AM COMMUNICATIONS INC
EXHIBIT 10.7
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<FILENAME>ex10-7.txt
<DESCRIPTION>EXHIBIT 10.7
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March 21, 2003

Privileged and Confidential

Mr. Howard Bashford
Chief Financial Officer
AM Communications, Inc.
1900 AM Drive
Quakertown, PA 18951

Dear Mr. Bashford,


1. Introduction

   This letter confirms that we, FTI Consulting, Inc. ("FTI"), have been
   retained by you, AM Communications, Inc. (the "Company"), to provide certain
   financial advisory and consulting services (the "Services") set out below.
   This letter of engagement (the "Engagement") and the related Standard Terms
   and Conditions constitute the engagement contract (the "Engagement Contract")
   pursuant to which the Services will be provided.

2. Scope of Services

   The Services, to be performed at your direction, may include, but are not
   limited to the following:

         o  Assist the Company in the development of a rolling thirteen week
            cash receipt and disbursements forecast;
         o  Analyze the weekly variances of actual to forecasted cash receipts
            and disbursements;
         o  Assist in the development of semi-monthly flash reports, identifying
            the Company's critical business drivers;
         o  Analyze the Company's accounts receivable turnover, identifying
            areas for improvement in their billing and collection policies;
         o  Analyze the Company's long term financial forecast, the underlying
            assumptions thereto and management's associated financial model;
         o  Provide other general business and financial analysis, which may be
            required.

   The Services may be performed by FTI or by any subsidiary of FTI, as FTI
   shall determine. FTI may also provide Services through agents or independent
   contractors. References herein to FTI and its employees shall be deemed to
   apply also, unless the context shall otherwise

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   indicate, to employees of each such subsidiary and to any such agents or
   independent contractors and their employees.

   The Services, as outlined above, are subject to change as mutually agreed
   between us.

   FTI is engaged by the Company to provide financial advisory and consulting
   services only. Accordingly, while we may from time to time suggest options
   which may be available to you, and further give our professional evaluation
   of these options, the ultimate decision as to which, if any, of these options
   to implement rests with the Company, its management and board of directors.
   FTI and its employees will not make any management decisions for the Company
   and will not be responsible for communicating information concerning the
   Company to the public, the Company's shareholders or others.

   As part of the Services, FTI may be requested to assist the Company (and its
   legal or other advisors) in negotiating with the Company's creditors and
   equity holders and with other interested parties. In the event that we
   participate in such negotiations, the representations made and the positions
   advanced will be those of the Company and its management, not FTI or its
   employees.


3. Fees

   Fees in connection with this Engagement will be based upon the time
   necessarily spent in providing the Services, multiplied by our standard
   hourly rates. The estimated blended hourly rate for this engagement will be
   approximately $290.00. Hourly rates are revised annually. We will notify you
   of any such changes to our rates. Note that we do not provide any assurance
   regarding the outcome of our work and our fees will not be contingent on the
   results of such work.

   In addition to the fees outlined above, FTI will bill the Company for
   reasonable expenses which are likely to include airfare, meals and hotel
   accommodations, telephone, industry research, duplicating and printing, etc.

   It is our typical practice to obtain a retainer in our engagements. Based on
   our initial understanding of the matter and our scope of work, this retainer
   has been sized at $10,000. The retainer, which is to be paid upon the
   execution of this Engagement Contract, will be held and applied to our final
   bill for the Services, with any excess amounts refunded to you. The retainer
   is not intended to be an estimate for the total cost of the work to be
   performed.

   Invoices for fees and expenses incurred in connection with this Engagement
   will be billed bi-weekly, and are due upon receipt. If we do not receive
   payment of any invoice within 30 days of the invoice date, we shall be
   entitled, without prejudice to any other rights that we may have, to
   immediately suspend provision of the Services until all sums due are paid in
   full.


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4. Terms and Conditions

   The attached Standard Terms and Conditions set forth the duties of each party
   with respect to the Services. Further, this letter and the Standard Terms and
   Conditions attached comprise the entire Engagement Contract for the provision
   of the Services to the exclusion of any other express or implied terms,
   whether expressed orally or in writing, including any conditions, warranties
   and representations, and shall supersede all previous proposals, letters of
   engagement, undertakings, agreements, understandings, correspondence and
   other communications, whether written or oral, regarding the Services.

5. Conflicts of Interest

   We have undertaken a limited review of our records to determine FTI's
   professional relationships with the Company. From the results of such review,
   we were not made aware of any conflicts of interest or relationships that we
   believe would preclude us from performing the Services.

   As you know, however, we are a large consulting firm with numerous offices
   throughout the United States. We are regularly engaged by new clients and
   cannot assure you that following our engagement by you, an engagement for
   other parties in this matter will not be accepted somewhere else in our firm.
   We will advise you as promptly as possible of the circumstances of any such
   engagement for other parties in this matter which creates a potential
   conflict of interest should the engagement team become aware of such
   engagement. We will not knowingly accept an engagement without your prior
   written consent, which shall not be unreasonably withheld.

6. Acknowledgement and Acceptance

   Please acknowledge your acceptance of the terms of this Engagement Contract
   by signing both the confirmation below and the attached Standard Terms and
   Conditions and returning a copy of each to us at the above address.

