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Exhibit 10.18
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections
200.80(b)(4), 200.83 and 240
EXCLUSIVITY AND AMENDMENT AGREEMENT
THIS IS AN EXCLUSIVITY AND AMENDMENT AGREEMENT ("Amendment") by and
between LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"), PARADYNE
CORPORATION (formerly "AT&T Paradyne Corporation"), a Delaware corporation
("Paradyne"), and GLOBESPAN SEMICONDUCTOR INC. (Formerly "CAP Acquisition
Corp."), a Delaware corporation ("GlobeSpan").
RECITALS
WHEREAS, Lucent, Paradyne, GlobeSpan (or their controlling entities), and other
entities over which Lucent, Paradyne or GlobeSpan have control, have entered
into certain agreements with respect to, arising from or in relation to the sale
by. Lucent to Paradyne Partners L.P of AT&T Paradyne Corporation in 1996;
WHEREAS, Lucent, Paradyne and GlobeSpan now wish to amend certain of the
foregoing agreements and to assume the rights and obligations stated herein;
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Lucent, GlobeSpan and Paradyne hereby agree as
follows:
AGREEMENT
Unless otherwise defined herein, all capitalized terms shall have the meanings
assigned to them in the Volume Purchase Letter or the Supply Agreement, as such
agreements are hereinafter defined.
1. NOTE. The parties acknowledge the cash payment from Lucent to Paradyne
on May 5, 1998, in the amount of Eight Million One Hundred Thirty-six
Thousand Six Hundred and Sixty-nine Dollars and Fifty-three Cents
($8,136,669.53) which represents a Ten Million Dollar ($10,000,000.00)
cash payment to Paradyne net of One Million Eight Hundred and
Sixty-three Thousand Three Hundred and Thirty Dollars and Forty-seven
Cents ($1,863,330.47) of interest due Lucent on the Core Business Note
for the period January 1, 1998 through March 31, 1998. In addition to
this payment, the parties agree that the Core Business Note issued by
AT&T Paradyne Corporation in favor of Lucent on July 31, 1996 (the
"Note")[***]. As of March 31, 1998, the principal and deferred interest
balance on the Note was Sixty Five Million Seven Hundred Eleven
Thousand Six Hundred Fifty Four Dollars and Twenty-nine Cents
($65,711,654.29). Lucent hereby forgives payment of principal in the
amount of Sixty Three Million Dollars ($63,000,000) and all accrued
interest thereon for the period beginning April 1, 1998 through August
6, 1998 in the amount of Nineteen Thousand Eight Hundred and Forty-nine
Dollars and Thirty-two Cents ($19,849.32) per day. The remaining
balance of Two Million Seven Hundred and Eleven Thousand Six Hundred
Fifty-four Dollars and Twenty-nine cents ($2,711,654.29) plus accrued
interest on such remaining balance for the period beginning
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April l, 1998 through August 6, 1998 will be paid in accordance with
the terms of the payoff letter ("Payoff Letter") attached hereto as
EXHIBIT A ("PAYOFF LETTER").
2. WARRANT. The parties agree that the definition of "Expiration Date" set
forth in SECTION 1 ("DEFINITIONS") of the Warrant to Purchase Common
Stock of CAP Acquisition Corp. (also referred to as Warrant No. 1)
entered into on July 31, 1996, by and between CAP Acquisition Corp. and
Lucent shall be deleted in its entirety and replaced with the
following: "Expiration Date" shall mean the earlier of (i) June 30,
2001; or (ii) the date on which the Warrant shall be cancelled pursuant
to subsection 2.2(d).
3. SECURITY AGREEMENT. The parties agree that the Security Agreement
("Security Agreement") entered into on July 31, 1996 by and between
AT&T Paradyne Corporation and Lucent is hereby terminated. Lucent shall
deliver executed financing statements as evidence such termination in
accordance with the terms of the Payoff Letter.
4. GUARANTY. The parties agree that the Guaranty ("Guaranty") entered into
on July 31, 1996, by and between Paradyne Canada, Ltd., a Canadian
corporation, and Lucent is hereby terminated.
5. STOCK PLEDGE AGREEMENT. The parties agree that the Stock Pledge
Agreement ("Stock Pledge Agreement") entered into on July 31, 1996, by
and between Paradyne Acquisition Corp., a Delaware corporation,
("PAC"), AT&T Paradyne Corporation and Lucent is hereby terminated.
Lucent shall deliver the original stock certificate to PAC in
accordance with the terms of the Payoff Letter.
6. VOLUME PURCHASE LETTER. The parties agree that the volume purchase
letter ("Volume Purchase Letter") entered into on July 31, 1996, by
and between AT&T Paradyne Corporation and CAP Acquisition Corp., is
hereby terminated. All references in the Volume Purchase Letter
contained in the Supply Agreement (as hereinafter defined) shall be
deleted, except to the extent inconsistent with the intent of this
Amendment.
