknowledges that Bell Atlantic must reduce its Access
Subnetwork Trouble Report Rate by [*********************************************
********************]. Supplier's Material, as part of Bell Atlantic's FSN, will
contribute to meeting this Objective. Supplier agrees to assist Company in
supporting Bell Atlantic's Overall Objective by providing reliability and other
information, including but not limited to Failures in Time (FIT) Rates for
Material, and will provide additional support and expertise which may contribute
to the specification and achievement of Bell Atlantic's objectives if requested
by Company, at no cost to Company.
29.0 General FSN Support
29.1 The parties acknowledge that the FSN Agreement and concomitant
Appendices contain performance obligations which are intended to be performed by
Company and Supplier individually and, in some instances, Company and Supplier
together. With respect to those obligations of the FSN Agreement and Appendices
related to content and/or Material to be provided by Supplier, Supplier agrees
to provide the same in a timely manner and to cooperate with and support Company
generally in the provision to Bell Atlantic and the Bell Atlantic Affiliates of
the FSN.
30.0 Cooperative Project Development Management
30.1 Supplier agrees to participate with Company and Bell Atlantic
throughout the product life cycle to assure that all Material and services are
delivered on time, and that they meet all requirements, including functionality,
maintainability, quality and reliability. Supplier also agrees to assist Company
with [******] and testing work associated with the ASE to the extent required to
make the ASE function with other vendor's equipment. Within thirty (30) days
after execution of this Amendment, a core management team(s) comprised of
representatives of Company, Supplier and Bell Atlantic will be established. This
core management team will review, assess and take corrective action, where
appropriate, in the areas of project management, risk
32
<PAGE>
management and quality assurance. Supplier agrees it will actively participate
on this team and share information with the team as required.
31.0 Cataclysmic Marketplace Event
31.1 Except as otherwise expressly agreed by the parties in writing,
the parties agree that nothing contained in the clause "Cataclysmic Marketplace
Event" in the Agreement shall affect or limit the rights and obligations of
either party under this Amendment.
32.0 Other Terms and Conditions
32.1 When not inconsistent with the clause "Engineering Changes" in the
Agreement, Company shall issue EC/CAR in writing to notify Supplier of
unsatisfactory conditions or performance of Material which Company believes
requires a change in the design, manufacturing process or installation and
engineering instructions. Supplier shall provide a written acknowledgment to
Company within ten (10) working days stating that Supplier has received and will
act on the EC/CAR. Supplier shall provide a written final report to each EC/CAR
within ninety (90) days or for design related conditions within 120 days of
receipt of such EC/CAR. This report shall include a plan for resolving the
EC/CAR and an estimated schedule for implementing the plan. To the extent not
inconsistent with this Amendment, Supplier agrees to administer EC/CAR in
accordance with Bellcore Technical Reference TR-EOP-000230, Guidelines for
Engineering Complaints and Operational Trouble Reports. Nothing herein shall
limit Supplier's obligations under the clauses entitled "Engineering Changes"
and "Warranty" of the Agreement, as modified by this Amendment.
32.2 The clause "Insignia" in the Agreement is amended to add the
following, "Material rejected or not purchased by Company which utilized such
Insignia shall have all such Insignia removed prior to any sale, use or
disposition thereof. Supplier agrees to indemnify and hold Company harmless from
any claim, loss or damage arising out of Supplier's failure to do so."
32.3 Subsection (c) of the clause "Marking" in the Agreement is amended
as follows, "(c) markings in accordance with the requirements outlined in
Technical Reference 52001, dated October 1985 and Bellcore Documents
#TR-STS-000485, TR-STS-000383, TR-ISD-000325, TR-TSY-000081, and KS-23490, as
amended from time to time."
32.4 The clause "Packing" in the Agreement is hereby amended to insert
in the first line "[*************]" after the word "Supplier" and to insert the
following two (2) sentences after the first sentence:
"[***************************
33
<PAGE>
********************************************************************************
*******************************************]. Electrostatic Shielded Packaging
is defined herein as packaging that meets the applicable requirements for
"ELECTROSTATIC SHIELDING TYPE" packaging as prescribed in Electronic Industries
Association (EIA) Interim Standard IS-5-A ("Packaging Material Standards for ESD
Sensitive Items")."
32.5 The first paragraph of Appendix F is hereby amended to state:
Supplier agrees to perform and administer all "Product Changes" in
accordance with Bell Communications Research Technical Reference No.
