Product Development and Distribution Agreement - Accent Color Sciences Inc. and Xerox Corp.


              PRODUCT DEVELOPMENT AND DISTRIBUTION AGREEMENT

This Agreement is made and entered into between Accent Color Sciences Inc., a
corporation organized under the laws of the State of Connecticut, U. S. A., with
an office in East Hartford, Connecticut (hereinafter referred to as "ACS"), and
Xerox Corporation, a corporation organized under the laws of the State of New
York, U.S.A., with an office in El Segundo, California (hereinafter "Xerox") and
shall be effective as of the date the last signature is affixed hereto
("Effective Date") upon the terms and conditions set forth below.

                          I.  DEFINITIONS

1.01 "ACS Preexisting Intellectual Property" shall mean any intellectual
     property owned or licensed by ACS prior to the execution of this Agreement
     which is not created or developed by ACS pursuant to this Agreement, and
     which is used by ACS to create or develop, or is incorporated in or is a
     part of, the Product.

1.02 "ACS 135 Spot Printer" shall mean the color spot printer which is to be
     developed hereunder by ACS to be interoperable and compatible with the
     Xerox 4890 and Xerox 4635 Printers, the Xerox Docutech 135 Production
     Publishing System ("Docutech") and otherwise to conform to the
     Specifications.

1.03 "Consumables" shall mean supplies which are consumed or used in connection
     with the ACS 135 Spot Printer or other ACS Printers distributed by Xerox
     hereunder.

1.04 "Day" shall mean, unless otherwise specified, a calendar day (as opposed to
     a regular working day).

1.05 "Documentation" shall mean all written text including but not limited to
     manuals, brochures, specifications and hardware or software descriptions,
     in electronic, printed and/or camera ready form and related materials
     customarily needed to use, provide service for, or otherwise support the
     Products.


 
1.06 "Mandatory Retrofit" shall mean a retrofit to the Products necessary to
     restore the Products to conformity to Specifications, to render the
     Products safe for use or repair, or have the Products comply with the
     requirements of applicable law current as of the date the affected unit of
     Products was delivered to Xerox/Xerox Affiliated Companies.

1.07 "Loan Agreement and Promissory Note" shall mean that certain agreement
     between the parties hereto dated____________, 1996 and styled "Loan
     Agreement and Promissory Note."

1.08 "Production Month" shall mean the calendar month in which production occurs
     of the ACS 135 Spot Printer or other ACS Products subject to this
     Agreement.

1.09 "Products" shall mean the ACS 135 Spot Printer and other ACS Products
     subject to this Agreement which meet the Specifications, together with
     Spares and Consumables therefor, and all modifications, improvements,
     enhancements, additions, updates, releases and versions thereof.

1.10 "Regulatory Agency" shall mean any regulatory agency or other body,
     governmental or private, including but not limited to agencies regulating
     product safety, and/or electromagnetic emissions, the approval of which is
     required by Xerox, the government of the United States or any political
     subdivision thereof, or the European Union or any member state thereof,
     prior to development, delivery or marketing of the Products in the United
     States, Puerto Rico, the territories and possessions of the United States,
     the EEC, and any other country fisted on Exhibit A hereto.  Examples of
     standards of which ACS shall be obligated to have the Products meet shall
     include Underwriters Laboratory ("UL") and the Canadian Standards
     Association ("CSA").

1.11 "Security Agreement" shall mean that certain agreement between the parties
     dated ________, 1996 and styled the "Security Agreement"

1.12 "Specifications" shall mean the engineering, operational and/or functional
     description of the Products as set forth in Exhibit A hereto, as the same
     may be amended by mutual agreement of the parties.


 
1.13 "Systemic Defect" shall mean a defect in the Products' materials and
     workmanship which occurs in identical or substantially similar form or from
     a substantially similar cause which occurs (i) in at least five per cent
     (5%) of a field population of the ACS 135 Spot Printer or other model(s) of
     ACS printers being distributed hereunder by Xerox or Xerox Affiliated
     Companies provided the field population consists of at least one hundred-
     fifty (150) units of the printer model at issue or (ii) in the event
     subparagraph (i) of this section doesn't apply, such defect occurs in at
     least seven units of the field population of the ACS 135 Spot Printer or
     other model of ACS printer(s) being distributed hereunder by Xerox or Xerox
     Affiliated Companies.

1.14 "Territory" shall mean the entire world.

1.15 "Xerox Affiliated Companies" shall mean Fuji Xerox Co., Ltd., Rank Xerox
     Limited, Xerox Canada, Inc., any entity which is owned or controlled
     jointly by Xerox Corporation and The Rank Organization PLC, and any entity
     which is owned or controlled directly or indirectly, by any of the
     foregoing, but shall not include Xerox.

1.16 "Agreement" shall mean this Agreement together with Exhibits A through
     C which are attached hereto and made a part hereof.

                    II.  ACS DEVELOPMENT WORK

2.01 (a) ACS shall, unless otherwise agreed in writing, at its sole expense use
     all commercially reasonable efforts to develop the ACS 135 Spot Printer to
     conform to the Specifications of Exhibit A and timely complete the
     deliverables, and achieve the milestones and program schedule, set forth in
     Exhibit B hereto.  The Specifications with respect to enabling the ACS 135
     Spot Printer to be interoperable and compatible with the Xerox 4635 and
     4890 Printers must be finalized by February 15, 1996.  The Specifications
     with respect to enabling the ACS 135 Spot Printer to be interoperable and
     compatible with the Docutech will be finalized as soon as practicable after
     the Effective Date.


 
     (b) ACS shall provide Xerox with progress reports, in accordance with the
     schedule set forth in Exhibit B hereto.  Each such report shall
     reflect/indicate:

     i.     Status of progress to current date/milestone;
     ii.    Short description of problems in meeting such milestones;
     iii.   Proposed recovery method to meet next milestone, if needed;
     iv.    Probability of meeting next milestone.

The parties agree to conduct regular program reviews as shown on the program
schedule to ensure their mutual satisfaction with the performance of the
development work.  In addition, upon reasonable notice, the parties agree to
mutually agreeable times and locations to discuss and inspect the status of the
development work.  The schedule for developing the ACS 135 Spot Printer to be
interoperable and compatible with the Docutech will be finalized as soon as
reasonably practicable after the Effective Date.

2.02 The parties will jointly develop in accordance with the milestones set
     forth in Exhibit B a SCSI II interface specification which shall also form
     part of the Specifications.

2.03 Xerox reserves the right to request in writing changes to the
     Specifications at any time prior to delivery of the ACS 135 Spot Printer or
     other Products to be developed hereunder by ACS.  If ACS reasonably
     determines that such changes are feasible, the parties will agree to such
     changes in writing and ACS will develop the ACS 135 Spot Printer or other
     products to be developed hereunder by ACS to conform to such modified
     Specification and to be delivered in accordance with any modified
     milestones.  Xerox and ACS agree to negotiate in good faith an equitable
     adjustment in Products prices or time schedule, as necessary, for all
     changes to the Specification and ACS shall not be required to continue with
     the development of the ACS 135 or other Products to be developed hereunder
     by ACS until such adjustment is agreed to.

2.04 (a) ACS shall timely deliver to Xerox both the Alpha Software Development
     units and up to ten (10) BO units for testing and acceptance by Xerox.  The
     Alpha Software Development unit shall be a unit sufficiently developed to
     enable Xerox to ascertain if the ACS 135 Spot Printer or any other Products
     to be developed hereunder win be capable of 


 
     meeting the Specifications, and the manufacturing cost targets, although
     such Alpha Software Development unit may not be fully functional or
     manufactured with actual production tooling The BO units shall be completed
     units with all required functionality and performance for final product
     test purposes. ACS shall sell Xerox up to ten (10) of the initial BO units
     of the ACS 135 Spot Printer or other printer to be developed hereunder by
     ACS at a price of one hundred fifty thousand ($150,000) dollars per unit.
     Delivery will be F.O.B. ACS' manufacturing facility. With respect to such
     BO units Xerox will pay ACS fifty (50%) percent of the applicable purchase
     price contemporaneously with Xerox' order for such units, fifty (50%)
     percent upon delivery.

(b)  ACS shall supply Xerox preliminary data on the On Going Maintenance Rate
     ("OGMR") and Mean Time To Repair ("MTTR") for the ACS 135 Spot Printer or
     other printers distributed hereunder by Xerox/Xerox Affiliated Companies as
     soon as practical 3 in their development cycle. Final OGMR and MT-FR data
     shall be provided as soon as design maturity of such printers is
     demonstrated but in no case later than thirty(30) days prior to general
     availability of the printers. Such OGMR data shall include failure data on
     all major subassemblies of such printers. Further, should any revisions or
     modifications to such printers or component parts thereof affect the OGMR
     or MTTR of such printers, ACS shall supply revised OGMR and MTTR data
     within thirty (30) days of such revisions or modifications.

(c)  In the event that a variance should occur such that the actual OGMR is
     worse than the OGMR specified in Exhibit A , ACS will implement a
     corrective action program at its sole expense acceptable to Xerox to
     correct such variance. If the average OGMR for the ACS 135 Spot Printer or
     other printers distributed hereunder by Xerox/Xerox Affiliated Companies
     nonetheless remains worse than that specified in Exhibit A after such
     corrective action is implemented., ACS agrees to implement a superior
     corrective action program and repair all such printers failed and affected
     Spares at no cost to Xerox. Should such corrective actions taken by ACS not
     result in average OGMR's in accordance with the Specifications, ACS shall
     replace all such printers with a printer that meets or exceeds the
     Specifications, including OGMR'S, at no cost to Xerox.

2.05 After delivery by ACS of any deliverable for which testing for compliance
     with the Specifications is feasible and reasonable, Xerox will test the
     same 


 
     and notify ACS in writing of either its approval or reasons for its
     rejection of the deliverable due to its nonconformance to the
     Specifications and/or its containing program errors or otherwise not
     functioning properly as soon as reasonably practicable but in no event
     later than thirty (30) days after commencement of such testing.