7. SUPPLY AGREEMENT: MARKET RIGHTS. The parties agree that SECTION 8
("MARKET RIGHTS") of the Supply Agreement ("Supply Agreement") entered
into on July 31, 1996, by and among AT&T Paradyne Corporation, CAP
Acquisition Corp., and Lucent, shall be deleted in its entirety and
replaced with the following:
8. MARKET RIGHTS.
(a) Supplier will supply 100% of Company's requirements for Access
Products (as defined in Subsection 8(d)) for resale as "Stand-Alone
Products" through June 30, 2001. Stand-Alone Products means products
that operate individually or as a component in a Supplier system.
Examples of Stand-Alone Products are the Supplier 3160 DSU/CSUs and/or
cards that are inserted into a carrier to create a system. An example
of a product that is not Stand-Alone would be a board or component that
is to be inserted into another vendor's product as an OEM in order to
complete a function that the other vendor wishes to provide. Company
shall not purchase products for resale as Stand-Alone Products that
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are substantially similar in design, functionality, and operating
characteristics to and compete in the marketplace with those Access
Products defined in Subsection 8(d), and as they basically exist on the
date of this Amendment. With respect to Company's internal requirements
for Access Products, Supplier shall have Preferred Supplier status
("Preferred Supplier") through the same period. Preferred Supplier
status shall mean, with respect to Company's internal requirements,
that Supplier shall be given the first opportunity to supply such
products. Supplier's ability to sell to any customer will not be
restricted. Supplier will use diligent efforts to meet such
requirement, shall be free to contract at its discretion with third,
parties to manufacture products of its design or otherwise assist in
fulfilling the requirements for its Access Products.
(b) Quarterly relationship meetings will occur with alternating sites
between Supplier and Company. Attendees shall include decision level
making representatives of each party. The host company shall assume
agenda and minute responsibility. Minutes require joint approval or
noted objections but such minutes should not be construed as binding or
enforceable legal agreements. Interim working group meetings will
continue similar to the structure today.
(c) Appropriate concepts contained in the Supply Agreement, modified to
be consistent with this Agreement, will continue including best price
(as amended for the agreed upon process for international sales and
excluding special bid situations, governmental sales, other unique
sales opportunities and an added, provision for comparability of
quantities), forecasting, ordering and delivery terms and a
benchmarking provision.
(d)-(i) Company shall satisfy 100% of its requirements for Access
Products for resale as "Stand-Alone Products" during the term of this
Amendment from Supplier for the following core products, their
enhancement, and their normal evolution within currently defined market
segments:
1. ANALOG PRODUCTS [***]
2. SUBRATE DSUs [***]
3. TI CSU'S AND TI DSU/CSUs [***]
4. TI ACCESS MULTIPLEXERS [***]
5. FRAME RELAY ACCESS UNITS
a) [***]
b) T3 ATM "OVER" FRAME RELAY NETWORK ACCESS PRODUCTS [***]
c) NxTI ATM/FRAME RELAY NETWORK ACCESS PRODUCTS [***]
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(ii) Company shall not be restricted by this Agreement for Access
Products in the following market segments:
L. TI ACCESS MULTIPLEXERS [***]
2. T3 ATM "OVER" FRAME RELAY OUTSIDE THE SCOPE OF
"FRAMEAWARE" APPLICATIONS.
3. NxTL ATM "OVER" FRAME RELAY OUTSIDE THE SCOPE OF
"FRAME AWARE" APPLICATIONS.
4. ALL ATM PRODUCTS MANUFACTURED BY COMPANY, UNLESS
OTHERWISE PROHIBITED UNDER THE TERMS OF THE
NONCOMPETITION AGREEMENT DATED 7/31/96 BETWEEN
COMPANY AND SUPPLIER.
5. ALL VOICE OVER PRODUCTS, RFC 1490 TRANSLATION
DEVICES, AND FRAME RELAY ROUTING-DEVICES [***]
(iii)Exception Statements-
1. APPLICABLE ONLY TO THE SUPPLIER'S ANALOG PRODUCTS OF
SECTION 8(d)(i)-1 - Company shall not be obligated to purchase
100% of its requirements from Supplier unless the products are
currently embedded, in Company designs, drawings, or
configurators. Company will not proactively encourage current
analog customers to replace Supplier's analog products with
like products from other manufacturers. Company shall not be
obligated to purchase 100% of its requirements from Supplier
if customer has called for a specific vendor's product in an
RFP or sale. In those cases where customer has called for a
specific vendor's product, Company may not make a concerted
effort to expend marketing dollars, include as part of an
offer, promote, pay commission or incentives, nor PEC/Com code
such products for general availability of the other vendor's
analog products. Company should first attempt to respond with
Supplier's equipment and revert to another vendor as a last
resort.
