Common use of MVP Premise Equipment Pricing for 1998 and 1999 Clause in Contracts

MVP Premise Equipment Pricing for 1998 and 1999. A. The first [***] MVP Endpoints purchased by AGCS from Paradyne will be priced at the [***] unit discount level. AGCS will then market the Derived Telephony Product to prospective customers. Should AGCS sell the Derived Telephony Product for more than the combined [***] unit discounted price (AGCS' port price plus Paradyne's endpoint price), then AGCS shall pay to Paradyne [***] percent [***] of the incremental revenue. If additional units are required in 1998, both paries will mutually agree on the discount level. B. After the sale of the initial [***] MVP Endpoints, the following pricing shall apply to all purchases by AGCS hereunder: List Price 25,000 50,000 75,000 100,000 MVP Premise Equipment units. units. units. units. ----------------------------------------------------------------------------------------------------------------- A. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 1 Derived POTS B. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 2 Derived POTS C. Ethernet -- Data Only MVP [***] [***] [***] [***] [***] Endpoint, POTS / Data D. USB -- Data Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / Data E. Ethernet -- MVP Full [***] [***] [***] [***] [***] Configuration, POTS / 2 Derived POTS / Data F. USB -- MVP Full Configuration, [***] [***] [***] [***] [***] POTS / 2 Derived POTS / Data ------------- *** Confidential Treatment Requested EARNED DISCOUNT The parties mutually agree that: a) The earned discount period (ED Period) is defined as January 1 to December 31 of any calendar year. b) The initial discount level for 1999 will be at the 50,000 unit level. All MVP Endpoints shipped in 1998 will be added to the accumulated volume shipped in 1999 ED period and will be eligible for earned discount for the 1999 ED period. c) The discount level achieved in a ED period will be the initial discount level for the next ED period (e.g. if Paradyne shipped AGCS 75,000 units during the 1999 ED period, then the initial discount level for the 2000 ED period would be at the 75,000 unit level). d) The discount level for an order will be based upon the greater of the earned discount or the total number of all MVP Endpoints (A-F) shipped prior to the specific order during that year (e.g., if Paradyne has shipped AGCS 35,000 unit A's, 42,000 unit B's and 45,000 unit E's, the volume discount level would be at the 1000,000 unit level because the total equals 100,000 units). e) Earned discount will be determined annually. The calculation of earned discount will be completed during January and is based on the MVP Endpoints shipped in the previous ED period. The earned discount is the difference between the actual discount applied to the individual orders and the discount earned based on the accumulative total units shipped during the ED period. Paradyne will determine if further discounts are due based upon the discount schedule set forth above and the rules stated below. If a credit is due, Paradyne will issue a credit to AGCS for the total amount due. Paradyne will apply this credit to subsequent orders by AGCS hereunder. If the credit is not fully consumed within the first calendar quarter of the current year then Paradyne will remit to AGCS the excess amount by March 31st of the current year. If monies are due, Paradyne will issue an invoice to AGCS for the outstanding amount having net thirty day terms. Rule 1 -- Application of discount on orders during the ED period: Higher level discounts will be applied to all shipments when the number of units shipped exceeds the next higher discount level. (e.g. during the 1999 the initial discount level is at the 50,000 unit level. All orders for MVP Endpoints will be priced at the 50,000 unit level until 75,000 units have been shipped to AGCS. The 75,000 unit level discount will be applied to all orders after 75,000 units have been shipped to AGCS). Due to market conditions, an order may receive special pricing. The units shipped as part of these orders will not be eligible for earned discount monies, however the shipped unit volume will be used in calculating the Rule 3 -- Annual True Up of earned discount: Rule 3a -- Determination of the discount level achieved At the end of the ED period Paradyne will review all orders and calculate the actual number of units shipped to determine the discount level to be applied to all units shipped during the ED period. The discount level achieved will be rounded to the unit level nearest to the number of