2.06 Following receipt by ACS of Xerox' written notice of rejection under
     Section 2.05 hereof, ACS will develop within [*] a mutually agreeable
     corrective action plan. If ACS subsequently delivers a corrected
     deliverable to Xerox within said plan corrective period, Xerox will have up
     to an additional [*] from receipt to reevaluate the corrected deliverable.

2.07 If, with respect to any particular ACS deliverable, ACS is unable due to
     ACS' own fault to meet the agreed-upon Specifications and/or eliminate any
     program errors and/or otherwise not provide a properly functioning
     deliverable within the correction period set forth in Section 2.06 above,
     or fails to meet any agreed upon milestone or date for delivery of a
     deliverable then, in addition to any other rights Xerox may have hereunder
     or under applicable law, Xerox may:

(a) extend the correction period by an amount of time as may be determined by
    Xerox; or

(b) approve the deliverable with an equitable reduction in any Products'
    purchase price as mutually determined by Xerox and ACS; or

(c) elect to complete or have completed on its behalf at Xerox' expense the
    nonconforming deliverable and ACS shall give Xerox and Xerox Affiliated
    Companies all reasonable and necessary cooperation with respect thereto at
    ACS' expense including but not limited to (i) helping Xerox and Xerox
    Affiliated Companies procure consumables, parts, components, or
    subassemblies from ACS' vendors, (ii) granting Xerox and Xerox Affiliated
    Companies a world-wide, royalty-free, non-exclusive, irrevocable right to
    use, and sublicense, any ACS intellectual property, including know-how, and
    related documentation, which is necessary for Xerox/Xerox Affiliated
    Companies to complete or have completed such nonconforming deliverable; and
    (iii) assist Xerox and Xerox Affiliated Companies to obtain any 


[*] OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
    necessary licenses from third parties necessary for the completion of such
    nonconforming deliverable. Provided, however, within thirty (30) days after
    Xerox elects to exercise the rights granted to it in this subparagraph, it
    shall meet with ACS and discuss in good faith the possibility of ACS
    reacquiring the right to complete in whole or in part the deliverables due
    under this Agreement. In the event Xerox employees or contractors create or
    conceive of any ideas, discoveries, innovations, and inventions
    ("Improvements") in the course of completing the nonconforming deliverable,
    Xerox will own such Improvement and will grant ACS a world-wide , non-
    exclusive, royalty-free, irrevocable right to use such Improvements in
    connection with manufacturing Products hereunder solely for Xerox and Xerox
    Affiliated Companies; or

     (d)  terminate this agreement.

2.08 (a) Number of Persons Employed on Development Activities - At all times
         ----------------------------------------------------               
     during the development activities contemplated by this Agreement ACS shall
     have at least ten (10) ACS full-time employees or contract workers whose
     duties will principally relate to the development efforts hereunder.

     (b)  Conflicts - In the event there is any conflict between ACS achieving
     its development obligations under this Agreement and any development or
     other obligations respecting any other person, the former will take
     priority.

     (c)  Xerox Exclusivity - While any amount of any loans by Xerox to ACS
          -----------------                                                
     remain outstanding, and unless otherwise approved in writing by Xerox'
     Business Program Manager(s) appointed under this Agreement, ACS (i) may not
     engage in any product (hardware or software) development work alone or in
     concert with one or more other persons (natural or otherwise) nor enter
     into a binding agreement relating to such product development work, other
     than with or for Xerox or Xerox Affiliate Companies, relating to rendering
     the ACS 135 Spot Printer or any other current or future cut-sheet ACS
     products interoperable or compatible with any printer which has a rated
     speed of 30 PPM or greater or copier which has a rated speed of 50 CPM or
     greater and (ii) may not enter into any legally binding arrangements or
     agreements with any person, including IBM and Siemens, which arrangement or
     agreement directly precludes or has the effect of precluding ACS from
     developing for or distributing to Xerox or Xerox Affiliated 


 
     Companies for resale an ACS Spot Printer or other printer which is
     interoperable and compatible with Xerox' version of a web-fed printer with
     a rated speed of 30 PPM or more.

2.09 (a) Improvements - Title to any Improvements created or conceived solely by
         ------------                                                           
     employees of Xerox or those of ACS shall be owned solely by the party whose
     employees solely created or conceived such Improvements.


(b)  Pre-Existing ACS Intellectual Property - At all times title to pre-existing
     --------------------------------------                                     
ACS Intellectual Property resides with ACS and, unless expressly provided
herein, no licenses with respect thereto are granted by ACS to Xerox or Xerox
Affiliated Companies.


2.10 Escrow - Promptly after each portion thereof is completed, ACS shall place
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     with the Office of the General Counsel of Xerox, 800 Long Ridge Road,
     Stamford, CT 06904, one complete set of any software source code developed
     hereunder, related Documentation, and all diagrams, drawings, and
     schematics ("Source Material") related to the ACS 135 Spot Printer and
     other printers being developed hereunder for Xerox.  The foregoing shall
     not be made available to anyone outside Xerox' Office of the General
     Counsel unless there is a breach of this Agreement by ACS and Xerox elects
     to complete or have completed the development activities contemplated by
     this Agreement or to the extent allowed under applicable law in the event
     of ACS' bankruptcy or insolvency.  The use of such Source Materials will be
     subject to the agreement between the parties styled "Confidential
     Disclosure Agreement" effective (date), ("Confidentiality Agreement"). ACS
     shall promptly send Xerox on a monthly basis updates of such source code,
     related Documentation, and all diagrams, drawings, and schematics for the
     ACS 135 Spot Printer and other printers being developed hereunder for
     Xerox.  In ACS' presence, Xerox may inspect, test, and review, but not
     copy, the escrowed materials at the time of deposit or within a reasonable
     time thereafter to verify that ACS is meeting its escrow obligations
     hereunder.

2.11 Product Quality Plan - ACS will develop, implement and provide to Xerox a
     --------------------                                                     
     manufacturing Quality Plan for the deliverables to be delivered by ACS
     hereunder in accordance with End Item Quality Provisions (Xerox 


 
     document "EIQP-3105-4"). Such Quality Plan shall define the controls and
     operating systems required to assure that only defect free deliverables
     will be delivered to Xerox. ACS will ensure that their suppliers will meet
     the Xerox quality standards as set forth in the EIQP-3105-4. Xerox'
     Material Quality Assurance Group or their authorized representatives shall
     source verify au deliveries until ACS achieves Xerox' certification.
     Existing ACS quality procedures which totally comprehend any quality plan
     elements may be used to satisfy the plan and will become the basic
     operating document for assuring compliance to Xerox' quality requirements.

2.12 Program Milestone Management - The parties agree that achievement of
     ----------------------------                                        
     certain key milestones, as set forth in Exhibit B, must be managed actively
     to assure that the ACS deliverables hereunder meet Xerox' market
     requirements.  Both parties agree to apply diligent efforts to assure that
     the progress of the program is kept on schedule.  Both parties shall
     appoint Business Program and Technical Program Manager(s) with respect to
     this Agreement.  The Business Program Manager(s) for Xerox will be Amitabh
     Saran respecting development activities relating to the Xerox 4635 and 4890
     and Larry Rourke respecting the development activities relating to the
     Xerox Docutech 135 Production Publisher.  The Technical Program Manager(s)
     win be Steve Baumann respecting development activities relating to the
     Xerox 4635 and 4890 and to be identified by 3/15/96 respecting the
     development activities relating to the Xerox Docutech 135 Production
     Publisher.  The Business Program and Technical Program Manager for ACS win
     respectively be Martyn R. Jones and Robert S. Rizza.  If it is determined
     by either party that the progress of key program milestones is insufficient
     to assure that delivery schedule of conforming deliverables is maintained,
     the parties' respective Technical Program Managers shall be empowered to
     schedule a milestone exception review upon written notification to the
     other party.  Milestone exception reviews will be held at a mutually agreed
     location within ten (10) working days of such written notification and will
     be attended by the program team members that Xerox and ACS respectively
     each select.  The parties respective Business Program Managers will review
     the problems and causes for delay in achieving the key milestones and
     commit the necessary resources within their company to recover or minimize
     the program delay.

                 Ill.  AGENCY APPROVAL AND SAFETY


 
3.01 Compliance - The Products shall comply with all applicable governmental
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     laws, regulations and other safety requirements and governmental or other
     agency certifications or approvals required for marketing of the Products
     which are set forth in the Specifications.

                          IV.  PURCHASE AND SALE

4.01 Purchase and Sale - Xerox and Xerox Affiliated Companies may purchase from
     -----------------                                                         
     ACS and ACS shall sell to Xerox and Xerox Affiliated Companies pursuant to
     this Agreement, the Products as are listed in Exhibit C for resale and
     servicing by Xerox, Xerox Affiliated Companies, and/or their respective
     authorized resellers in the Territory.

4.02 Prices
     ------

     (a) Prices for the initial version of Products shall be those set forth in
     Exhibit C hereto. As of the Effective Date, Exhibit C reflects only ACS'
     maximum initial prices to Xerox respecting the purchase of Products.
     Exhibit C will be completed no later than March 15, 1996. Prices for
     Products shall include the cost of packaging and packing which conform to
     the agreed packaging specifications.

     (b)  Xerox may ask ACS for a downward price correction whenever, in
     Xerox' considered opinion, the prices of the Products are, or have become,
     so high compared to similar products marketed by third party competitors or
     by Xerox or Xerox Affiliated Companies, such that Xerox or Xerox Affiliated
     Companies are no longer in a position to compete normally in the
     marketplace.  ACS agrees to negotiate any such request in good faith with
     Xerox, provided that until such time as agreement on any price decrease is
     reached, the prices then in effect shall prevail.

     (c)  If ACS' costs of materials for Products unexpectedly increase and, on
     a cumulative basis, increases the materials component of Products' unit
     manufacturing cost by more than ten (10%) percent in any twelve month


 
     period ACS may increase Products prices to reflect one-half of such
     unexpected increased cost of materials.

