OEM AGREEMENT

Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. Sections

200.80(b)(4), 200.83 and 230.406



OEM AGREEMENT

# LGSC103DS



THIS AGREEMENT IS MADE AND ENTERED INTO BY PREMISYS COMMUNICATIONS, INC. AND ITS PARENT PREMISYS COMMUNICATIONS HOLDINGS, INC., HAVING THEIR PRINCIPAL PLACE OF BUSINESS AT 1032 ELWELL COURT, PALO ALTO, CALIFORNIA, 94303, A CALIFORNIA CORPORATION, HEREINAFTER COLLECTIVELY REFERRED TO AS, "SELLER", AND AT&T PARADYNE CORPORATION, A DELAWARE CORPORATION, HAVING ITS PRINCIPAL PLACE OF BUSINESS AT 8545 126TH AVENUE NORTH, P.O. BOX 2826, LARGO, FLORIDA 34649-2826, HEREINAFTER REFERRED TO AS "BUYER".



WHEREAS, Buyer desires to purchase from Seller certain Products as defined hereinafter.



WHEREAS, Seller desires to supply Buyer with such Products,



The above parties therefore agree that the following mutual promises and covenants shall govern the sale by Seller, and the purchase by Buyer, of such Products.



01.0. DEFINITIONS



01.1. EFFECTIVE DATE



The "Effective Date" of this Agreement shall be the date of execution.



01.2. TERM OF AGREEMENT



The initial term of this Agreement shall commence upon the Effective Date of this Agreement by Seller and Buyer and shall terminate FIVE (50) years after the Acceptance Date, unless sooner terminated as hereinafter provided.



01.3. PRODUCT



"Product" or "Products" shall mean the Seller's Channel Bank product line as set forth in Exhibit A, including all associated hardware, software, firmware, documentation and any enhancements or modifications thereof. This shall include "New Products" that have been mutually agreed to between the parties for inclusion into this Agreement.



01.4. RELEASE



"Release" shall mean Buyer's printed, written or Electronic Data Interchange (EDI) order to Seller specifying Product shipment, quantities and Buyer's shipment dates.



01.5. SPECIFICATIONS





"Specifications" shall mean those purchase specifications (#351-0047-0031) for the Product as now set forth in Exhibit B and as modified from time to time in accordance with this Agreement.



01.6. EPIDEMIC



"Epidemic" shall mean the occurrence of one or more of the following events:



a. Products that are dead on arrivals (DOA's) exceeding the greater of three (3) percent of the Products delivered to Buyer or Buyer's customer within a one month period.



b. Four (4) percent or more of any consecutive one hundred Products delivered to Buyer or Buyer's customer that are rejected for defective materials or workmanship.



c. Field repair reports indicate a non conformance to the Specifications for the same defect of four (4) percent or more of the installed Product base.



d. Reliability plots of field data for two (2) consecutive months indicate that Products have an actual mean time between failure (MTBF) less than eighty percent (80%) of the MTBF specified at one hundred and one thousand (101,000) hours.



01.7. NEW PRODUCT



"New Product" shall mean any of Seller's products distributed after execution of this Agreement, that would (i) replace or obsolete existing Product or (ii) include all existing functions of the Products plus any Enhancements or (iii) create a more favorable price/performance ratio than the Products. Further, New Product shall include any new, jointly developed with Buyer or existing models that offer new features, options or other new technology not previously offered on existing Products but would otherwise not be offered to Buyer under the existing Product specifications.



01.8. DELIVERY SCHEDULE



"Delivery Schedule" shall mean the mutually agreed upon date(s) of shipment of Product to Buyer's customer. This date, that Product is to ship to Buyer's designated customers, shall also be referred to as the "Scheduled Ship Date".



01.9. ENHANCEMENT



"Enhancements" shall mean minor modifications or additions to the Products which shall not materially alter its architecture or fundamental functionality. Enhancements include substantial cost reductions of Products, or portions of the Products.