TR-EOP-000209, Issue 5, titled "Guideline for Product Change Notices",
which is incorporated herein by reference, except as stated in (a) and
(b) below:
(a) The last sentence under 3.01 is changed to read,
"Suppliers are obligated to announce such Product
Changes to their Products throughout the life of the
Product."
(b) The third and fourth sentences under 8.01 are
changed to read, "In most cases the PIC stock should be used
for the rotational seed stock. In unusual situations, the
Supplier may provide a seed stock."
32.6 The second sentence in the first paragraph of the clause "Repairs
Not Covered Under Warranty" in the Agreement is amended as follows:
Material to be repaired under this clause will be returned to a
location designated by Supplier, and unless otherwise agreed upon by
Supplier and Company, Supplier shall ship the repaired Material which
meets the specifications within an average of [*************] of
receipt of the defective or non-conforming Material or replace such
Material within and average of [*********], with shipment and risk of
loss to Supplier.
32.7 The clause "Storage of Paid for Stock" in the Agreement is
hereby amended as follows:
(a) the first sentence shall state, "All Material invoiced to Company
in accordance with the INVOICING FOR STOCK clause shall be marked conspicuously
as Company's property, and safely stored by Supplier separately from other
material stocks, without charge to Company for a period of [***************],
and shall be shipped out as ordered by Company, except as provided in Section
18.5."
34
<PAGE>
(b) the third sentence shall state, "Beyond the [*********], charges to
Company shall be mutually agreed to."
32.8 The last sentence of the second paragraph of the clause "Technical
Support" in the Agreement is amended as follows, "After the [*************]
period, and for a period of [**************] after the expiration of this
Agreement, charges for field service technical support via telephone or on site,
will be as shown in Attachment G." The following paragraph shall be added to
this clause "Technical Support":
If requested, Supplier agrees to provide on-site support [***********]
to Company (i) for the Beta Test and first service application of
Material in geographic areas defined by Company, and (ii) for the first
service application of each new release. Otherwise, technical support
shall be billable at Supplier's then current rates.
32.9 The last sentence of the clause "Title and Risk of Loss" in the
Agreement is amended to delete, "....and risk of loss and damages shall pass to
Company."
32.10 Notwithstanding anything contained in the clause "Bar Code
Shipping and Receiving Labels" in the Agreement to the contrary, Supplier agrees
to abide by and meet the requirements of the "Telecommunications Industry Forum
(TCIF)" and Bell Atlantic's "Packaging, Packing, Palletization and Marking
Requirements" specifications as defined below. If requested by Company, Supplier
further agrees to meet with Company quarterly, at Company's warehouse locations,
to review all non-compliance issues and to agree upon a written schedule to cure
such instances of non-compliance.
(a) The following Telecommunications Industry Forum (TCIF)
specifications:
1. Shipping and Receiving Transaction Bar Code Label
specification, BC/93-001;
2. Implementation Guideline to Package Labeling, BC/93-002;
3. Product Package Label Specification, BC/89-003;
4. Guideline for Identification and Bar Code labeling of Cable
Reels (8/91), if applicable; and
(b) Bell Atlantic specification: Packaging, Packing, Palletization and
Marking Requirements, specification SR-NWT-002759.
35
<PAGE>
32.11 The following provision shall apply to transaction conducted
under this Amendment in lieu of the clause "Force Majuere" in the Agreement:
Neither of the parties shall be held responsible for any delay or
failure in performance hereunder caused by fires, strikes, embargoes,
requirements imposed by Government regulation, civil or military
authorities, acts of God or by the public enemy or other similar causes
beyond such party's control. However, Supplier's delay or failure to
perform shall not be excused by a default of any of its subcontractors
or suppliers unless such default arises out of causes beyond the
control of both the Supplier and its subcontractor or supplier and
without the fault or negligence of either of them, and unless the
supplies or services to be furnished by such subcontractor or supplier
are not obtainable from other sources. If such contingency occurs, the
party injured by the other's inability to perform may elect to: (a)
terminate this Amendment or part thereof as to Material or Services not
already received; (b) suspend this Amendment for the duration of the
delaying cause, buy or sell elsewhere Material and/or Services to be
bought or sold hereunder, and deduct from any commitment the quantity
bought or sold for which commitments have been made elsewhere; or (c)
resume performance hereunder once the delaying cause ceases with an
option in the injured party to extend the period, hereunder up to the
length of time the contingency endured. Unless written notice is given
within thirty (30) days after such injured party is apprised of the
contingency, (c) shall be deemed selected.