2. APPLICABLE ONLY TO THE SUPPLIER'S TI CSU AND TI DSU/CSUs OF
SECTION 8(d)(i)-3 - Company shall not be obligated to purchase
100% of its requirements from Supplier to respond to special
situations where the customer has called for a specific
DSU/CSU vendor product in a RFP or sale on a one-off basis.
Company may not, however, make any concerted effort to expend
marketing dollars, include as pan of an offer, promote, pay
commission or incentives nor PEC/Com code products for general
availability, of the other vendor's DSU/CSU products. Company
should first attempt to respond with Supplier's equipment and
revere to another vendor as a last resort.
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*Confidential Treatment Requested
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3. In all of the above cases, Company will provide Supplier
with written notification of the one-off, sale of the other
vendor's products. Company shall provide information
consisting of product, type, dollar value of the transaction,
and rationale for the resale of the other vendor's product.
4. Excluded from the exclusivity obligations of rigs Amendment
are products purchased by Acquired Companies, where prior to
acquisition by Company, these Acquired Companies purchased and
included substantially similar product from other sources in
their systems designs. However, not excluded are substantially
similar Stand-Alone Products where a Supplier Access Product
is or becomes a feasible alternative. To determine if such
substantially similar product is or becomes a feasible
alternative, Company and Supplier shall utilize the
Benchmarking provisions, and if required, follow the dispute
resolution process outlined under Benchmarking. Use of "Other
Sourced Product" in any form other than the original offer
will be subject to the exclusivity, provisions and not an
exception under subsection 4. Additionally, if after
acquisition, the Acquired Company develops a need for an
Access Product substantially similar to those defined herein,
then they shall satisfy 100% of this requirement from
Supplier. In no way is this meant to relieve Company of its
obligations under the Noncompetition Agreement, dated 7/31/96.
(e) Requests for Access Product enhancements and new features or new
products shall be processed through the Quarterly Meeting process, or
as needed, and decisions to proceed shall be based upon a business
relationship, that assures a positive business case for each party.
Upon failure to reach an agreed upon action plan, the resolution
escalation process shall go to Supplier CEO and Company Purchasing Vice
President or designee. In the event of a dispute, the "industry
consultant" steps described under SECTION 9 ("BENCHMARKING"), as
amended in this Amendment, may be invoked by either party.
8. SUPPLY AGREEMENT: BENCHMARKING. The parties agree that SECTION 9
("BENCHMARKING") of the Supply Agreement shall be deleted in its
entirety and replaced with the following:
9. BENCHMARKING
On a quarterly basis, Company and Supplier shall, if requested
by either party, undertake to benchmark price, quality, product
functionality, and service performance of material offered by
Supplier. Price shall mean general pricing issues or trends, not
specific opportunities which shall, continue to be handled under
the Supplier "P Quote" process. Product functionality shall mean
a major function that represents an industry trend and which is
considered essential to compete in the current marketplace and
preserve market share. Singular features that Supplier may or
may not have as part of the product offering would not qualify
for benchmarking. The decision to benchmark will be presented
and developed at regularly scheduled quarterly business
meetings. Prior to any benchmarking, both companies shall agree
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upon the framework to conduct the benchmarking process (see
Exhibit B). This shall include clear identification of industry,
leaders to be benchmarker.
Following the benchmark study, Supplier and Company shall review
such benchmark information and Supplier shall develop a plan of
action for improving Material Price, quality, product
functionality, and service performance if such benchmark
information indicates improvements are needed when compared to
the then existing standards of the industry of comparable Price,
quality, product functionality and service. Supplier shall
introduce improvements that assure Company that Material is
meeting or exceeding competitive benchmarks with respect to: (1)
Material Price within thirty (30) days after the later of such
review or objective assessment as described below, and (2) for
Material quality, product functionality, or service performance
within a mutually agreed upon period after the later of such
review or objective assessment. Supplier will provide a plan for
introducing such improvements within the first thirty (30) days
of such review objective assessment. If Supplier fails to
perform as described in items 1 or 2 above, Company shall have
the right to competitively quote such Material in the
marketplace. Company will give Paradyne a thirty (30) day prior
written notice of such intent to place business with any other
vendor and provide Supplier that thirty (30) day period to match
or beat such other offer received by Company. If Supplier
matches or beats such other offer, Company agrees to continue to
place Orders with Supplier at the new price, quality, product
functionality, and service levels subject to the terms and
conditions of this Amendment. If Supplier does not match or beat
Company's offer, Company may elect to purchase Material from
another source without further obligation of exclusivity for
those products. Where Company and Supplier have agreed upon a
schedule and the scheduled General Availability for such new
feature, functionality or quality slips without contributing
fault by Company, Company may procure a competitive product.