     (d)  In addition, either party may request a change in the price of
     Products hereunder based upon changes in costs or market conditions then
     prevailing, and the parties agree to negotiate such requested price change
     in good faith, and until such time as an agreement on any changed price is
     reached, the prices then in effect shall prevail.

     (e)  ACS shall make all commercially reasonable efforts to reduce year
     over year its costs of manufacturing, selling, and delivering the Products
     to Xerox and Xerox Affiliated Companies by at least eight (8%) percent.
     ACS agrees to pass along to Xerox and Xerox Affiliated Companies one-half
     of such cost reductions in the form of Products prices decreases.

     (f)  The applicable price for Products shall be the price in effect as of
     the date an order for Products is submitted to ACS.

4.03 Trademarks of Products - Xerox intends to market the ACS 135 Spot Printer
     ----------------------                                                   
     bearing the trademarks, trades dress and logos of Xerox and Xerox
     Affiliated Companies, as appropriate.  However, if doing so will cause the
     date of the ACS 135 Spot Printer's initial availability for customer
     deliveries to be significantly negatively impacted, Xerox will agree to
     initially market the ACS 135 Spot Printer bearing ACS' trademarks, trade
     dress, and logos.

4.04 Most Favored Nation Pricing
     ---------------------------

     (a) ACS represents and warrants that the prices for the Products offered to
         Xerox and Xerox Affiliated Companies will be no higher than those
         offered to any other reseller of the Products [*].

     (b) ACS agrees that to the extent the prices offered to Xerox/Xerox


[*] OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
     Affiliated Companies for Products or any other ACS products distributed
     hereunder by Xerox/Xerox Affiliated Companies are higher than those offered
     by ACS to any competitor of Xerox/Xerox Affiliated Companies respecting
     other ACS products, including related spares and consumables, such price
     difference will merely reflect any differing methods employed by ACS in
     manufacturing, selling, or delivering such products for Xerox as compared
     to such other resellers.  In the event ACS is in breach of the foregoing
     such lower prices will apply to Xerox/Xerox Affiliated Companies purchases
     of Products from the date such lower prices were offered to such other
     reseller by ACS.

4.05 Payment - Xerox and Xerox Affiliated Companies shall make payment in U.S.
     -------                                                                  
     currency for all Products within thirty (30) days after the date of the
     invoice.  ACS shall issue an invoice to Xerox and Xerox Affiliated
     Companies for Products promptly after the Products are delivered to Xerox'
     carrier.  Provided, however, ACS shall take no action respecting collection
     of payment, other than utilizing the informal dispute mechanisms provided
     hereunder, unless it fails to receive payment within sixty (60) days after
     the date of its applicable invoice.

4.06 Delivery - All Products shall be delivered FOB ACS' facility in the United
     --------                                                                  
     States.  Unless otherwise agreed in writing, Xerox or Xerox Affiliated
     Companies, as the case may be, shall arrange for transportation and
     insurance during transit from the named delivery point, and in all cases
     Xerox or Xerox Affiliated Companies, as the case may be, shall pay for such
     transportation and insurance.  Xerox or Xerox Affiliated Companies shall
     also be responsible for payment of all customs and other duties and taxes
     (except those taxes calculated or assessed on the income of ACS) together
     with any documentation costs and for obtaining any import licenses that may
     be required in the Territory.

4.07 Forecasts - Xerox shall, on a quarterly basis, submit to ACS a non-binding
     ----------                                                                
     rolling forecast of Xerox and Xerox Affiliated Companies demand for
     Products that are to be delivered within the twelve (12) month period
     immediately succeeding the month in which the forecast is issued.

4.08 Purchase Orders - All Purchases of Products hereunder shall be made only
     ---------------                                                         
     upon the issuance of written purchase orders by Xerox or Xerox Affiliated


 
     Companies.  The purchase orders shall contain requests for specific
     delivery dates for the Products.  Prior to September 30,1996 ACS agrees
     that the maximum lead time for delivery of the Products shall be one
     hundred eighty (180) days from the date of issuance of the respective
     purchase orders unless a longer lead time is requested by Xerox or Xerox
     Affiliated Companies.  Thereafter, the maximum lead time for Products'
     delivery will be one hundred twenty (120) days.  ACS shall provide Xerox on
     a monthly basis written reports reflecting open and rescheduled orders for
     Products and type and amount of Products delivered during the previous 30
     days.  ACS shall in good faith explore the possibility of enabling Xerox or
     Xerox Affiliated Companies to directly link its computer systems to those
     of ACS for Product order entry purposes and if such linkup is acceptable to
     ACS the parties shall work together in good faith to achieve such linkup.

4.09 Confirmation - Within ten (10) days of receipt of the purchase order ACS
     ------------                                                            
     shall accept and confirm in writing purchase orders issued by Xerox or
     Xerox Affiliated Companies hereunder or shall advise Xerox or Xerox
     Affiliated Companies if, for any reason, it determines that it will be
     unable to fulfill such purchase order.  In such event, ACS shall advise
     Xerox or Xerox Affiliated Companies of the quantities of Products it
     expects to supply during the Production Month covered by such purchase
     order, and such quantity shall, unless the parties otherwise agree,
     constitute a revised purchase order quantity for such Production Month.
     All purchases hereunder shall be governed solely by the terms and
     conditions of this Agreement notwithstanding any preprinted terms and
     conditions contained on any purchase orders or acknowledgments thereof
     issued by Xerox or Xerox Affiliated Companies.

4.10 Improved Products - If during the term of this Agreement and any extension
     -----------------                                                         
     thereof, ACS develops improvements, extensions or modifications of the
     Products, ACS shall offer such Products containing such improvements,
     extensions or modifications for sale to Xerox and Xerox Affiliated
     Companies.  If the parties hereto reach an agreement for the sale of such
     new or improved Products, the appropriate Exhibits and other provisions
     hereof will be appropriately amended.  Amendments to this Agreement
     applicable to such Products win not result in a price adjustment for
     Products ordered or delivered prior to the effective date of such
     amendment.  Prices 


 
     for Products added to this Agreement by amendment will be mutually agreed
     to by ACS and Xerox.

4.11 Discontinuance of Manufacturing - ACS may discontinue the manufacture of
     -------------------------------                                         
     any Products hereunder, provided that ACS gives Xerox not less than
     eighteen (18) months prior written notice of such Product discontinuance.
     ACS will, however, fill Xerox and Xerox Affiliated Companies' then current
     open orders for Products.  Provided Xerox and Xerox Affiliated Companies
     requested delivery times are within the normal order-delivery lead time,
     ACS agrees to use all reasonable efforts to honor all Xerox and Xerox
     Affiliated Companies purchase orders for such discontinued Products.

4.12 Exclusivity of Distribution - While any amount of the loans subject to the
     ---------------------------                                               
     Loan Agreement and Promissory Note are outstanding, Xerox and Xerox
     Affiliated Companies will have the exclusive right (inclusive of ACS) to
     distribute the (i) ACS 135 Spot Printer and (ii) cut-sheet ACS Spot
     Printers with rated speeds of between 30 - 200 PPM.  Following the
     repayment in full of such loans, subject to Section 4.13 hereof, Xerox'
     distribution rights with respect to the ACS 135 Spot Printer and cut-sheet
     ACS Printers with rated speeds between 30 - 200 PPM shall be non-exclusive.

4.13 Reserved Government Accounts - During the term of this Agreement, Xerox
     ----------------------------                                           
     shall have the exclusive right (inclusive of ACS) to solicit the sale,
     lease, or rental of Products and service or software support therefor with
     respect to (i) any United States Government General Services Administration
     Schedule contract covering any or all of the Products or service or
     software support therefor and (ii) any state contract covering the sale,
     lease, or rental of any or all of the Products or service of software
     support therefor, where the -express intent of such contract is to give the
     successful offer or a right to do business with any or all agencies or
     instrumentalities of that state on a "sole source" or other statewide
     basis.

                      V.   DOCUMENTATION

5.01 Documentation - ACS shall furnish to Xerox and Xerox Affiliated Companies
     -------------                                                            
     on an ongoing basis during the term hereof, free of charge, all
     Documentation in mutually agreeable, camera-ready electronic-file and hard
     copy formats in the English language, all engineering drawings, theory of


 
     operation documents, service manuals, a Spares list, Products brochures and
     such other materials as the parties mutually agree are reasonably required
     by Xerox or Xerox Affiliated Companies to market and service the Products.
     In the event ACS produces Documentation in languages other then English it
     shall make such non-English documentation available to Xerox as per this
     Section of the Agreement.  ACS grants to Xerox or Xerox Affiliated
     Companies, the right and license to reproduce or use all or any part of
     such Documentation in connection with their sales, marketing and servicing
     of the Products.  Xerox or Xerox Affiliated Companies are further given the
     right to modify any or all parts of the documentation to reflect either
     changes made to the Products or for translation into different languages or
     consistency in style with other documentation.  Additional documentation as
     agreed by the parties may be provided by ACS for a mutually agreed fee.

                         VI.  DELIVERIES

6.01 Transportation And Packaging - All Products will be shipped with commercial
     ----------------------------                                               
     packaging suitable for shipment via land, air or sea, as applicable, in
     standardized containers in accordance with Xerox standards and procedures.
     If requested, ACS agrees to assist Xerox or the forwarder selected by Xerox
     in arranging the most economical transportation from the ACS site from
     which the Products will be shipped.

6.02 Early Delivery - Xerox shall be under no obligation to accept early
     --------------                                                     
     deliveries and reserves the right, at its option and without liability, to
     retain any early delivered Product and hold ACS' invoice until the date it
     would otherwise be due if delivery had been made on the delivery date set
     forth in the purchase order.