01.10. SOFTWARE





"Software" shall mean any binary product in the form of object code, whether residing on media loadable into the Products or in the Products as firmware, and all documentation related to its use.



01.11. SOFTWARE BUG FIX



A "Software Bug Fix" shall mean any Software related defect that has been fixed in a later revision of software.



01.12. SOFTWARE MAINTENANCE RELEASE



A "Software Maintenance Release" shall mean any Software that has been revised by including one or more Software Bug Fixes into the base Software.



01.13. SOFTWARE FEATURE RELEASE



A "Software Feature Release" shall mean any Software that has been revised to include new features or functionally.



01.14. ACCEPTANCE DATE



The "Acceptance Date" of the Product shall mean the date in which the Buyer agrees that the Product has successfully passes the Buyer's internal system tests and field beta tests and the product can be introduced into the Buyer's controlled introduction process.



02.0. PURCHASE AND SALE OF PRODUCTS



02.1. PURCHASE AND SALE



Seller agrees to manufacture the Products released hereunder by Buyer in accordance with the Specifications and to sell such Products, including any Enhancements, to Buyer, and Buyer agrees to purchase from Seller the Products on the terms and conditions and at the prices as hereinafter provided.



02.1.1 NO RESALE RESTRICTIONS



Except as provided herein, nothing contained herein shall be deemed in any way restrict the rights of Buyer with respect to the resale of the Products purchased hereunder.



02.2. EXPORTATION



Buyer agrees not to export the Products, or any systems containing the Products, or any technical data relating to the Products without first obtaining licenses or any other approvals required by the United States Department of Commerce or other United States governmental agencies. Buyer agrees not to export to any prohibited countries listed under the United States Export Administration Act of 1979 as amended and updated from time to time and the regulations promulgated thereunder.





02.3. MARKET RIGHTS



02.3.1. WORLDWIDE MARKET RIGHTS



Both Seller and Buyer intend that Buyer and the Buyer's distributors shall be a primary distribution channel for the Products to end-user customers for both the domestic and international markets. The Buyer shall have worldwide distribution rights to sell the Products.



Seller shall assist Buyer in obtaining type approvals and homologation for Buyer to distribute Products worldwide. Homologation schedules and distribution of homologation costs are to be mutually agreed upon between the Buyer and Seller. Seller further agrees where applicable to list Buyer's OEM name on certificates already earned, where possible.



With respect to non domestic market rights Seller and Buyer agree to the following:







a. On ore before the effective date of this Agreement, Buyer

will provide to Seller a confidential list (Buyer's list) of those

countries in which Buyer will support sales of the Products through

Buyer's direct sales operations or its in-country distributors. The

Buyer's list will also indicate the names of the distributors that

Buyer intends to use for resale of the Products in each country. Seller

will review the Buyer's list and within ten (10) days after receipt of

such list: i.) Seller shall provide to the Buyer a list (Seller's list)

that specifies any areas of potential conflicts or problems with the

Buyer's list and will specify the names of the distributors within the

countries on the Buyer's list that the Seller is currently in

negotiation with, ii.) Seller further agrees that it will not enter

into any new discussions to add other in-country distributors to the

countries on the Buyer's list for at least six (6) months after the

Effective Date without Buyer's written consent. After Seller has

received Buyer's list and returned to the Buyer the Seller's list, the

Buyer agrees to grant Seller forty five (45) day in which to close on

any distribution agreements that the Seller may have in process.



b. Any time within one year after the Effective Date Buyer may

add countries to the Buyer's list as Buyer requires. The same

guidelines as outlined in item a. of this Section will be used for each

country, with the six month time period starting after Seller receives

Buyer's written request to add the countries to the Buyer's list.



c. Beginning one year after the Effective Date any new

countries added to the Buyer's list, per item a. and b. above, will be

subject to a four month rather than a six month window.



d. Buyer and Seller agree to review at least semi-annually

Buyer's sales performance in each country where it is selling the

Products. If minimal performance objectives are not being met in any

country, Buyer and Seller will implement mutually agreeable programs to

improve sales performance in those countries.





e. Notwithstanding paragraphs a. through d. above, Seller at

its option may sell directly to carriers and service providers, and

OEMs who may sell to these carriers and service providers. However,

Seller agrees to inform Buyer, whenever practical of any opportunity

for sales of Product in those international countries where Buyer has

direct sales channels, except when Seller is unable to do so due to

business conditions including, but not limited to, non-disclosure

agreements, RFPs directed to Seller, and opportunities brought to

Seller by its other partners.