32.12 (a) Supplier represents and warrants that, where applicable, all
products and Materials provided hereunder will be packaged, labeled, handled and
shipped in accordance with all applicable federal, state, county and local laws,
rules, regulations, orders and other lawfully mandated requirements. This
obligation shall include but not be limited to compliance with the following:
(i) all product labeling and other requirements imposed by the New
Jersey Worker and Community Right-to-Know Act, N.J.S.A. 34:5A-1, et. seq.,
and all regulations adopted pursuant thereto;
(ii) all product labeling and other requirements imposed by the
Occupational Safety and Health Act of 1970 (OSHA), as amended, and all
regulations adopted pursuant thereto, including the Hazard Communication
Standard regulations;
36
<PAGE>
(iii) all requirements of the Hazardous Material Transportation Act,
the Toxic Substance Control Act, as amended, the Federal Insecticide, Fungicide
and Rodenticide Act (FIFRA) and the New Jersey Pesticide Control Code (N.J.A.C.
7:30).
(b) All unit packages or other substances which must be disclosed under
applicable law must bear a label indicating the following:
(i) name of the product;
(ii) chemical name and Chemical Abstracts Service (CAS) number
of the five (5) most predominant substances in a container, whether
they are hazardous or nonhazardous;
(iii) chemical name and CAS number for all hazardous
substances constituting greater than one percent (1%) of the product
(or greater than 0.1% for carcinogens, mutagens, and teratogens);
(iv) appropriate hazard warnings; and,
(v) the name and address of the manufacturer, importer, or
other responsible party.
(c) The label must be a sign, emblem or sticker of durable nature
affixed to or stenciled onto a container. Labels must be in English, easy to
read, not obscured, and prominently displayed on the unit package.
(d) In addition, Supplier agrees to furnish Company on or before the
date of delivery of Material, and thereafter upon request of Company, a copy of
the applicable Material Safety Data Sheet(s) (MSDS) for all Material provided
hereunder, in accordance with the OSHA requirements cited above. In the event of
any change in the composition of the Material during the course of the
Agreement, Supplier shall provide Company an updated MSDS and Supplier must
update the product label accordingly.
(e) Supplier agrees to defend, indemnify and hold harmless Company for
any loss, damage, penalty, fine or liability (including any costs and attorney's
fees) sustained because of Supplier's noncompliance with the provisions of this
Section 32.12.
32.13 The clause "Infringement" of the Agreement is hereby amended
to add the following paragraph:
If the use and/or sale of such Material is enjoined, Supplier
shall. at its own expense and option, procure for Company the
37
<PAGE>
right to continue using or reselling Material, or replace the
infringing Material or part thereof with substantially equivalent
Material or parts free of infringement, or modify the Material or parts
thereof so that they will be free of infringement, or remove infringing
Material in its entirety and refund to Company the full Material
purchase price and the costs associated with removal and transportation
of such Material.
32.14 If requested by Company, Supplier will to the best of its ability
provide information and assistance required in the planning, conduct and
research associated with regulatory matters in connection with the Material to
be furnished hereunder.
32.15 "Interconnect Information" is that non-proprietary technical
information necessary to comply with those FCC requirements designed to provide
Company's customers a functional interface with the Material supplied by
Supplier hereunder. For a period of ten (10) years after providing such
Material, Supplier shall, upon request, provide to Company Interconnect
Information.
33.0 Confidentiality and Non-Disclosure
33.1 The parties hereby reaffirm the validity of the Non-Disclosure
Agreement dated July 25, 1995 between Supplier and Company's
predecessor-in-interest, AT&T Corp. (the "Non-Disclosure Agreement"). For
purposes of this Amendment, the term "INFORMATION" (as defined in the
Non-Disclosure Agreement) shall also include the FSN Agreement (including,
without limitation, the General Purchase Agreement between Bell Atlantic and
Company) and any other information provided to Supplier, in any form or medium,
which is the confidential and/or proprietary information of Company or Bell
Atlantic. Notwithstanding anything contained in Paragraph 1 of the
Non-Disclosure Agreement to the contrary, Supplier agrees to hold the FSN
Agreement in confidence, shall use the FSN Agreement only for the purpose of
performing Supplier's obligations and duties under this Amendment and shall not
disclose the FSN Agreement to any third party without prior written approval of
the Company and Bell Atlantic, [****************************************
******************************************************************************].
All other terms and conditions of the Non-Disclosure Agreement shall remain in
full force and effect.