units shipped. (e.g. if Paradyne shipped 65,000 units to AGCS during 1999 then the level achieved would be 75,000, if only 60,000 units were shipped then the discount level achieved would be the 50,000 unit level discount). Rule 3b -- Calculation of the earned discount The earned discount will be the different between the initial discount applied to the units shipped and the actual discount level achieved using Rule 3a. The earned discount amount is determined on a per endpoint type basis for each order. The total earned discount for the order is the sum of earned discount amounts for each endpoint type shipped with the order. If a credit or invoice is required they be issued via the terms and conditions defined in Section 1 B (e) of this Appendix. Rule 3c -- Earned discount on units shipped in different ED periods The units in an order are given a discount level at the time the order is placed based on the actual number of units shipped. The discount level determined at the date of order will be used for all units shipped as part of that order. This applies even when the shipment schedule spans ED periods. Only the units actually shipped in a given ED period will be used to determine the earned discount level. Example 1: If AGCS places four (4) orders throughout the year, and each order placed contains various MVP Endpoint types totaling 25,000 units, the pricing and invoicing would be as shown below: All orders were shipped within the ED period. The discount level for all orders in the next ED period would be at 100,000 unit level. Orders placed during 1999 Note Initial discount is at the [***] unit level Endpoint Order Invoice Earned Order Type Volume Price Amount Discount Net Amount Comments ------- -------- ------- ------- ------- -------- ---------- ------------- 1 A 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] $[xxx] unit level discount achieved 4 D 25,000 $[xxx] $[xxx] $[xxx] $[xxx] TOTAL 100,000 $[xxx] $[xxx] $[xxx] Earned discount calculation for previous orders 100,000 unit level discount achieved Endpoint Order Invoiced Earned Earned Order Type Volume Price Price Discount ------- -------- ------- -------- ------- -------- 1 A 25,000 $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] 4 D 25,000 $[xxx] $[xxx] $[xxx] TOTAL 100,000 $[xxx] SCHEDULE ACTUAL SHIPMENT SHIPMENT ENDPOINT SHIPPED GROSS EARNED DELIVERY DATE DATE TYPE VOLUME PRICE AMOUNT DISCOUNT NET AMOUNT -------- -------- -------- -------- ------- ----- ------ -------- ---------- Order 1 a Mar-00 Xxx-00 A 12,500 $[***] [***] [***] [***] b Jun-99 Jun-99 B 12,500 $[***] [***] [***] [***] c Aug-99 Feb-00 E 0 $[***] [***] [***] [***] d Feb-00 Apr-00 E 0 $[***] [***] [***] [***] Order 2 May-99 Oct-99 B 20,000 $[***] [***] [***] [***] Order 3 Jun-99 Nov-99 E 20,000 $[***] [***] [***] [***] ------ ------ ----- ------ ----- ------ -------- ---------- TOTAL 66,000 [***] [***] [***] ENDPOINT SHIPPED INVOICED EARNED ORDER TYPE VOLUME PRICE EARNED PRICE DISCOUNT ----- -------- ------- -------- ------------ -------- Order 1 a A 12,500 [***] [***] [***] b B 12,500 [***] [***] [***] c E 0 [***] [***] [***] d E 0 [***] [***] [***] Order 2 B 20,000 [***] [***] [***] Order 3 E 20,000 [***] [***] [***] ----- ------ -------- ------------ -------- TOTAL 65,000 [***] ----------------------- *** Confidential Treatment Requested

MVP Premise Equipment Pricing for 1998 and 1999. A. The first [***] MVP Endpoints purchased by AGCS from Paradyne will be priced at the [***] unit discount level. AGCS will then market the Derived Telephony Product to prospective customers. Should AGCS sell the Derived Telephony Product for more than the combined [***] unit discounted price (AGCS' port price plus Paradyne's endpoint price), then AGCS shall pay to Paradyne [***] percent [***] of the incremental revenue. If additional units are required in 1998, both paries will mutually agree on the discount level. B. After the sale of the initial [***] MVP Endpoints, the following pricing shall apply to all purchases by AGCS hereunder: List Price 25,000 50,000 75,000 100,000 MVP Premise Equipment units. units. units. units. ----------------------------------------------------------------------------------------------------------------- A. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 1 Derived POTS B. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 2 Derived POTS C. Ethernet -- Data Only MVP [***] [***] [***] [***] [***] Endpoint, POTS / Data D. USB -- Data Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / Data E. Ethernet -- MVP Full [***] [***] [***] [***] [***] Configuration, POTS / 2 Derived POTS / Data F. USB -- MVP Full Configuration, [***] [***] [***] [***] [***] POTS / 2 Derived POTS / Data ------------- *** Confidential Treatment Requested EARNED DISCOUNT The parties mutually agree that: a) The earned discount period (ED Period) is defined as January 1 to December 31 of any calendar year. b) The initial discount level for 1999 will be at the 50,000 unit level. All MVP Endpoints shipped in 1998 will be added to the accumulated volume shipped in 1999 ED period and will be eligible for earned discount for the 1999 ED period. c) The discount level achieved in a ED period will be the initial discount level for the next ED period (e.g. if Paradyne shipped AGCS 75,000 units during the 1999 ED period, then the initial discount level for the 2000 ED period would be at the 75,000 unit level). d) The discount level for an order will be based upon the greater of the earned discount or the total number of all MVP Endpoints (A-F) shipped prior to the specific order during that year (e.g., if Paradyne has shipped AGCS 35,000 unit A's, 42,000 unit B's and 45,000 unit E's, the volume discount level would be at the 1000,000 unit level because the total equals 100,000 units). e) Earned discount will be determined annually. The calculation of earned discount will be completed during January and is based on the MVP Endpoints shipped in the previous ED period. The earned discount is the difference between the actual discount applied to the individual orders and the discount earned based on the accumulative total units shipped during the ED period. Paradyne will determine if further discounts are due based upon the discount schedule set forth above and the rules stated below. If a credit is due, Paradyne will issue a credit to AGCS for the total amount due. Paradyne will apply this credit to subsequent orders by AGCS hereunder. If the credit is not fully consumed within the first calendar quarter of the current year then Paradyne will remit to AGCS the excess amount by March 31st of the current year. If monies are due, Paradyne will issue an invoice to AGCS for the outstanding amount having net thirty day terms. Rule 1 -- Application of discount on orders during the ED period: Higher level discounts will be applied to all shipments when the number of units shipped exceeds the next higher discount level. (e.g. during the 1999 the initial discount level is at the 50,000 unit level. All orders for MVP Endpoints will be priced at the 50,000 unit level until 75,000 units have been shipped to AGCS. The 75,000 unit level discount will be applied to all orders after 75,000 units have been shipped to AGCS). Due to market conditions, an order may receive special pricing. The units shipped as part of these orders will not be eligible for earned discount monies, however the shipped unit volume will be used in calculating the total units shipped during the ED period and to determine the initial discount for the next ED period. Rule 3 -- Annual True Up of earned discount: Rule 3a -- Determination of the discount level achieved At the end of the ED period Paradyne will review all orders and calculate the actual number of units shipped to determine the discount level to be applied to all units shipped during the ED period. The discount level achieved will be rounded to the unit level nearest to the number of units shipped. (e.g. if Paradyne shipped 65,000 units to AGCS during 1999 then the level achieved would be 75,000, if only 60,000 units were shipped then the discount level achieved would be the 50,000 unit level discount). Rule 3b -- Calculation of the earned discount The earned discount will be the different between the initial discount applied to the units shipped and the actual discount level achieved using Rule 3a. The earned discount amount is determined on a per endpoint type basis for each order. The total earned discount for the order is the sum of earned discount amounts for each endpoint type shipped with the order. If a credit or invoice is required they be issued via the terms and conditions defined in Section 1 B (e) of this Appendix. Rule 3c -- Earned discount on units shipped in different ED periods The units in an order are given a discount level at the time the order is placed based on the actual number of units shipped. The discount level determined at the date of order will be used for all units shipped as part of that order. This applies even when the shipment schedule spans ED periods. Only the units actually shipped in a given ED period will be used to determine the earned discount level. Example 1: If