6.03 Rescheduling - Xerox may request changes to its purchase orders for
     ------------                                                       
     Products.  Xerox may, by written notice to ACS, not less than thirty (30)
     days prior to scheduled delivery change orders for Products in accordance
     with the following matrix:

     Percentage Reschedule of Existing Orders for Products


 
      Allowable Quantity

      Days Prior to Delivery                     Percentage Reschedule
      -----------------------                    --------------------- 

               [*]                                        [*]
               [*]                                        [*]
               [*]                                        [*]
          
Periods designated as No Change in the matrix above for Products shall be
considered a period in which no alterations, modifications or cancellations can
be made to the quantity on order or new Orders placed unless mutually agreed to
in writing by ACS and Xerox.

6.04 Configuration Mix and Timing/Increasing Size of Orders - Xerox may request
     ------------------------------------------------------                    
     that ACS change the configuration mix and/or size of orders, and ACS
     agrees to make reasonable efforts to change the configuration mix and
     timing within the Production Month of Products then on order and the number
     of units to be delivered pursuant to an order.  Subject to Paragraph 6.03
     above, ACS agrees to make reasonable efforts to accommodate such
     request(s).

6.05 Cancellation Without Cause - Xerox or Xerox Affiliated Companies may cancel
     --------------------------                                                 
     purchase orders or portions thereof upon written notice to ACS at any time.
     ACS shall take all steps to mitigate any loss to Xerox or Xerox Affiliated
     Companies arising from such cancellation and in no event shall Xerox or
     Xerox Affiliated Companies' obligations to ACS as a consequence of
     cancellation exceed the purchase price of the Products ordered.  If ACS
     claims cancellation cost resulting from Xerox or Xerox Affiliated
     Companies' Purchase Order cancellation and requests Xerox or Xerox
     Affiliated Companies to pay such cancellation cost, ACS shall have the
     burden of proof to substantiate the cancellation cost amount claimed.  If
     requested by Xerox or Xerox Affiliated Companies, ACS shall agree to an
     independent certified accountant (or other independent party appointed
     jointly by both Parties) review within a reasonable time after cancellation
     of ACS' business records for the purpose of validating ACS' cancellation
     claim.  Provided, however, that Xerox/Xerox Affiliated Companies may not

[*]  OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
     cancel without cause orders for Products any later than thirty (30) days
     prior to the scheduled delivery date.  Any payments made by Xerox or Xerox
     Affiliated Companies on account of an order which is later canceled without
     cause shall be credited against any cancellation charges payable hereunder.

6.06 Cancellation For Cause - In the event ACS is, except for reasons beyond its
     ------------------------                                                   
     control or as would be otherwise excused pursuant to this Agreement, [*] or
     more working days delinquent in meeting the agreed upon delivery schedule
     of any Products, Xerox or the ordering Xerox Affiliated Company, as the
     case may be, may, by written notice to ACS, cancel without liability such
     delinquent Product. In addition, if ACS is unable, for any reason
     whatsoever, except reasons beyond its control or as would be otherwise
     excused pursuant to this Agreement, to deliver Products in a timely fashion
     ACS shall, as to such orders, grant Xerox or the affected Xerox Affiliated
     Companies, as the case may be, a price discount for affected Products as
     follows:

               Days Late                              Price Discount
               ---------                              -------------- 
                 [*]                                       [*]
                 [*]                                       [*]
                 [*]                                       [*]

6.07 Disposition Of Canceled Product - In the event Xerox or Xerox Affiliated
     -------------------------------                                         
     Companies cancel any purchase order or portion thereof pursuant to 6.05 or
     6.06 hereof, ACS may dispose of the canceled Products, after removing all
     identifying marks which identify the Products as Xerox and Xerox Affiliated
     Companies Products.

6.08 Mixing Product Deliveries with Deliveries of other Products - If
     -----------------------------------------------------------     
     commercially feasible and provided that ACS is not negatively impacted in
     any way, Products may be shipped with products not subject to this
     Agreement if Xerox and Xerox Affiliated Companies deem doing so a benefit
     to them.

6.09 Emergency Spares Orders  ACS will put into place as soon as is reasonably
     -----------------------                                                  
     commercially practicable a process to fill emergency Spares orders when 

[*]  OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
     not available through Xerox' internal distribution system. ACS may make
     such emergency shipments subject to reasonable incremental charges.

6.1  Inspection/Acceptance - Xerox and Xerox Affiliated Companies may inspect 
     ---------------------                                           
     any shipment of Products and reject such shipment, in whole or in part, for
     failure to meet the Specifications or otherwise comply with this Agreement.
     At the option of Xerox, such non-conforming Products may be returned to ACS
     at ACS' expense for prompt replacement or repair and shipment thereof to
     Xerox, at ACS' expense. The choice of repair or replacement shall be with
     ACS.

6.11 Priority Deliveries - While any amounts of the loans made by Xerox to ACS
     -------------------                                                      
     under the Loan Agreement and Promissory Note remain outstanding, deliveries
     of Products to Xerox shall take priority over deliveries of ACS products,
     including the Products, to any other person.

                     VII.   PRODUCT CHANGES

7.01 Product Changes - The Products delivered hereunder shall incorporate the
     ---------------                                                         
     latest improvements implemented by ACS and approved by Xerox in writing ACS
     shall inform Xerox, in writing, of the following in requesting such
     approval:

     The date of the proposed incorporation of such changes into the Products
     and description of changes affecting the:

(a) form (external appearance of finished products or piece parts; or external
    dimensions, dimension tolerances or shape),

(b) fit (provisions for mounting; changes to mounting holes, holes for mounting
    shipping restraints, or holes or fittings for mounting accessory or optional
    features; changes in the dimension or shape of internal spaces available for
    customer use; or changes affecting the interchangeability of parts,
    electrical or other power and environmental requirements),

(c) function (changes in the Product specification, Product performance, or any
    changes affecting the Product's reliability); or


 
(d) compatibility of the Products (changes to or which affect Products
    operation, internal logic or tinting, part number or configuration dash
    number of parts which can be replaced in the field, the interchangeability
    of Spares, service documentation which might affect a customer's
    applications for the Products).

Xerox shall respond within thirty (30) days to each request for Product changes
received from ACS indicating its acceptance or rejection of such change.

7.02 Implementation - Any changes made by ACS and accepted by Xerox pursuant to
     --------------                                                            
     7.01 hereof shall be implemented in accordance with the schedule indicated
     by ACS in the written notification of change.  Such changes shall be
     incorporated into Products shipped pursuant to purchase orders received by
     ACS after Xerox approved such changes.  The serial number of the first such
     changed Product shall be identified to Xerox and ACS agrees that all
     Products with serial numbers greater than such serial number shall
     incorporate such changes.

7.03 Cost Effects Of Changes - In the event that any change in the form, fit or
          ------------------                                                   
     function (as collectively defined in 7.01) of, or Specifications for, any
     Products which is necessitated by such mutually agreed change results in a
     significant increase or decrease in the cost of such Products, or in the
     length of time required for the manufacture or delivery thereof, equitable
     adjustment to the price of such Products or agreed upon shipping date or
     both shall be made by the parties pursuant to good faith negotiations.

7.04 Obsolete Inventory - In the event of changes to Products, ACS shall
     ------------------                                                 
     repurchase from Xerox or Xerox Affiliated Companies, as applicable, for a
     sum equal to the original purchase price paid therefor by Xerox or Xerox
     Affiliated Companies, as applicable, all Spares and Consumables which are
     in Xerox' and Xerox Affiliated Companies inventory and which have become
     obsolete as a result of any change to Products, other than a Products'
     change requested by Xerox.

7.05 Effect of Rejection - In the event Xerox rejects a proposed change to
     -------------------                                                  
     Products, ACS shall remain obligated to deliver Products conforming to the
     Specifications.


 
7.06 Interface Specification - Unless otherwise agreed by the parties in
     -----------------------                                            
     writing, ACS shall not knowingly make any changes to the Products which
     obsoletes the interface specification applicable to the then current
     version of the Products and the then current version of the Xerox 4890 and
     4635 Printers, the Docutech, or any other Xerox product which Xerox has
     notified ACS in writing are being used by end-user customers in connection
     with the Products.

             VIII.   SPARE PARTS AND CONSUMABLES

8.01 Spares Listing - ACS and Xerox shall mutually agree on a list of spares
     --------------                                                         
     which shall be designated as the recommended Spares. . Such list shall be
     set forth in Exhibit C hereto.  Exhibit C will be completed by no later
     than March 15, 1996.  Prices of the Spares shall be established so that the
     total prices for all the Spares required to completely manufacture one
     printer shall not exceed one hundred thirty percent (130%) of the price for
     the applicable ACS printer listed in Exhibit C hereto.

8.02 Spares and Consumables
     ----------------------

     (a) ACS shall make available to Xerox and Xerox Affiliated Companies, for a
         period of [*] from the date the last unit of the relevant
         printer model is shipped to Xerox or Xerox Affiliated Companies
         hereunder Spares and Consumables in sufficient quantities for Xerox and
         Xerox Affiliated Companies to meet the service and Consumables needs of
         its customers for such printer(s).  Xerox and Xerox Affiliated
         Companies shall place its final purchase orders for such Spares and
         Consumables at least six (6) months prior to the expiration of such
         applicable period.

  (b) Xerox agrees to purchase during the initial term of this Agreement all of
its requirements for Consumables from ACS provided Consumables price to Xerox is
no higher than the maximum prices for Consumables set forth in Exhibit C hereto
or twenty (20% ) more than the lowest price offered Xerox for a product
competitive to the Consumables, whichever is lower.  Provided however, ACS shall
have up to a thirty(30) day period to meet the competitive price offered Xerox.

[*] OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
8.03 Equivalent Spares - Xerox agrees to accept equivalent and/or
     -----------------                                           
     interchangeable (form, fit and function compatible as defined in Section
     7.01 hereof) Spares and Consumables during the [*] period defined in
     Section 8.02(a) hereof. The determination as to whether Spares and
     Consumables are equivalent and/or interchangeable shall be made by Xerox.

