April 7, 2006 Eatontown, NJ -- Amedia Networks and Motorola subsidiary Motorola Wireline Networks announced their entry into a strategic alliance agreement on April 5, 2006, pursuant to which the companies will jointly develop a family of three IP "home gateway products" that will enable customers using Motorola's existing multi-service access platform to access IP-based services. The gateway products will be exclusively distributed by Motorola under the Motorola brand. Under the agreement, Amedia has also granted Motorola certain rights with respect to the re-sale of Amedia's products, as described below.
The strategic alliance agreement provides that Motorola will pay to Amedia $1.9 million for engineering costs associated with the development of the gateway products, approximately 32% of which is payable within 30 days of the effective date of the agreement and the remainder of which is payable in installments on the achievement of certain agreed upon project milestones. Motorola is entitled to terminate the development program at any time prior to the completion of the development of the gateway products and, in the event that it does so, Amedia will be entitled to retain any of the engineering costs paid or due and owing by Motorola as of the date of termination. Upon successful completion of all necessary testing, the gateway products will be manufactured by Amedia for exclusive sale to Motorola.
Also under the strategic alliance agreement, Amedia has granted Motorola the exclusive right to resell Amedia's PG1000 and the HG-V100 gateway products, and all derivative or substantially similar "exclusive products" to certain specified leading telecommunications carriers and their affiliates ("exclusive customers") for a period of 24 months from the effective date of the agreement as part of Motorola's portfolio of broadband wireline platforms. The exclusivity may be terminated by Amedia unless, among other things, at least one of the exclusive customers shall have accepted one of the exclusive products for lab testing within one year of the effective date of the strategic alliance agreement and signed a contract to purchase exclusive products (which is reasonably expected to result in revenue to Amedia in a specified minimum amount) within 18 months of the effective date of the agreement; provided, however, that if these conditions are satisfied with respect to an exclusive customer, then Motorola's exclusivity period for such a customer will be extended for an additional 24 months. At all times Amedia retains the right to sell the exclusive products to customers other than the exclusive customers. In addition, Amedia also granted Motorola the non-exclusive right to resell all of Amedia's other existing products worldwide.
The agreement also provides that Amedia will not, during the term of the agreement and for a period of two years thereafter, directly or indirectly sell to or solicit or accept any order for any of its products from any customer to which Motorola has resold an Amedia product during the term of the agreement. These provisions will not apply to customers to whom Amedia made sales of products in the twelve months preceding the effective date of the strategic alliance agreement or in the event of termination of the agreement by Amedia for cause or by Motorola for convenience. Notwithstanding the foregoing, if Motorola sources, manufactures, or resells a gateway which has substantially the same functionality as Amedia's PG1000 or HG-V100 products, the exclusivity and the non-solicitation provisions contained in the agreement shall immediately terminate. Amedia has also agreed that the prices for its products that it charges Motorola will be no higher than the prices that Amedia charges any other reseller, customer or entity.
The strategic alliance agreement has an initial term of three years which will automatically extend for successive additional one-year terms unless either party gives notice of termination no less than 30 days prior to the expiration date of the then-current term. The agreement may be terminated by Motorola at any time on 30 days notice and by either party if the other ceases to do business in the ordinary course or defaults on its material obligations, representations or warranties under or otherwise materially breaches the agreement subject, except in the case of payment failures, to a 30-day cure period.