AGCS places four (4) orders throughout the year, and each order placed contains various MVP Endpoint types totaling 25,000 units, the pricing and invoicing would be as shown below: All orders were shipped within the ED period. The discount level for all orders in the next ED period would be at 100,000 unit level. Orders placed during 1999 Note Initial discount is at the [***] unit level Endpoint Order Invoice Earned Order Type Volume Price Amount Discount Net Amount Comments ------- -------- ------- ------- ------- -------- ---------- ------------- 1 A 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] $[xxx] unit level discount achieved 4 D 25,000 $[xxx] $[xxx] $[xxx] $[xxx] TOTAL 100,000 $[xxx] $[xxx] $[xxx] Earned discount calculation for previous orders 100,000 unit level discount achieved Endpoint Order Invoiced Earned Earned Order Type Volume Price Price Discount ------- -------- ------- -------- ------- -------- 1 A 25,000 $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] 4 D 25,000 $[xxx] $[xxx] $[xxx] TOTAL 100,000 $[xxx] Example 2: The earned discount level achieved in the previous period was at the 100,000 unit level. An order for 50,000 units is placed in March 99 with a delivery schedule over the next 12 months. However, the shipment schedule resulted in delivery of only 25,000 units during the ED period. Two other orders totaling 40,000 units were placed and shipped during the ED period. Therefore, earned discount must be recaptured for the ED period based on Rule 3b. The discount level for the next ED period is at the 75,000 unit level using Rule 3c. SCHEDULE ACTUAL SHIPMENT SHIPMENT ENDPOINT SHIPPED GROSS EARNED DELIVERY DATE DATE TYPE VOLUME PRICE AMOUNT DISCOUNT NET AMOUNT -------- -------- -------- -------- ------- ----- ------ -------- ---------- Order 1 a Mar-00 Xxx-00 A 12,500 $[***] [***] [***] [***] b Jun-99 Jun-99 B 12,500 $[***] [***] [***] [***] c Aug-99 Feb-00 E 0 $[***] [***] [***] [***] d Feb-00 Apr-00 E 0 $[***] [***] [***] [***] Order 2 May-99 Oct-99 B 20,000 $[***] [***] [***] [***] Order 3 Jun-99 Nov-99 E 20,000 $[***] [***] [***] [***] ------ ------ ----- ------ ----- ------ -------- ---------- TOTAL 66,000 [***] [***] [***] ENDPOINT SHIPPED INVOICED EARNED ORDER TYPE VOLUME PRICE EARNED PRICE DISCOUNT ----- -------- ------- -------- ------------ -------- Order 1 a A 12,500 [***] [***] [***] b B 12,500 [***] [***] [***] c E 0 [***] [***] [***] d E 0 [***] [***] [***] Order 2 B 20,000 [***] [***] [***] Order 3 E 20,000 [***] [***] [***] ----- ------ -------- ------------ -------- TOTAL 65,000 [***] ----------------------- *** Confidential Treatment Requested

MVP Premise Equipment Pricing for 1998 and 1999. A. The first [***] MVP Endpoints purchased by AGCS from Paradyne will be priced at the [***] unit discount level. AGCS will then market the Derived Telephony Product to prospective customers. Should AGCS sell the Derived Telephony Product for more than the combined [***] unit discounted price (AGCS' port price plus Paradyne's endpoint price), then AGCS shall pay to Paradyne [***] percent [***] of the incremental revenue. If additional units are required in 1998, both paries will mutually agree on the discount level. B. After the sale of the initial [***] MVP Endpoints, the following pricing shall apply to all purchases by AGCS hereunder: List Price 25,000 50,000 75,000 100,000 MVP Premise Equipment units. units. units. units. ----------------------------------------------------------------------------------------------------------------- A. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 1 Derived POTS B. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 2 Derived POTS C. Ethernet -- Data Only MVP [***] [***] [***] [***] [***] Endpoint, POTS / Data D. USB -- Data Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / Data E. Ethernet -- MVP Full [***] [***] [***] [***] [***] Configuration, POTS / 2 Derived POTS / Data F. USB -- MVP Full Configuration, [***] [***] [***] [***] [***] POTS / 2 Derived POTS / Data ------------- *** Confidential Treatment Requested EARNED DISCOUNT The parties mutually agree that: a) The earned discount period (ED Period) is defined as January 1 to December 31 of any calendar year. b) The initial discount level for 1999 will be at the 50,000 unit level. All MVP Endpoints shipped in 1998 will be added to the accumulated volume shipped in 1999 ED period and will be eligible for earned discount for the 1999 ED period. c) The discount level achieved in a ED period will be the initial discount level for the next ED period (e.g. if Paradyne shipped AGCS 