         IX.   WARRANTIES AND MANDATORY RETROFITS

9.01 Express Warranties - ACS warrants to Xerox or Xerox Affiliated Companies:
     ------------------                                                       

     (a) that it has good and marketable title to all Products delivered to
         Xerox or Xerox Affiliated Companies hereunder and that all units of
         Products shall be free and clear of all hens, encumbrances, security
         interests or other claims (except those arising under the Security
         Agreement), and

     (a)  that all Products delivered to Xerox or Xerox Affiliated Companies
          hereunder shall be free from defects in material and workmanship for
          a period of ninety (90) days after installation.

     (c) that all Products conform to the Specifications.

9.02 Warranty Obligations - With respect to any Products found to be defective,
     --------------------                                                      
     ACS shall, without charge (including freight) deliver to Xerox or the
     applicable Xerox Affiliated Companies, as the case may be, such repair
     parts as are necessary for the repair of the Products within thirty (30)
     days from the time of Xerox or the applicable Xerox Affiliated Companies,
     as the case may be, notification to ACS of defective Products.  Xerox/Xerox
     Affiliated Companies obligation shall be to repair such defective Products
     and maintain adequate records regarding the causes (if known) and dates of
     such failures and provide such information to ACS at ACS' request.
     Xerox/Xerox Affiliated Companies shall, upon the request of ACS, return to
     ACS all defective parts removed from Products under the above warranties
     and return the same, all at ACS' expense, to ACS, provided that such
     request shall be made within fifteen (15) days of the notification by
     Xerox/Xerox Affiliated Companies to ACS of such defective Products.  This
     shall constitute ACS' sole obligation and Xerox/Xerox Affiliated 

[*] OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
     Companies sole remedy pursuant to the warranties set forth in Section 9.01
     of this Agreement (but shall not affect additional warranties of ACS set
     forth elsewhere in this Agreement).

9.03 Replaced Products and Parts - AR Products replaced by ACS under this
     ---------------------                                               
     Article become the property of ACS provided ACS requests the return of same
     to ACS and pays all costs associated with such return.

9.04 Systemic Defects - Notwithstanding the warranty requirements and conditions
     ----------------                                                           
     of Section 9.01 hereof, ACS will undertake without undue delay to remedy
     any Systemic Defect in all affected Products in inventory or in the field,
     by delivering to Xerox/Xerox Affiliated Companies replacement, if
     requested, of Spares or consumables if the Systemic Defect applies thereto,
     or repair kit if the Systemic Defect applies to the printer, and in either
     15 event reimburse Xerox/Xerox Affiliated Companies for actual parts
     replacement costs incurred by them plus any associated labor.  ACS shall
     not be required to cure any Systemic Defect for any Products which have
     been subjected to accident, negligence, misuse, alteration, modification,
     tampering or causes other than ordinary use.  The foregoing obligations of
     the parties shall apply during the term of this Agreement.

9.05 Mandatory Retrofits - ACS will, as necessary from time to time, provide to
     -------------------                                                       
     Xerox/Xerox Affiliated Companies Mandatory Retrofit kits for the Products
     free of charge and Xerox/Xerox Affiliated Companies agree to install such
     retrofits on the Products (including those Products already delivered to
     Xerox/Xerox Affiliated Companies customers) within a reasonable time.  ACS
     will provide Xerox/Xerox Affiliated Companies with its good faith estimates
     of the time it should take for a mandatory retrofit to be completed.  The
     cost of such installation will be borne by Xerox/Xerox Affiliated
     Companies.  In the event Xerox/Xerox Affiliated Companies fail to install
     any such Mandatory Retrofit as herein provided, Xerox/Xerox Affiliated
     Companies agree to fully and completely indemnify, defend and hold ACS
     harmless from and against any claims, damages or liabilities asserted by
     any third party alleging personal injury or property damage which injury or
     damage would have been avoided, in whole or in part, by the prompt
     installation of the Mandatory Retrofit.


 
9.06   WARRANTY DISCLAIMER - THE EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE,
       -------------------                                                     
       AND THE OBLIGATIONS AND LIABILITIES OF ACS HEREUNDER, ARE IN LIEU OF ALL
       OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
       MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

9.07   WARRANTY LIMITATIONS - THE WARRANTIES SET FORTH IN THIS ARTICLE IX ARE
       --------------------                                                  
       EXPRESSLY CONDITIONED UPON THE PROPER USE OF THE PRODUCTS FOR THEIR
       INTENDED PURPOSES, AND SHALL NOT APPLY TO ANY PRODUCTS WHICH HAVE BEEN
       SUBJECTED TO MISUSE, ACCIDENT, OR ALTERATION OR MODIFICATION (EXCEPT AS
       SPECIFICALLY AUTHORIZED BY ACS).

                                  X. TRAINING

10.01  ACS Training of Xerox/Xerox Affiliated Companies - During the Term of
       ------------------------------------------------                     
       this Agreement, ACS shall provide Xerox/Xerox Affiliated Companies, at no
       additional charge, service training consisting of two (2) classes each
       attended by up to five (5) Xerox employees. Such training will be
       designed to have Xerox/Xerox Affiliated Companies service trainees
       achieve industry standard knowledge and competency respecting the
       servicing of the Products. ACS shall make available additional training
       at mutually agreeable charges.

10.02  Technical Support - ACS shall provide Xerox/Xerox Affiliated Companies,
       -----------------                                                      
       at a mutually agreeable price, telephone technical support respecting the
       Products and service and software support therefor for a period of at
       least seven (7) years from the date of Xerox/Xerox Affiliated Companies
       last install of an ACS 135 Spot Printer or other printers purchased from
       ACS hereunder, as applicable. If a technical problem cannot be resolved
       by telephone technical support, ACS shall provide on site technical
       support to Xerox/Xerox Affiliated Companies at the per them rate as
       specified in Exhibit C hereto.


 
                           XI.  TERM AND TERMINATION

11.01  Term - This Agreement shall be effective on the Effective Date and
       shall continue for a period of thirty-six (36) months ("Initial Term"),
       and shall be automatically renewed for successive twelve (12) month terms
       unless either party gives at least six (6) months prior written notice to
       the other that the notifying party does not wish this Agreement to be
       renewed.

11.02 Termination for Cause
      ---------------------

      (a) Either party may terminate this Agreement:

          i.  immediately upon written notice if the other party materially
              breaches this Agreement and such breach is not curable or, thirty
              (30) days after written notice of breach if the other party
              materially breaches this Agreement and such breach is curable but
              is not cured within such 30 day notice period (or such other cure
              period as is provided under this Agreement) or,



         ii.  immediately upon written notice if the other party is subject to
              a force majeure condition for more than ninety (90) consecutive
              days and during such time period does not arrange for alternative,
              comparable performance, or

        iii.  if a petition for relief under the applicable bankruptcy
              regulations is filed by or against the other party, or the other
              party makes an assignment for the benefit of creditors, or a
              receiver is appointed, or a purchase agreement is executed for all
              or substantially all of the other party's assets or of the shares
              in such other party and such petition, assignment or agreement is
              not dismissed or vacated within thirty (30) days. To the extent
              applicable law prevents the non breaching party from terminating
              this Agreement as described herein, then the parties shall have
              only those rights and remedies permitted by applicable law.
              Termination rights for the specified causes shall exist for a
              period of ninety (90) days after the occurrence of each such
              cause.


 
(b) Xerox may terminate this Agreement immediately upon written notice if any of
    the Exhibits which this Agreement provides will be completed after the
    Effective Date are not completed by the date set forth herein for
    completion.

11.03  Manufacturing License - In addition to any other rights arising under
       ---------------------                                                
       this Agreement or under applicable law which Xerox may have due to ACS'
       material breach of this Agreement, Xerox may elect to manufacture or have
       the Products manufactured and in such event ACS hereby grants Xerox and
       Xerox Affiliated Companies the non-exclusive world-wide irrevocable right
       to manufacture or have the Products manufactured and to use and sub-
       license, in connection with manufacturing the Products, any ACS
       intellectual property, including know-how and related Documentation,
       which is necessary for the manufacture of the Products. In addition, ACS
       shall assign to Xerox all agreements with ACS' vendors to the extent such
       agreements are assignable by ACS and ACS shall give Xerox all reasonable
       cooperation respecting Xerox being assigned the rest of ACS' agreements
       with its vendors. While any amount of the principle and interest subject
       to the Loan Agreement and Promissory Note are outstanding, the foregoing
       license shall be royalty-free. After the aforementioned principle and
       interest is completely repaid the foregoing license shall be subject to a
       royalty of five percent (5%) of then applicable ACS 135 Spot Printer
       price as set forth in Exhibit C. The fact that Xerox exercises the
       manufacturing rights granted to it under this subparagraph shall serve to
       mitigate Xerox' damages on account of ACS' breach of this Agreement to
       the extent permitted by applicable law.

11.04  Effect of Breach of Loan Agreement by ACS, Effect of Breach of this
       -------------------------------------------------------------------
       Agreement upon Loan Agreement - A breach by ACS of the Loan Agreement and
       -----------------------------                                            
       Promissory Note or the Security Agreement shall be deemed a material,
       breach of this Agreement by ACS if there remains outstanding and unpaid
       more than one-third of the original principal payable by ACS under the
       Loan Agreement and Promissory Note. A breach by ACS of this Agreement
       respecting the critical milestones identified in Exhibit B hereto shall
       be deemed a material, breach of the Loan Agreement and Promissory Note
       and the Security Agreement.


 
11.05  Termination Effect - Upon termination or expiration of this Agreement for
       ------------------                                                       
       any reason, each party shall immediately return to the other all
       proprietary, confidential or private data and all copies thereof, if so
       requested by the other party. Notwithstanding the above, Xerox/Xerox
       Affiliated Companies will retain the necessary rights, including the
       right to purchase from ACS the quantities of Spares, Consumables, and
       Documentation at commercially reasonable prices, to continue servicing
       its Products customer base.

XII.     INDEPENDENT PRODUCT DEVELOPMENT AND RELATED
                            RIGHTS

12.01  Except as otherwise provided herein, this Agreement does not and shall
       not be construed to limit the rights of either party to develop, market,
       sell lease, service or manufacture competing products.