38
<PAGE>
34.0 Counterparts
34.1 This Amendment may be executed in two or more counterparts, and by
each party on the same or different counterparts, but all of such counterparts
shall together constitute one and the same instrument and agreement of the
parties hereto.
IN WITNESS WHEREOF, Company and Supplier have executed this Amendment
by their authorized representatives.
BROADBAND TECHNOLOGIES, INC. LUCENT TECHNOLOGIES INC.
By: /s/ Salim A.L. Bhatia By: /s/ Gerald J. Butters
Name (Print): Salim A.L. Bhatia Name (Print): Gerald J. Butters
Title: President & CEO Title: President, North American Region
Date: July 16, 1996 Date: July 16, 1996
39
<PAGE>
EXHIBIT A
Escrow Agreement
["INTENTIONALLY DELETED"]
40
<PAGE>
EXHIBIT B
Pricing
See Attached.
41
<PAGE>
EXHIBIT B
BBT PRICING FOR BELL ATLANTIC FSN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
BBT
AT&T PRODUCT UNIT OF UNIT
COMCODE NUMBER BBT PRODUCTION DESCRIPTION MEASURE PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[************]
TBD TBD [****************************************] [*************] [*********]
TBD TBD [***********************************************] [*************] [*********]
TBD TBD [**********************************************************************] [*************] [*********]
TBD TBD [*******************************************************************] [*************] [*********]
TBD TBD [***********************************************************************] [*************] [*********]
TBD TBD [*****************************************************************] [*************] [*********]
TBD TBD [****************************************************] [*************] [*********]
[************************]
TBD TBD [**************************************************************] [*************] [*********]
TBD TBD [****************************] [**************] [*********]
[******************]
TBD TBD [*****] [****] [******]
TBD TBD [********************] [****] [*******]
TBD TBD [********************] [****] [*******]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[******************************************]
42
<PAGE>
BBT PRICING FOR BELL ATLANTIC FSN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BBT
AT&T PRODUCT UNIT OF UNIT
COMCODE NUMBER BBT PRODUCTION DESCRIPTION MEASURE PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[************]
[***********] [*********] [****************] [*************] [*****]
[***********] [************] [******************] [*************] [*********]
[************************]
[***] [***] [****************************] [*********]
[***********] [************] [*************************] [***************] [*********]
[***********] [************] [***************************] [***************] [*********]
[***********] [*********] [*************] [*************] [*****]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
***************************************
43
<PAGE>
BBT PRICING FOR BELL ATLANTIC FSN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
BBT
AT&T PRODUCT UNIT OF UNIT
COMCODE NUMBER BBT PRODUCTION DESCRIPTION MEASURE PRICE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[*********************]
[**********] [********] [*******************] [****] [*********]
[***********] [********] [****************************] [****] [*******]
[***********] [********] [**********************] [****] [*******]
[***********] [********] [**********************] [****] [*******]
[***********] [********] [****************************] [****] [******]
[***********] [********] [*********************] [****] [******]
[***********] [********] [*********************] [****] [******]
[***********] [********] [*******************************] [****] [******]
[***********] [********] [*******************************] [****] [******]
[******************]
[***********] [********] [***************************] [****] [*********]
[***********] [********] [************************************] [****] [*********]
[***********] [********] [*****************************] [****] [*********]
[***********] [********] [********************************] [****] [*********]
[***] [********] [********************************] [****] [*********]
[***********] [********] [***********************************] [****] [*********]
[***********] [********] [*********************************] [****] [*********]
[***********] [********] [*********************************] [****] [*********]
[***********] [********] [******************************] [****] [*********]
- ---------------------------------------------------------------------------------------------------------------------------------
[******************]
[***********] [********] [*****************************] [****] [******]
[***********] [********] [*****************************] [****] [*******]
[***********] [********] [***********************************] [****] [*******]
[***********] [********] [***********************************] [****] [*******]
[***********] [********] [******************************] [****] [*******]
[***********] [********] [******************************] [****] [*******]
[***********] [********] [*************************] [****] [******]
[***********] [********] [*****************************] [****] [******]
[***********] [********] [*****************************] [****] [******]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
***********************************
44
<PAGE>
EXHIBIT C
[***********************************]
See Attached.