75,000 units during the 1999 ED period, then the initial discount level for the 2000 ED period would be at the 75,000 unit level). d) The discount level for an order will be based upon the greater of the earned discount or the total number of all MVP Endpoints (A-F) shipped prior to the specific order during that year (e.g., if Paradyne has shipped AGCS 35,000 unit A's, 42,000 unit B's and 45,000 unit E's, the volume discount level would be at the 1000,000 unit level because the total equals 100,000 units). e) Earned discount will be determined annually. The calculation of earned discount will be completed during January and is based on the MVP Endpoints shipped in the previous ED period. The earned discount is the difference between the actual discount applied to the individual orders and the discount earned based on the accumulative total units shipped during the ED period. Paradyne will determine if further discounts are due based upon the discount schedule set forth above and the rules stated below. If a credit is due, Paradyne will issue a credit to AGCS for the total amount due. Paradyne will apply this credit to subsequent orders by AGCS hereunder. If the credit is not fully consumed within the first calendar quarter of the current year then Paradyne will remit to AGCS the excess amount by March 31st of the current year. If monies are due, Paradyne will issue an invoice to AGCS for the outstanding amount having net thirty day terms. Rule 1 -- Application of discount on orders during the ED period: Higher level discounts will be applied to all shipments when the number of units shipped exceeds the next higher discount level. (e.g. during the 1999 the initial discount level is at the 50,000 unit level. All orders for MVP Endpoints will be priced at the 50,000 unit level until 75,000 units have been shipped to AGCS. The 75,000 unit level discount will be applied to all orders after 75,000 units have been shipped to AGCS). Due to market conditions, an order may receive special pricing. The units shipped as part of these orders will not be eligible for earned discount monies, however the shipped unit volume will be used in calculating the Rule 3 -- Annual True Up of earned discount: Rule 3a -- Determination of the discount level achieved At the end of the ED period Paradyne will review all orders and calculate the actual number of units shipped to determine the discount level to be applied to all units shipped during the ED period. The discount level achieved will be rounded to the unit level nearest to the number of units shipped. (e.g. if Paradyne shipped 65,000 units to AGCS during 1999 then the level achieved would be 75,000, if only 60,000 units were shipped then the discount level achieved would be the 50,000 unit level discount). Rule 3b -- Calculation of the earned discount The earned discount will be the different between the initial discount applied to the units shipped and the actual discount level achieved using Rule 3a. The earned discount amount is determined on a per endpoint type basis for each order. The total earned discount for the order is the sum of earned discount amounts for each endpoint type shipped with the order. If a credit or invoice is required they be issued via the terms and conditions defined in Section 1 B (e) of this Appendix. Rule 3c -- Earned discount on units shipped in different ED periods The units in an order are given a discount level at the time the order is placed based on the actual number of units shipped. The discount level determined at the date of order will be used for all units shipped as part of that order. This applies even when the shipment schedule spans ED periods. Only the units actually shipped in a given ED period will be used to determine the earned discount level. Example 1: If AGCS places four (4) orders throughout the year, and each order placed contains various MVP Endpoint types totaling 25,000 units, the pricing and invoicing would be as shown below: All orders were shipped within the ED period. The discount level for all orders in the next ED period would be at 100,000 unit level. Orders placed during 1999 Note Initial discount is at the [***] unit level Endpoint Order Invoice Earned Order Type Volume Price Amount Discount Net Amount Comments ------- -------- ------- ------- ------- -------- ---------- ------------- 1 A 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] $[xxx] unit level discount achieved 4 D 25,000 $[xxx] $[xxx] $[xxx] $[xxx] [***] TOTAL 100,000 $[xxx] $[xxx] $[xxx] Earned discount calculation for previous orders 100,000 unit level discount