                                XIII.  NOTICES

13.01  Any notice which may be or is required to be given under this Agreement
       shall be in writing. AR written notices shall be sent by registered or
       certified airmail, postage prepaid, return receipt requested. To the
       extent this Agreement requires notice to be given to Xerox or ACS, such
       notices shall be denied to have been given when received, addressed in
       the manner indicated below or at such other addresses as the parties may
       from time to time notify each other of:

Notices regarding 4635/4890 technical information:

XEROX:                                   ACS:
[*]                                      [*]
4800 Family Technical Program Manager    Xerox Technical Program Manager
101 Continental Blvd.                    Accent Color Sciences, Inc.
El Segundo, CA 90245                     Riverview Square
                                         99 East River Drive
                                         East Hartford, CT 06108

Notices regarding Xerox Docutech technical information:


[*] OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
XEROX:                              ACS:
[*]                                 [*]
New Business Development            Xerox Technical Program Manager
Fairport, N.Y. 14450                Accent Color Sciences
                                    Riverview Square
                                    99 East River Drive
                                    East Hartford, CT 06108

Notices regarding daily administrative operations:

XEROX:                                    ACS:
[*]                                       [*]
Manager, Color Printing Product Business  Team Director of Marketing
101 Continental Blvd.                     Riverview Square
El Segundo, CA 90245                      99 East River Drive
                                          East Hartford, CT 06108

Notices regarding contract modifications and contract interpretation and all
other matters not enumerated above:

XEROX:                                          ACS:
[*]                                             [*]
Manager, Color Printing Product Business Team   Chief Financial Officer
101 Continental Blvd.                           Accent Color Sciences, Inc.
El Segundo, CA 90245                            Riverview Square
                                                99 East River Drive
                                                East Hartford, CT 06108

                                XIV.  HEADINGS

14.01  The headings and titles of the Articles and Sections of this Agreement
       are inserted for convenience only and shall not affect the construction
       or interpretation of any provision.


                                XV. ASSIGNMENT

[*]  OMITTED INFORMATION SUBJECT TO PENDING CONFIDENTIAL TREATMENT REQUEST


 
15.01  Neither party shall assign this Agreement to any other party without the
       prior written consent of the other party hereto, which consent shall not
       be unreasonably withheld.  Notwithstanding the foregoing, Xerox may
       perform any of its obligations, by or through any Xerox/Xerox Affiliated
       Companies.

                              XVI.   SEVERABILITY

16.01  If any provision of this Agreement is held invalid by any law, rule,
       order or regulation of any government, or by the final determination of a
       court of last resort, such invalidity shall not affect (a) the other
       provisions of this Agreement, (b) the application of such provision to
       any other circumstance other than that with respect to which this
       Agreement was found to be unenforceable, or (c) the validity or
       enforceability of this Agreement as a whole.

                                XVII.  SURVIVAL

17.01  Unless this Agreement expressly provides otherwise or by its nature a
       provision cannot survive this Agreement, the provisions of this Agreement
       shall survive the expiration or any termination of this Agreement.

                         XVIII.  CONTROLLING LANGUAGE

18.01 This Agreement is in English only, which language shall be controlling in
      all respects. All documents exchanged under this Agreement shall be in
      English only.

                            XIX.   INDEMNIFICATION

19.01 (a) ACS Indemnity - ACS agrees, at its expense, to defend Xerox and Xerox
          -------------                                                        
      Affiliated Companies from, and pay any judgment for, any suit, claim or
      proceeding (hereinafter "Claim") against Xerox or Xerox Affiliated
      Companies alleging that any Products either (i) violates any applicable
      safety or regulatory standard in effect as of the date of Products
      delivery, or (fi) has caused injury or damage to the person or property
      of another arising from defects in materials, design or construction of
      such Products, unless based upon the negligent conduct of Xerox, Xerox
      Affiliated Companies, or 


 
      any of their respective agents, representatives or employees, or (iii)
      infringes any patents, utility models, copyrights, trade secrets, or any
      other intellectual property rights of a third party issued in any country,
      provided that ACS is promptly notified in writing of any Claim, given all
      reasonable assistance required, and permitted to direct the defense. ACS
      shall have no liability for settlements or costs incurred without its
      consent.

(b)   Xerox' Indemnity Xerox agrees, at its expense, to defend ACS from, and Pay
      ----------------                                                          
any judgment for, any suit, claim or proceeding (hereafter "Claim") against
Xerox alleging injury or damage to the person or property of another if such
claim arose due to the modification of Documentation by, or from the acts or
omissions of Xerox, Xerox Affiliated Companies or any of their respective
agents, representatives or employees with respect to the marketing of the
Products, provided that Xerox is promptly notified of any Claim, given all
reasonable assistance required, and permitted to direct the defense. Xerox shall
have no liability for settlement or costs incurred without its consent-

19.02 Injunction - In the event that Xerox's or Xerox Affiliated Companies' use
      ----------                                                               
      or marketing of any of the Products is enjoined, ACS shall, at its option
      and expense, either substitute fully equivalent Products not subject to
      such injunction, modify the Products so that they are no longer subject to
      such injunction, or obtain for Xerox and Xerox Affiliated Companies and
      their respective customers the right to continue using the enjoined
      Products. If none of the foregoing is feasible, and said injunction is in
      effect for more than three (3) months, ACS will take back the enjoined
      Products from Xerox and its customers and refund to Xerox the purchase
      price paid therefor reduced by an amount which equals one-sixtieth of the
      purchase price for each month which has elapsed since the Products were
      delivered to Xerox /Xerox Affiliated Companies to the time such injunction
      became effective, plus arrange at ACS' expense to have the Products
      returned to ACS.

19.03 Limitations - ACS shall not be liable for any Claim arising solely out of
      -----------                                                              
      or resulting solely from:  (i) its compliance with or adoption of any
      specification, design, feature, mark or symbol, component parts or printed
      materials or other information or materials required by Xerox or Xerox
      Affiliated Companies for incorporation or use with any Products, or (ii)
      any 


 
      modification or reworking made by ACS to any Products upon instruction of
      Xerox or Xerox Affiliated Companies.

19.04 Insurance - ACS shall procure and maintain with an insurer acceptable to
      ---------                                                               
      Xerox insurance coverage for both bodily injury and property damage caused
      by or arising out of the manufacture, delivery, use, handling, or storage
      of the Products in amounts of at least One Million Dollars ($1,000,000)
      per occurrence and Two Million Dollars ($2,000,000) in the aggregate.

                XX.   CONFIDENTIAL AND PROPRIETARY INFORMATION

20.0 In the event Xerox and ACS deem it necessary for one party to disclose to
     the other confidential information the parties' respective rights and
     obligations with respect to the disclosure and use of such shall be
     governed by the Confidential Disclosure Agreement with an effective date of
     February, 1996.

                         XXI.  LIMITATION OF LIABILITY

21.01 (a)DISCLAIMER OF OTHER DAMAGES -NOTWITHSTANDING ANY OTHER PROVISION
CONTAINED HEREIN TO THE CONTRARY EXCEPT SECTION 19.01 OF THIS AGREEMENT WHICH
SHALL BE GOVERNED BY ITS TERMS, XEROX, XEROX AFFILIATED COMPANIES AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, OR AGENTS SHALL HAVE NO LIABILITY FOR
DAMAGES OTHER THAN DIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO PUNITIVE OR
EXEMPLARY DAMAGES, HOWEVER DENOMINATED, AND INDIRECT, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES, WHETHER ARISING IN CONTRACT, IN TORT (INCLUDING WITHOUT
LIMITATION NEGLIGENCE), OR ANY OTHER THEORY EVEN IF INFORMED OF THE POSSIBILITY
OF SUCH DAMAGES AND EVEN IF AS A RESULT ANY REMEDY ARISING HEREUNDER OR UNDER
APPLICABLE LAW FAILS OF ITS ESSENTIAL PURPOSE.

                            XXII.   EXPORT CONTROL


 
22.01  ACS and Xerox shall comply with all applicable laws and regulations
       respecting the export, directly or indirectly, of any technical data
       acquired from the other under this Agreement or any software utilizing
       any such data to any country the laws or regulations of which at the time
       of export, require an export license or other government approval
       including but not limited to first obtaining such license or approval.

                            XXIII.   FORCE MAJEURE

23.01  Subject to a party's right to terminate this Agreement under Section
       11.02 (b), neither ACS nor Xerox shall be liable to the other for its
       failure to perform any of its obligations hereunder or under any purchase
       order or acknowledgment thereof during any period in which such
       performance is delayed by unforeseeable circumstances beyond its
       reasonable control.

                                 XXIV.  WAIVER

24.01  Failure or delay of either party to exercise any right or remedy under
       this Agreement or to require strict performance by the other party of any
       provision of this Agreement shall not be construed to be a waiver of any
       such right or remedy or any other right or remedy hereunder. All of the
       rights of either party under this Agreement shall be cumulative and may
       be exercised separately or concurrently.

                           XXV.   ETHICAL STANDARDS

25.01  ACS agrees that, with respect to its role as supplier to Xerox including
       any interaction with any employee of Xerox, ACS shall not: (1) give or
       offer to give any gift or benefit to any such employee of Xerox, (2)
       solicit or accept any information, data, services, equipment, or
       commitment from such employee unless same is (i) required under a
       contract between Xerox and ACS, or (ii) made pursuant to a written
       disclosure Agreement between Xerox and ACS, or (iii) specifically
       authorized in writing by Xerox' management, (3) solicit or accept
       favoritism from said employee, and (4) enter into any outside business
       relationship with said employee without full disclosure to, and prior
       approval of, the appropriate management of Xerox. As used herein:
       "employee" includes members of the employee's immediate family and
       household, plus any other person who is attempting 


 
       to benefit from his or her relationship to the employee. "ACS" includes
       all employees and agents of ACS. "Gift or benefit" includes money, goods,
       services, discounts, favors and the like in any form, but excluding
       employment or offers of employment and low value advertising items such
       as pens, pencils, and calendars.