In the event of a dispute with respect to approach, procedure or
results of the benchmarking, the parties agree to promptly
retain an independent, non-affiliated consultant experienced in
the industry to provide an objective assessment of the issue(s)
in dispute. The determination of the consultant shall be final
and binding.
This Amendment is the complete and exclusive statement of the parties with
respect to this subject matter, and merges and supersedes all communications,
negotiations and agreements between the parties with respect thereto. This
Amendment may be executed in counterparts, each of which shall be deemed an
original, and ail of which together shall constitute one and the same
instrument. Except as expressly modified herein, all agreements between, the
parties shall remain fully in effect and shall continue to bind the parties.
Without limiting the generality of the foregoing, the parties understand and
agree that the Noncompetition Agreement of July 31, 1996, by and among Lucent,
Paradyne Partners L.P., Paradyne Acquisition Corp., AT&T Paradyne Corporation,
and CAP Acquisition Corp., shall remain fully in effect and shall continue to
bind the parties.
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AGREED TO:
LUCENT TECHNOLOGIES INC.
BY: /s/
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TITLE: Vice President, Enterprise Networks
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DATE: 8/6/98
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PARADYNE CORPORATION
BY: /s/ Xxxxxx X. May
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TITLE: CEO
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DATE: 8/6/98
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GLOBESPAN SEMICONDUCTOR INC.
BY: /s/
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TITLE: President and CEO
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DATE: 8/28/98
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EXHIBIT A
PAYOFF LETTER
LUCENT TECHNOLOGIES INC.
000 XXXXXXXX XXXXXX. ROOM 0X-000
XXXXXX XXXX, XXX XXXXXX 00000
August 6, 1998
Paradyne Corporation
0000 000xx Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000-0000
RE: PAYOUT ARRANGEMENTS AND FORGIVENESS OF DEBT
Ladies and Gentlemen:
We refer to the Core Business Note dated as of July 3l, 1996 (as
amended and in effect from time to time, the "Note") issued by Paradyne
Corporation f/k/a AT&T Paradyne Corporation ("Paradyne") (the "Borrower") in
favor of Lucent Technologies Inc. (the "Lender") in the original principal
amount of [***].
The Borrower has advised the Lender that it intends to repay certain
amounts due and owing under the Note (the "Loans") and has requested that the
Lender provide the Borrower with appropriate pay-off figures of the principal,
interest and other amounts owing by the Borrower to the Lender under the Note.
The pay-off figures for the Borrower as of August 6, 1998 (the "Computation
Date") under the Note are as follows (collectively, together with any additional
interest accruing, or fees and expenses incurred, after the Computation Date,
that must be paid by the Borrower, the "Pay-Off Amount"):
Principal: $2,711,654.29
Interest: $ [***]
Total Amount Owing $ [***]
From and after the Computation Date and until the Pay-Off Date (as
defined, below), interest shall continue to accrue on the unpaid principal
amount of the Loans at the rates set forth in the Notes. The per diem accrual of
interest on the Loans would be [***]. Upon request of the Borrower, the Lender
shall provide the Borrower with a revised figure for the amount of interest to
be paid as part of the Pay-Off Amount plus any additional fees and expenses
incurred since the Computation Date that must be paid as part of the Pay-Off
Amount.
Lender hereby waives the five day notice requirement set forth in
Section 2(b) of the Note.
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Effective immediately upon receipt of the Pay-Off amount Lender hereby
releases its lien and security interest in Borrower's assets and relinquishes
any and all right, title and interest Lender may have in such assets. Promptly
after the date hereof, but in no event later than three (3) business days,
Lender agrees to execute any UCC financing statements, including releases,
termination statements, or other documentation as Borrower may request. Lender
also agrees to promptly return the shares of capital stock of Borrower and the
stock powers issued in connection therewith to Paradyne Acquisition Corp., a
Delaware Corporation ("PAC"), pursuant to that certain Pledge Agreement dated as
of July 31, 1996 by and between Lender, PAC and Paradyne. Lender further agrees
to promptly return the cancelled Guaranty; (Core Note and Lucent Interim Note)
made by Paradyne Canada Ltd., a Canadian corporation ("Paradyne Canada"), in
favor of Lender on July 3l, 1996 to Paradyne Canada.
Very truly yours,
LUCENT TECHNOLOGIES INC.
By: /s/ X. X. Xxxxxxxx
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X. X. Xxxxxxxx
Title: EVP & CFO
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Date:
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ACCEPTED AND AGREED TO:
PARADYNE CORPORATION F/K/A AT&T PARADYNE
CORPORATION
By: /s/ Xxxxxx X. May
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Title: CEO
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Date: 8/27/98
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EXHIBIT B
BENCHMARKING PROCESS
[***] [***]
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*Confidential Treatment Requested
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