If Buyer wishes to pursue an opportunity brought to Buyer by Seller,

Buyer will provide to Seller a plan to pursue the opportunity in a time

frame in accordance with the following applicable situation:



1) Pursuit of an opportunity for which there is no

pressing deadline from an external entity: Buyer will submit

to Seller a plan within 60 days.



2) Pursuit of an opportunity which is constrained by

a deadline imposed by an external entity. Buyer must submit a

plan to Seller within a time period as required to meet

Seller's needs. Seller shall make every reasonable effort to

maximize the amount of time that the Buyer has to respond.



If rejected by the Seller, Seller will inform Buyer

of the reasons for rejection within four (4) business days and

conversely Buyer has four days to remedy reasons for

rejection, if practical. If accepted, Seller will assist Buyer

in Buyer's plan to pursue that opportunity. Furthermore,

Seller will not pursue direct sales to the identified customer

unless such customer indicates that its does not wish to do

business with Buyer.



In those cases where Buyer has proposed the Product

into an account, and that account subsequently contacts Seller

directly, Seller will inform Buyer as soon as practicable. In

addition, Seller will use all reasonable efforts to maintain

sales of Product through Buyer. If the account informs Seller

that it does not want to purchase from Buyer, Seller may

pursue that business directly. In such cases, Seller will

provide compensation to Buyer in the form of a commission on

revenue for all Products sold to that customer for a 12 month

period. Such commission will be based on the discount that

Seller offers to that customer according to the following

schedule:



Seller's Discount to Purchaser Buyer's Commission

0 to 15% [***]

15 to 20% [***]

21 to 25% [***]

26 to 30% [***]

31 to 35% [***]

36 to 40% [***]



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41% or more [***]



All such commission will be in the form of a credit

which Buyer may apply up to 50% of the purchase price of any

future purchases of Products.



In addition, any U.S.-based reseller with which

Seller may have an agreement is not precluded from providing

Product to any of its international customers.



f. Seller agrees to support Buyer's international sales

efforts for the Products without preferential treatment to other



With respect to domestic (US) market rights and obligations, Buyer and Seller agree to the following:



g. For a period of twelve months from the general availability

of the Products to the Buyer's customers ("General Availability

Date"), Seller agrees to limit to twenty (20) the number of

distributors authorized by Seller to sell its products. These

distributors can be either stocking or non-stocking distributors

classified as "VADs" (Distributors) and resellers (exclusive of

OEMs).



h. The limit of twenty (20) distributors in (a) does not apply

to OEMs, telcos, Inter-Exchange Carrier's or other providers or

resellers of telecommunications services. It also does not apply

to wholesale distributors which primarily sell to such

telecommunications service providers. For a period of twelve

months from General Availability Date, such wholesale distributors

shall be limited to four (4) and shall be reviewed with Buyer.

Specific wholesale distributors may change from time to time,

although the number shall be limited to four.



i. If Buyer wishes to pursue an opportunity brought to Buyer

by Seller, Buyer will provide to Seller a plan to pursue the

opportunity in a time frame in accordance with the following

applicable situation:



1) Pursuit of an opportunity for which there is no

pressing deadline from an external entity: Buyer will submit

to Seller a plan within 60 days.