                              XXVI.   ARBITRATION

26.01 The parties shall attempt in good faith to resolve any dispute arising out
      of or relating to this Agreement promptly by negotiations, as follows. Any
      party may give the other party written notice of any dispute not resolved
      in the normal course of business. Executives of both parties at levels one
      step above the project personnel who have previously been involved in the
      dispute shall meet at a mutually acceptable time and place within 10 days
      after delivery of such notice, and thereafter as often as they reasonably
      deem necessary, to exchange relevant information and to attempt to resolve
      the dispute. All negotiations pursuant to this clause are confidential and
      shall be treated as compromise and settlement negotiations for purposes of
      the Federal Rules of Evidence and state rules of evidence. Each party
      shall bear its own expenses.

If the parties are unable to resolve the dispute by negotiations as set forth
above and at least 60 days have elapsed since notice was given, such dispute
shall be settled by arbitration, conducted on a confidential basis, under the
then current Commercial Arbitration Rules of the American Arbitration
Association ("the Association") strictly in accordance with the terms of this
Agreement and the substantive law of the State of New York.  The arbitration
shall be held at a mutually agreeable location in Stamford, Connecticut and
conducted by one arbitrator chosen from a list of attorneys who are members of
the Association's commercial arbitration panel and are knowledgeable about the
semiconductor and business equipment industries.  If the parties cannot
promptly, within thirty (30) days, agree on the selection of the arbitrator, the
arbitrator will be chosen pursuant to Rules 13 of the Commercial Arbitration
Rules of the Association.  The costs of the arbitration, including the fees to
be paid to the arbitrator, shall be shared equally by the parties to the
dispute.  The parties to the dispute shall be limited to taking no more than
three (3) depositions each.  The length of each deposition shall be limited to
one (1) day.  No interrogatories shall be permitted.  The arbitration shall be
completed within six (6) months from the date of the selection 


 
of the arbitrator. The scope of document production shall be governed by the
commercial Arbitration Rules of the Association and the decision of the
arbitrator with respect thereto. The Judgment upon the award rendered by the
arbitrator may be entered and enforced in any court of competent jurisdiction.
Neither party shall be precluded hereby from seeking provisional remedies in the
courts of any jurisdiction including, but not limited to, temporary restraining
orders and preliminary injunctions, to protect its rights and interest, but such
shall not be sought as a means to avoid or stay arbitration. The arbitrator is
not empowered to award any consequential, incidental, punitive, or exemplary
damages. The parties acknowledge that they have voluntarily agreed to arbitrate
their disputes in accordance with the foregoing and each party hereby
irrevocably waives any damages in excess of compensatory damages.

                             XXVII.  NONPUBLICITY

27.1 Without the prior written consent of the other party (which shall not be
  unreasonably withheld) neither party shall (a) make any news release, public
  announcement, denial or confirmation of this Agreement or its subject matter,
  or (b) advertise or publish any facts relating to this Agreement, unless
  otherwise required to do so by law.

                           XXVIII.   CONTROLLING LAW

28.01  This Agreement shall be governed by and construed in an respects in
       accordance with the laws and regulation of the State of New York, U.S.A.
       The parties specifically agree that the 1980 United Nations Convention on
       Contracts for the International Sale of Goods, as such may be amended
       from time to time, shall not apply to this Agreement.

28.02  ACS represents and warrants compliance with all Federal, State and local
       laws, ordinances and regulations applicable to this Agreement and the
       performance of Services or development work here under including, but not
       limited to: (a) applicable requirements of Sections 6, 7 and 12 of the
       Fair Labor Standards Act, as amended, and applicable regulations and
       orders of the Administrator of the Wage and Hour Division issued under
       Section 14 thereof, (b) the Toxic Substances Control Act including the
       requirement that every chemical substance delivered appear on the fist of
       chemical substances as compiled by the Administrator, Environmental


 
       Protection Agency or have been submitted by ACS for inclusion on such
       list, (c) Executive Order 11246 including promptly supplying Xerox with
       all certifications required thereunder upon request, and (d) the
       applicable requirements of 38 U.S.C. 2012 of the Vietnam Era Veterans
       Readjustment Assistance Act of 1974, Section 503 of the Rehabilitation
       Act of 1973, and the Americans with Disabilities Act of 1990. To the
       extent applicable, ACS shall comply with 15 U.S.C.A. Sec. 637(d) (3) (48
       CFR 52.219-8), "Utilization of Small Business Concerns and Small
       Disadvantaged Business Concerns" for all contracts exceeding $10,000 and,
       in contracts exceeding $500,000, agrees to adopt a plan similar to that
       required under 15 U.S.C.A. Sec. 637 (d) (4) or (5) (48 CFR 52.219-9,
       "Small Business and Small Disadvantaged Business Subcontracting Plan,"
       hereby expressly incorporated by reference. ACS shall accurately label,
       consistent with the requirements of Section 611 of the Clean Air Act, as
       amended, and all regulations promulgated pursuant thereto, any container
       of a controlled substance and any product manufactured with or containing
       a controlled substance that is supplied to Xerox. In addition, ACS hereby
       confirms that it is in compliance with au applicable environmental,
       health and safety regulations, and reiterates its commitment to provide
       products and/or services which are safe for its customers and the
       environment and which contain recycled materials where appropriate and
       when authorized by Xerox.

                          XXIX.  REMEDIES CUMULATIVE

29.00  Except as otherwise set forth herein, any rights of cancellation or
       termination, or remedies prescribed in this Agreement are cumulative and
       are not intended to be exclusive of any other remedy of which the injured
       party may be entitled to herein or at law or in equity, including but not
       limited to the remedy of specific performance.

            XXX.     PREREQUISITE LICENSES/THIRD PARTY 
                                 ENCUMBRANCES

30.01  The development activities or other rights granted or which may be
       granted by ACS to Xerox or Xerox Affiliated Companies may require that
       ACS obtain certain prerequisite license(s) from third party licensor(s)
       or


 
       may be subject to third party encumbrances other than prerequisite
       license(s) (e.g., license limitations or payment obligations). All such
       currently known requirements/encumbrances will be communicated by ACS
       promptly to Xerox but in any event prior to the final acceptance by Xerox
       of an affected ACS deliverable. The Parties will attempt to minimize,
       where possible, the necessity for such prerequisite licenses or the use
       of deliverables subject to such third party encumbrances. However, where
       such prerequisite licenses are necessary ACS at its cost will arrange for
       Xerox and Xerox Affiliated Companies to obtain a license from the
       applicable third party licensor prior to Xerox receiving the affected
       deliverable. Upon request, ACS will provide written assurance to Xerox of
       the existence of such license.

                              XXXI.  INTEGRATION

31.01 This Agreement constitutes the entire agreement of the parties as to the
      subject matter hereof and supersedes any and all prior oral or written
      understandings and agreements as to such subject matter, including any
      preprinted terms and conditions contained in any purchase orders and
      acknowledgments issued hereunder.

             XXXII. PRE-EXISTING TECHNOLOGY/INTELLECTUAL PROPERTY

32.01  Unless otherwise agreed in writing, nothing herein shall be deemed to
       transfer any ownership of any technology or intellectual property, or
       other things, tangible or intangible, created by a party, or acquired by
       a party from a third party, outside the scope or term of this Agreement.

                     XXXIII.  RELATIONSHIP OF THE PARTIES

33.01 (a)  It is the intent of the parties that during the term of this
      Agreement, ACS shall be an independent contractor, and nothing set forth
      herein shall be deemed or construed to render the parties joint ventures,
      partners or employer and employee. Neither party is authorized to make any
      commitment or representation on the other's behalf.


 
      (b)  During the term of this Agreement, if the term "partnership",
      "partner" or "development partner" or the like is used to describe the
      parties' relationship, Xerox and ACS agree to make it clear to third
      parties that these terms refer only to the spirit of cooperation between
      them and neither describe, nor expressly or implied create, the legal
      status of partners or joint ventures.

IN WITNESS WHEREOF, authorized representatives of the parties have affixed their
signatures as of the Effective Date.

XEROX CORPORATION                   ACCENT COLOR SCIENCES, 
INC.

By:                                 By:                             
    ----------------------------        -------------------------------
    Name                                Name

    ----------------------------        -------------------------------
    Title                               Title

Date:                               Date:                           
      --------------------------          -----------------------------


 
CUSTOMIZED COLOR 1996 DELIVERABLES--EXHIBIT "A", PAGE 1
Revision 4 - 2/15/96, 1:09 PM
S. Sweeney/S. Palace/S. Baumann