achieved Endpoint Order Invoiced Earned Earned Order Type Volume Price Price Discount ------- -------- ------- -------- ------- -------- 1 A 25,000 $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] 4 D 25,000 $[xxx] $[xxx] $[xxx] TOTAL 100,000 $[xxx] SCHEDULE ACTUAL SHIPMENT SHIPMENT ENDPOINT SHIPPED GROSS EARNED DELIVERY DATE DATE TYPE VOLUME PRICE AMOUNT DISCOUNT NET AMOUNT -------- -------- -------- -------- ------- ----- ------ -------- ---------- Order 1 a Mar-00 Xxx-00 A 12,500 $[***] [***] [***] [***] b Jun-99 Jun-99 B 12,500 $[***] [***] [***] [***] c Aug-99 Feb-00 E 0 $[***] [***] [***] [***] d Feb-00 Apr-00 E 0 $[***] [***] [***] [***] Order 2 May-99 Oct-99 B 20,000 $[***] [***] [***] [***] Order 3 Jun-99 Nov-99 E 20,000 $[***] [***] [***] [***] ------ ------ ----- ------ ----- ------ -------- ---------- TOTAL 66,000 [***] [***] [***] ENDPOINT SHIPPED INVOICED EARNED ORDER TYPE VOLUME PRICE EARNED PRICE DISCOUNT ----- -------- ------- -------- ------------ -------- Order 1 a A 12,500 [***] [***] [***] b B 12,500 [***] [***] [***] c E 0 [***] [***] [***] d E 0 [***] [***] [***] Order 2 B 20,000 [***] [***] [***] Order 3 E 20,000 [***] [***] [***] ----- ------ -------- ------------ -------- TOTAL 65,000 [***] ----------------------- *** Confidential Treatment Requested

MVP Premise Equipment Pricing for 1998 and 1999. A. The first [***] MVP Endpoints purchased by AGCS from Paradyne will be priced at the [***] unit discount level. AGCS will then market the Derived Telephony Product to prospective customers. Should AGCS sell the Derived Telephony Product for more than the combined [***] unit discounted price (AGCS' port price plus Paradyne's endpoint price), then AGCS shall pay to Paradyne [***] percent [***] of the incremental revenue. If additional units are required in 1998, both paries will mutually agree on the discount level. B. After the sale of the initial [***] MVP Endpoints, the following pricing shall apply to all purchases by AGCS hereunder: List Price 25,000 50,000 75,000 100,000 MVP Premise Equipment units. units. units. units. ----------------------------------------------------------------------------------------------------------------- A. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 1 Derived POTS B. Voice Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / 2 Derived POTS C. Ethernet -- Data Only MVP [***] [***] [***] [***] [***] Endpoint, POTS / Data D. USB -- Data Only MVP Endpoint, [***] [***] [***] [***] [***] POTS / Data E. Ethernet -- MVP Full [***] [***] [***] [***] [***] Configuration, POTS / 2 Derived POTS / Data F. USB -- MVP Full Configuration, [***] [***] [***] [***] [***] POTS / 2 Derived POTS / Data ------------- *** Confidential Treatment Requested EARNED DISCOUNT The parties mutually agree that: a) The earned discount period (ED Period) is defined as January 1 to December 31 of any calendar year. b) The initial discount level for 1999 will be at the 50,000 unit level. All MVP Endpoints shipped in 1998 will be added to the accumulated volume shipped in 1999 ED period and will be eligible for earned discount for the 1999 ED period. c) The discount level achieved in a ED period will be the initial discount level for the next ED period (e.g. if Paradyne shipped AGCS 75,000 units during the 1999 ED period, then the initial discount level for the 2000 ED period would be at the 75,000 unit level). d) The discount level for an order will be based upon the greater of the earned discount or the total number of all MVP Endpoints (A-F) shipped prior to the specific order during that year (e.g., if Paradyne has shipped AGCS 35,000 unit A's, 42,000 unit B's and 45,000 unit E's, the volume discount level would be at the 1000,000 unit level because the total equals 100,000 units). e) Earned discount will be determined annually. The calculation of earned discount will be completed during January and is based on the MVP Endpoints shipped in the previous ED period. The earned discount is the difference between the actual discount applied to the individual orders and the discount earned based on the accumulative total units shipped during the ED period. Paradyne will determine if further discounts are due based upon the discount schedule set forth above and the rules stated below. If a credit is due, Paradyne will issue a credit to AGCS for the total amount due. Paradyne will apply this credit to subsequent orders by AGCS hereunder. If the credit is not fully consumed within the first calendar quarter of the current year then Paradyne will remit to AGCS the excess amount by March 31st of the