2) Pursuit of an opportunity which is constrained y a

deadline imposed by an external entity: Buyer must submit a

plan to Seller within a time period as required to meet

Seller's needs. Seller shall make every reasonable effort to

maximize the amount of time that the Buyer has to respond. If

rejected by the Seller, Seller will inform Buyer of the

reasons for rejection within four (4) business days and

conversely Buyer has four (4) days to respond, if practicable.



j. Seller agrees to review Seller's present distributors and

future distributors before authorizing distribution or sale of its

Products with the Buyer in order to minimize sales channel

conflict and sales expense for both parties. The intent of these



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reviews is to assure Seller that its desired market coverage is

being met and to assure Buyer that its sales penetration is



k. Seller agrees to maintain a minimum differential of 19%,

referenced to Seller's published list price, between the most

favorable VAD or Distributor (not OEM's) contract pricing and that

of the Buyer. In the event of an exception to this for specific

distributor sales opportunities, the Seller shall notify the Buyer

and gain the Buyer's agreement as to the special pricing for that



l. In those cases where Buyer has proposed the Product into an

account, and that account subsequently contacts Seller directly,

Seller will inform Buyer as soon as practicable. In addition,

Seller will use all reasonable efforts to maintain sales of

Product through Buyer. If the account informs Seller that it will

not purchase from Buyer, Buyer shall inform Seller and Seller with

Buyer's approval may pursue that business directly. In such cases,

Seller will provide compensation to Buyer in the form of a

commission on net revenue on all Product sold to that customer for

a 12 month period. Such commission will be based on the discount

that Seller offers to that customer according to the following

schedule:



Seller's Discount to Purchaser Buyer's Commission

0 to 15% [***]

15 to 20% [***]

21 to 25% [***]

26 to 30% [***]

31 to 35% [***]

36 to 40% [***]

41% or more [***]



All such commission will be in the form of a credit

which Buyer may apply up to 50% of the purchase price of any

future purchases of Products.



02.3.2. OTHER MARKET RIGHTS



Seller will agree not to enter into any technology transfers, joint development efforts, manufacturing rights, or distribution agreements for Products with the following: Codex, Racal-Milgo, N.E.T., Timeplex, Newbridge, Stratacom, G.D.C., or Gandalf. Buyer and Seller may from time to time add companies to this list by mutual agreement.



Buyer may provide Seller with a list of it's customers (not to exceed 1,600) and Seller agrees that it will not pursue direct sales with said customers. This list may be updated from time to time. Seller agrees that if its direct sales force attempts to sell Products to customers of Buyer, then Seller at the request of Buyer will support Buyer in the sale, unless that customer has stated that it only buys product directly from the manufacturer or will not purchase Products from the Buyer. Seller in these cases will not show preferential financial consideration to any of the Sellers



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distribution channels in competitive sales situations. In the event that Seller does sell under this paragraph, the commission schedule applicable to domestic sales in sub paragraph 1. shall apply.



02.3.3. RETENTION OF MARKET RIGHTS



In order to retain the preferential market rights specified in paragraphs 2.3.1. a-d with respect to the international rights, paragraphs 2.3.1. g-j with respect to domestic rights and paragraph 2.3.2 (hereinafter collectively called "Preferential Market Rights"), Buyer and Seller agree to the following:



a. From the Effective Date of this Agreement the Buyer agrees to attempt to achieve purchase objectives of Products of six hundred (600) units by September 1, 1993, purchases of an additional seven hundred (700) units by March 1, 1994, purchases of an additional one thousand (1,000) units by September 1, 1994, and an additional one thousand four hundred and fifty (1,450) units by March 1, 1995.



b. Buyer and Seller will review Seller's purchase performance on said dates. Buyer's Preferential Marketing Rights may thereafter terminate, at the election of Seller after thirty days written notice, if Buyer failed to meet the purchase objectives unless Seller was unable to meet Buyer's requested deliveries during such period, if such requests were consistent with the forecast provided under section 03.3. The above state performance objectives and remedies apply solely to the Preferential Marketing Rights and shall in no way be construed to affect Buyer's other rights under this Agreement or any other terms and conditions of this Agreement.



c. On or before March 1, 1995, Buyer and Seller shall in good faith meet and negotiate the six month purchase targets for the remainder of the term of this Agreement. Absent reaching agreement the Preferential Marketing Rights shall terminate on March 1, 1995, unless Buyer has offered to attempt to purchase at least in the aggregate the same number of units purchased during the prior six months and thereafter such Preferential Marketing Rights shall terminate.