45
<PAGE>
[****************************************] ________
1996
[*******************************]
[***********************************************************************
***********
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
46
<PAGE>
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******************************************************************
******]
47
<PAGE>
EXHIBIT D
Nonconformance Provisions
See Attached.
48
<PAGE>
EXHIBIT D
<TABLE>
<CAPTION>
DELIVERY [*********** [***** [***********
DATE ********] ***] *******]
<S> <C> <C> <C> <C> <C>
[**********] [****] [******************************] [***] [***] [***]
[*************************************************************************]
[***********] [****] [*******] [********] [*******] [**********]
[****] [*******] [********] [*******] [**********]
[*******************************]
[*************] [****] [********] [********] [******] [**********]
[****] [********] [*******] [******] [**********]
[***] [********] [*******] [******] [**********]
[**********************************]
[**************] [***] [****************] [********] [*******] [**********]
[***********] [***] [*******] [********] [*******] [**********]
[***********] [************ [****************************] [***]
*]
[****] [*********************] [*******] [*******] [**********]
[*****] [***************************] [*******] [*******] [**********]
[****] [*******] [*******] [*******] [**********]
[***] [*******] [*******] [*******] [**********]
[****************************************************************************]
[***********] [****] [*******] [*******] [*******] [**********]
[*****] [*******] [*******] [*******] [**********]
[****] [*******] [*******] [*******] [**********]
[***] [*******] [*******] [*******] [**********]
[*****************************************************************************************]
[**************] [****] [*******] [*******] [*******] [**********]
49
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
[****] [*******] [********] [*******] [**********]
[***] [*******] [********] [*******] [**********]
[**********************************]
[***********] [****] [*******] [********] [*******] [**********]
[****] [********] [*******] [*******] [**********]
[***] [********] [*******] [*******] [**********]
[*****************************************************************************************************]
[************] [****] [********] [*******] [*******] [**********]
[****] [********] [*******] [*******] [**********]
[***] [********] [*******] [*******] [**********]
[*********************************************************]
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
NOTES:
<S> <C>
[*] [*******************************************************************************]
[**] [****************************************************************]
[****************************************************************************]
[**********************************************]
[***************************************]
[*******************************]
[*******************************]
[********************************************************************]
[**] [******************************************************************************************************************]
[**] [**************************************************************************************************************************
**********************************************************************************************************************]
[**] [******************************************************************************************************************]
[**] [*************************]
[****] [*****************************************************************************************************************
***************************************]
[***********************************************]
[***] [*****************************************************************************************************************
*****************************************************************************************************************]
[**] [*********************************************************************************************]
[**] [*************************************************************]
[*********************************************************]
[**] [***********************************************************************************]
[***********************************]
[**********************************************************************]
[******************************************************]
[***********************************************************************************************]
[***********************************************************]
[*****************************************************]
[**************************************************]
[*****************************************************************************************************************
******************************************************************************************************************
******************************************************************************************************************
******************************************************************************************************************
******************************************************************************************************************
*****************************************************************************************************************]
[******************************************************************************]
[*****************************************************************************************************************
*******************************************************************************************************
[**] [*****************************************************************************************************************
************************************************************************************************]
51
<PAGE>
[**] [*****************************************************************************************************************
******************************************************************************************************************
*************]
[**] [*****************************************************************************************************************
******************************************************************************************************************
******************************************************************************************************]
[**] [**************************************************************************************************************************
******************************************************************************************]
</TABLE>
52
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 146,504,025
<SECURITIES> 16,193,979
<RECEIVABLES> 3,320,441
<ALLOWANCES> 0
<INVENTORY> 1,228,620
<CURRENT-ASSETS> 1,042,759
<PP&E> 25,312,880
<DEPRECIATION> 12,720,270
<TOTAL-ASSETS> 184,664,573
<CURRENT-LIABILITIES> 23,948,884
<BONDS> 115,000,000
132,391
0
<COMMON> 0
<OTHER-SE> 45,583,298
<TOTAL-LIABILITY-AND-EQUITY> 184,664,573
<SALES> 9,511,562
<TOTAL-REVENUES> 9,511,562
<CGS> 9,480,134
<TOTAL-COSTS> 9,480,134
<OTHER-EXPENSES> 15,385,308
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,303,585)
<INCOME-PRETAX> (14,050,295)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,050,295)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,050,295)
<EPS-PRIMARY> (1.07)
<EPS-DILUTED> (1.07)
</TABLE>