current year. If monies are due, Paradyne will issue an invoice to AGCS for the outstanding amount having net thirty day terms. Rule 1 -- Application of discount on orders during the ED period: Higher level discounts will be applied to all shipments when the number of units shipped exceeds the next higher discount level. (e.g. during the 1999 the initial discount level is at the 50,000 unit level. All orders for MVP Endpoints will be priced at the 50,000 unit level until 75,000 units have been shipped to AGCS. The 75,000 unit level discount will be applied to all orders after 75,000 units have been shipped to AGCS). Due to market conditions, an order may receive special pricing. The units shipped as part of these orders will not be eligible for earned discount monies, however the shipped unit volume will be used in calculating the Rule 3 -- Annual True Up of earned discount: Rule 3a -- Determination of the discount level achieved At the end of the ED period Paradyne will review all orders and calculate the actual number of units shipped to determine the discount level to be applied to all units shipped during the ED period. The discount level achieved will be rounded to the unit level nearest to the number of units shipped. (e.g. if Paradyne shipped 65,000 units to AGCS during 1999 then the level achieved would be 75,000, if only 60,000 units were shipped then the discount level achieved would be the 50,000 unit level discount). Rule 3b -- Calculation of the earned discount The earned discount will be the different between the initial discount applied to the units shipped and the actual discount level achieved using Rule 3a. The earned discount amount is determined on a per endpoint type basis for each order. The total earned discount for the order is the sum of earned discount amounts for each endpoint type shipped with the order. If a credit or invoice is required they be issued via the terms and conditions defined in Section 1 B (e) of this Appendix. Rule 3c -- Earned discount on units shipped in different ED periods The units in an order are given a discount level at the time the order is placed based on the actual number of units shipped. The discount level determined at the date of order will be used for all units shipped as part of that order. This applies even when the shipment schedule spans ED periods. Only the units actually shipped in a given ED period will be used to determine the earned discount level. Example 1: If AGCS places four (4) orders throughout the year, and each order placed contains various MVP Endpoint types totaling 25,000 units, the pricing and invoicing would be as shown below: All orders were shipped within the ED period. The discount level for all orders in the next ED period would be at 100,000 unit level. Orders placed during 1999 Note Initial discount is at the [***] unit level Endpoint Order Invoice Earned Order Type Volume Price Amount Discount Net Amount Comments ------- -------- ------- ------- ------- -------- ---------- ------------- 1 A 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] $[xxx] [***] unit level discount achieved 4 D 25,000 $[xxx] $[xxx] $[xxx] $[xxx] TOTAL 100,000 $[xxx] $[xxx] $[xxx] Earned discount calculation for previous orders 100,000 unit level discount achieved Endpoint Order Invoiced Earned Earned Order Type Volume Price Price Discount ------- -------- ------- -------- ------- -------- 1 A 25,000 $[xxx] $[xxx] $[xxx] 2 B 25,000 $[xxx] $[xxx] $[xxx] 3 C 25,000 $[xxx] $[xxx] $[xxx] 4 D 25,000 $[xxx] $[xxx] $[xxx] TOTAL 100,000 $[xxx] SCHEDULE ACTUAL SHIPMENT SHIPMENT ENDPOINT SHIPPED GROSS EARNED DELIVERY DATE DATE TYPE VOLUME PRICE AMOUNT DISCOUNT NET AMOUNT -------- -------- -------- -------- ------- ----- ------ -------- ---------- Order 1 a Mar-00 Xxx-00 A 12,500 $[***] [***] [***] [***] b Jun-99 Jun-99 B 12,500 $[***] [***] [***] [***] c Aug-99 Feb-00 E 0 $[***] [***] [***] [***] d Feb-00 Apr-00 E 0 $[***] [***] [***] [***] Order 2 May-99 Oct-99 B 20,000 $[***] [***] [***] [***] Order 3 Jun-99 Nov-99 E 20,000 $[***] [***] [***] [***] ------ ------ ----- ------ ----- ------ -------- ---------- TOTAL 66,000 [***] [***] [***] ENDPOINT SHIPPED INVOICED EARNED ORDER TYPE VOLUME PRICE EARNED PRICE DISCOUNT ----- -------- ------- -------- ------------ -------- Order 1 a A 12,500 [***] [***] [***] b B 12,500 [***] [***] [***] c E 0 [***] [***] [***] d E 0 [***] [***] [***] Order 2 B 20,000 [***] [***] [***] Order 3 E 20,000 [***] [***] [***] ----- ------ -------- ------------ -------- TOTAL 65,000 [***] ----------------------- *** Confidential Treatment Requested