03.0. ORDERING OR PRODUCTS



03.1. USE OF RELEASES



Buyer shall issue Releases via Buyer's purchase orders, or customer drop ship orders confirmed in writing and/or via Electronic Data Interchange (EDI), specifying Buyer's part numbers and/or model numbers, quantities, prices, destination and Delivery Schedule(s) for the Products furnished under this Agreement. Releases for Products which are the subject of this Agreement will be considered released under the provisions of this Agreement unless otherwise specified in writing. This Agreement will take precedence over any preprinted terms of Buyer's Releases in the event there are conflicting or additional terms and conditions.



Seller shall have EDI available, in a format compatible with Buyer's current software, within six (6) months of the Effective Date of this Agreement.





Seller shall drop ship Releases and logistics spare parts at Buyer's request to Buyer or Buyer's customer at locations specified by Releases as defined, above. Seller shall utilize freight carriers designated by Buyer in Buyer's Corporate Routing Guide, a copy of which is attached hereto as Exhibit C, unless otherwise specified on Buyer's Release.



0.3.2. RELEASE ACKNOWLEDGMENT



Seller shall acknowledge to Buyer each Release within 24 hours where possible, but no more than 48 hours of Seller's receipt of same. Such acknowledgment shall constitute acceptance of the Release, and Seller will at the same time confirm the Scheduled Ship Date.



03.3. FORECAST



Buyer will provide a rolling monthly forecast of Buyer's demand for the Product with visibility for the next six (6) months. The quantity of Products forecast for the first month of a given forecast will be no more than one hundred twenty percent (120%) of the Products forecast for the second month of the immediately prior forecast. This shall hold true for any ninety (90) day period of the then current monthly rolling forecast. The forecast given for any period beyond this ninety (90) day window may be increase by any amount. This forecast will be for planning purposes only.



03.4. RELEASE RESCHEDULE BY BUYER



Buyer has the right to reschedule any Release up to an including twenty one (21) calendar days before a Release's Scheduled Ship Date. Buyer may reschedule any Release one (1) time without surcharge within twenty one (21) calendar days of the Release's Schedule Ship Date. Buyer may reschedule the same Release additional times upon payment of two (2) percent of the Buyer's purchase price of such Release or five hundred dollars ($500.00), whichever is less, for each time the Buyer makes such additional reschedulings. All rescheduled ship date under this Section shall be no more than thirty (30) days after the then current ship date for the Release.



Notwithstanding the above, Buyer may reschedule in any manner 100% of any Release under this Agreement without surcharge or penalty in the event of Seller's delay in delivery of production quantities of the products ordered in conformity with this Agreement.



03.5. RELEASE RESCHEDULE BY SELLER



At no time can the Seller reschedule any of the Buyer's Releases that were previously committed and assigned Scheduled Ship Dates by the Seller without the express advance authorization of the Buyer. This advance notice of the Seller's potential rescheduling of the Buyer's Release must be provided to the Buyer, with all reasonable effort, five (5) business days before the Release's Scheduled Ship Date.



03.6. RELEASE INCREASE AND RELEASE DECREASE



Notwithstanding anything else in this Agreement to the contrary, Buyer may, up to and including twenty (21) business days before a Scheduled Shipment Date, without surcharge or





penalty, increase or decrease the quantity of Products previously ordered for such shipment. If Buyer increases a Release within twenty (21) business days before Scheduled Shipment Date for that Release, Seller shall use reasonable commercial efforts to meet such increased Release. Buyer and Seller shall negotiate in good faith any associated expediting fees, provided Seller provides documented evide ...