A B C CC PRODUCT DELIVERABLE 5/96-6/96 MINIMUM 7/96-8/96 MINIMUM 9/96 MINIMUM REQ. REF. BO #1-6 ACCEPT. BO #7-10 ACCEPT B1 ACCEPT. PARA. NO. CRITERIA CRITERIA LEVEL CRITERIA 1.0 PAPER SIZES same as 4635 same as 4635 same as 4635 same as 4635 same as 4635 same as 4635 PAPER 16-110# 20-40# 16-110# 16-110# 16-110# 16-110# WEIGHTS 2.0 PRINTHEADS 8(2.5'TOT.) 8(2.5'TOT.) 8(2.5'TOT.) 8(2.5'TOT.) 8(2.5'TOT.) 8(2.5'TOT.) 3.0 SCSI YES N/A YES N/A YES N/A INTERFACE 4.0 IOT 4635/4890 4685/4890 4635/4890 4635/4890 4635/4890 4635/4890 INTERFACES 5.0 ACS FUNC. PARA. 5.1, N/A PARA. 5.1, N/A PARA. 5.1, N/A 5.2&5.3 5.2&5.3 5.2&5.3 6.0 SPEED 200PPM 135PPM 200PPM 135PPM 200PPM 200PPM 7.0 PRINT 300DPI 300DPI 300DPI 300DPI 300DPI 300DPI QUALITY 8.0 SAFETY MN NOT FULLY MN MN MN MN APPROVED APPROVED APPROVED APPROVED APPROVED APPROVED 9.0 COLORS CMYK CMYK CUSTOM 1 CUSTOM CUSTOM 3 CUSTOM 10.0 DFA 1.0 YES NO YES YES YES YES 11.0 PRINT HD. YES NO YES YES YES YES COLOR/LOC. 12.0 DEGRADED YES NO YES YES YES YES MODE 13.0 RELIABILITY: 13.1 OGMR LESS THAN or 6/M LESS THAN or 3/M LESS THAN or 1 EQUAL TO 4/M EQUAL TO 2/M EQUAL TO 1/M 13.2 SHTDWNS N/A N/A LESS THAN or 80/M LESS THAN or 30 EQUAL TO 60/M EQUAL TO 30 13.3 MTTR 2.5 HRS 2.5 HRS 2 HRS 2 HRS 1.7 HRS 1.7 HRS
14.0 SERVICE N/A N/A LESS-THAN=$300 AT $330 AT PARTS COST 1.0M AMPV 1.0M AMPV CUSTOMIZED COLOR ACS PRODUCT REOUIREMENTS--EXHIBIT A, PAGE 2 & 3 REVISION #4 - 2/15/96 1.0 Paper Sizes & Weights 1.1 All paper types and weights supported on the 4635 will be supported through the CC devices. This includes 7 x 10 up to II x 17. Reference paragraph 3.3.2 & 3.3.3, 4135 SRS #S-868-1 00 2.0 Print Heads - 2.1 The first implementations on the 4890 and 4635 will support the customers choice of four or eight print heads. Each of these heads is capable of applying a different color on the same page. At initial launch of the product, the heads will be 1/3". Based on eight heads this will allow a total color print band of 2.5'. This can be applied all in one location, or in eight different locations on the page. Following the launch of the product, print head size will be increased to .85'. Based on eight heads this will allow a total color print band of 6.8". Print head location is fixed on a job basis. 3.0 SCSI Interface 3.1 The Xerox/ACS system will be a Xerox high end printer, with a rasterization processor and an ACS marking engine/printer. The rastedzation processor for this implementation shall be a PC connected to the system via SCSI-2 bus interface. This interface shall meet the Protocol/Communication spec. #XXX 4.0 IOT Interfaces 11.1 The CC device will be compatible to the 4635 & 4890 at launch; the base CC design & interface shall not preclude its use on other Xerox print engine/systems such as, but not limited to, DocuTech, DocuPrint, Liberator, etc. 5.0 ACS Unit Functionality 5.1 The ACS 135 printer shall meet all performance and features detailed in the "ACS-135 Functional Specification', P/N 0130-0002 and the "ACS-135 System Operating Specification", P/N 0130-0021. 5.2 The first implementations on the 4890 and 4635 will support the customers choice of four or eight print heads. Each of these heads is capable of applying a different color on the same page. At initial launch of the product, the heads will be 1/3". Based on eight heads this will allow a total color print band of 2.5". This can be applied all in one location, or in eight different locations on the page. Following the launch of the product, print head size will be increased to .85". Based on eight heads this will allow a total color print band of 6.8". Print head location is fixed on a job basis. 5.3 The launch version of the CC device will contain up to eight, none color keyed, reservoirs; each with a 0.5 liter capacity. 5.4 The 4635 and 4890 both support duplex printing in their basic capabilities. However, only simplex printing will be offered with the CC devices. The output from the CC device can only be applied to one side of the sheet as delivered by the IOT. 6.0 Speed 6.1 The CC device shall be capable of accepting & processing cut sheet input up 200 pages per minute. 7.0 Print Quality - 7.1 Fonts, logos, and graphics will meet, in both appearance and quality, the jointly concurred to "ACS-1 35 Print Quality Specification", P/N 01 30-0020 8.0 Safety 8.1 The CC device shall meet all Safety Regulations/Specifications per paragraph 9.3.5, 4135 SRS #S-868-1 00 9.0 Colors - 9.1 Customers can choose from the full color spectrum. In addition to the standard ink colors of cyan, magenta, yellow and black, custom and Pantone colors will be available by special order. 10.0 DFA 10.1 The CC device implements the DFA Level 1 Specification per "Document Feeding & Finishing Device Interface Level 1 Generic Spec.' XNSG-159308. 11.0 Print Head Color/Location Verification Requirement 11.1 The CC device will perform integrity checks to include: verification of each head location and colors loaded in each head and by capable of comparing this information to the job requirements as sent from the ESS. The CC device will provide print head color data (location and color) for posting at the CC GUI. 12.0 Degraded Mode Operation 12.1 CC Device not Operational - In the event that the CC device is not operational, the CC component of the document will be printed by the Xerox IOT. The IOT will post a message to check the output, but the data will be printed in black. 12.2 Degraded Mode Operation - In the event that the CC device can not print but is still capable of transporting paper a operator warning shall be posted and the operator given the option of running the job (per the above) through the CC device and into the output/finishing device. 13.0 Reliability 13.1 OGMR: this is the sum of all service calls. It includes unscheduled maintenance calls, and scheduled maintenance calls; no other Xerox initiated calls are planned. 13.2 Shutdowns: A Shutdown is a system stoppage that an operator can recover from without loss of job integrity. The overall system shutdown rate shall not exceed the system shutdown rate indicated. 13.3 MT7R: Mean Time To Repair hardware problems in a customer environment. 14.0 Service Parts Costs 14.1 Mature/Bl field service parts cost target is $300 per million prints at an average CC AMPV of 1,000,000 prints CUSTOMIZED COLOR 1996 DELIVERABLES -EXHIBIT 'A', Page 1 1.0 Paper Sizes & Weights 1.1 All paper types and weights supported on the 4635 will be supported through the CC devices. This includes 7 x 10 up to 11 x 17. Reference paragraph 3.3.2 & 3.3.3, 4135 SRS #S-868-1 00 2.0 Print Heads - 2.1 The first implementations on the 4890 and 4635 will support the customers choice of four or eight print heads. Each of these heads is capable of applying a different color on the same page. At initial launch of the product, the heads will be 1/3". Based on eight heads this v,/ill allow a total color print band of 2.5". This can be applied all in one location, or in eight different locations on the page. following the launch of the product, print head size will be increased to .85'. Based on eight heads this will allow a total color print band of 6.8". Print head location is fixed on a job basis. 3.0 SCSI Interface 3.1 The Xerox/ACS system will be a Xerox high end printer, with a rasterization processor and an ACS marking engine/printer. The rasterization processor for this implementation shall be a PC connected to the system via SCSI-2 bus interface. This interface shall meet the Protocol/Communication spec. #XXX 4.0 IOT Interfaces 11.1 The CC device will be compatible to the 4635 & 4890 at launch; the base CC design & interface shall not preclude its use on other Xerox print engines/systems such as, but not limited to, DocuTech, DocuPrint, Liberator, etc. 5.0 ACS Unit Functionality 5.1 The ACS 135 printer shall meet all performance and features detailed in the "ACS-135 Functional Specification", P/N 0130-0002 and the "ACS-135 System Operating Specification", P/N 0130-0021. 5.2 The first implementations on the 4890 and 4635 will support the customers choice of four or eight print heads. Each of these heads is capable of applying a different color on the same page. At initial launch of the product, the heads will be 1/3". Based on eight heads this will allow a total color print band of 2.5". This can be applied all in one location, or in eight different locations on the page. Following the launch of the product, print head size will be increased to .85". Based on eight heads this will allow a total color print band of 6.8". Print head location is fixed on a job basis. 5.3 The launch version of the CC device will contain up to eight, none color keyed, reservoirs; each with a 0.5 liter capacity. 5.4 The 4635 and 4890 both support duplex printing in their basic capabilities. However, only simplex printing will be offered with the CC devices. The output from the CC device can only be applied to one side of the sheet as delivered by the IOT. 6.0 Speed 6.1 The CC device shall be capable of accepting & processing cut sheet input up 200 pages per minute. 7.0 Print Quality - 7.1 Fonts, logos, and graphics will meet, in both appearance and quality, the jointly concurred to "ACS-1 35 Print Quality Specification", P/N 01 30-0020 8.0 Safety 8.1 The CC device shall meet all Safety Regulations/Specifications per paragraph 9.3.5, 4135 SRS #S-868-1 00 9.0 Colors - 9.1 Customers can choose from the full color spectrum. In addition to the standard ink colors of cyan, magenta, yellow and black, custom and Pantone colors will be available by special order. 10.0 DFA 10.1 The CC device implements the DFA Level 1 Specification per "Document Feeding & Finishing Device Interface Level 1 Generic Spec." XNSG-1 59308. 11.0 Print Head Color/Location Verification Requirement 11.1 The CC device will perform integrity checks to include: verification of each head location and colors loaded in each head and by capable of comparing this information to the job requirements as sent from the ESS. The CC device will provide print head color data (location and color) for posting at the CC GUI. 12.0 Degraded Mode Operation 12.1 CC Device not Operational - In the event that the CC device is not operational, the CC component of the document will be printed by the Xerox IOT. The IOT will post a message to check the output, but the data will be printed in black. 12.2 Degraded Mode Operation - In the event that the CC device can not print but is still capable of transporting paper a operator warning shall be posted and the operator given the option of running the job (per the above) through the CC device and into the out-put finishing device. 13.0 Reliability 13.1 OGMR: this is the sum of all service calls. It includes unscheduled maintenance calls, and scheduled maintenance calls; no other Xerox initiated calls are planned. 13.2 Shutdowns: A Shutdown is a system stoppage that an operator can recover from without loss of job integrity. The overall system shutdown rate shall not exceed the system shutdown rate indicated. 13.3 MTTR: Mean Time To Repair hardware problems in a customer environment. 14.0 Service Parts Costs 14.1 Mature/Bl field service parts cost target is $300 per million prints at an average CC AMPV of 1,000,000 prints EXHIBIT B SUBJECT TO PENDING ---------------------------- CONFIDENTIAL TREATMENT REQUEST ------------------------------ EXHIBIT C SUBJECT TO PENDING ---------------------------- CONFIDENTIAL TREATMENT REQUEST ------------------------------