If you have any questions regarding this letter or the attached Standard Terms
and Conditions, please do not hesitate to contact Philip N. Seamon at (215)
246-3405.

Yours faithfully,


FTI CONSULTING, INC.

By:
   ---------------------------------
     Philip N. Seamon
     Senior Managing Director

Attachment - As stated

Confirmation of Terms of Engagement
-----------------------------------


                                      -3-
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We agree to engage FTI Consulting, Inc. upon the terms set forth herein and in
the attached Standard Terms and Conditions.

AM Communications, Inc.

By:
   --------------------------------
     Howard Bashford
     Chief Financial Officer

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


                                       -4-


<PAGE>


                              FTI CONSULTING, INC.

                          STANDARD TERMS AND CONDITIONS

The following are the Standard Terms and Conditions on which we will provide the
Services to you set forth within the attached Letter of Engagement with AM
Communications, Inc. dated March 21, 2003. The Letter of Engagement and the
Standard Terms and Conditions (collectively the "Engagement Contract") form the
entire agreement between us relating to the Services and replace and supersede
any previous proposals, letters of engagement, undertakings, agreements,
understandings, correspondence and other communications, whether written or
oral, regarding the Services. The headings and titles in the Engagement Contract
are included to make it easier to read but do not form part of the Engagement
Contract.

1.       Reports and Advice

1.1      Use and purpose of advice and reports - Any advice given or report
         issued by us is provided solely for your use and benefit and only in
         connection with the purpose in respect of which the Services are
         provided. Unless required by law, you shall not provide any advice
         given or report issued by us to any third party, or refer to us or the
         Services, without our prior written consent. In no event, regardless of
         whether consent has been provided, shall we assume any responsibility
         to any third party to which any advice or report is disclosed or
         otherwise made available.

2.       Information and Assistance

2.1      Provision of information and assistance - Our performance of the
         Services is dependent upon your providing us with such information and
         assistance as we may reasonably require from time to time.

2.2      Punctual and accurate information - You shall use reasonable skill,
         care and attention to ensure that all information we may reasonably
         require is provided on a timely basis and is accurate and complete and
         relevant for the purpose for which it is required You shall also notify
         us if you subsequently learn that the information provided is incorrect
         or inaccurate or otherwise should not be relied upon.

2.3      No assurance on financial data - While our work may include an analysis
         of financial and accounting data, the Services will not include an
         audit, compilation or review of any kind of any financial statements or
         components thereof. Company management will be responsible for any and
         all financial information they provide to us during the course of this
         Engagement, and we will not examine or compile or verify any such
         financial information. Accordingly, as part of this Engagement, we will
         not express any opinion or other form of assurance on financial
         statements of the Company.

2.4      Prospective financial information - In the event the Services involve
         prospective financial information, our work will not constitute an
         examination or compilation, or apply agreed-upon procedures, in
         accordance with standards established by the American Institute of
         Certified Public Accountants or otherwise, and we will express no
         assurance of any kind on such information. There will usually be
         differences between estimated and actual results, because events and
         circumstances frequently do not occur as expected, and those
         differences may be material. We will take no responsibility for the
         achievability of results or events projected or anticipated by the
         management of the Company.


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3.       Additional Services

3.1      Your responsibility for other parties - You shall be solely responsible
         for the work and fees of any other party engaged by you to provide
         services in connection with the Engagement regardless of whether such
         party was introduced to you by us. Except as provided in the Letter of
         Engagement, we shall not be responsible for providing or reviewing the
         advice or services of any such third party, including advice as to
         legal, regulatory, accounting or taxation matters. Further, we
         acknowledge that we are not authorized under our Engagement Contract to
         engage any third party to provide services or advice to you, other than
         agents or independent contractors engaged to provide Services, without
         your written authorization.

4.       Confidentiality

4.1      Restrictions on confidential information - Both parties agree that any
         confidential information received from the other party shall only be
         used for the purposes of providing or receiving Services under this or
         any other contract between us. Except as provided below, neither party
         will disclose the other party's confidential information to any third
         party without the other party's consent. Confidential information shall
         not include information that:

         4.1.1    is or becomes generally available to the public other than as
                  a result of a breach of an obligation under this Clause 4.1;

         4.1.2    is acquired from a third party who, to the recipient party's
                  knowledge, owes no obligation of confidence in respect of the
                  information; or

         4.1.3    is or has been independently developed by the recipient.

4.2      Disclosing confidential information - Notwithstanding Clause 4.1 above,
         either party will be entitled to disclose confidential information of
         the other to a third party to the extent that this is required by valid
         legal process, provided that (and without breaching any legal or
         regulatory requirement) where reasonably practicable not less than 2
         business days' notice in writing is first given to the other party.

4.3      Citation of engagement - Without prejudice to Clause 4.1 and Clause 4.2
         above, we may cite generally the performance of the Services to our
         clients and prospective clients as an indication of our experience,
         unless we both specifically agree otherwise in writing.

4.4      Internal quality reviews - Notwithstanding the above, we may disclose
         any information referred to in this Clause 4 to any other FTI entity or
         use it for internal quality reviews.

4.5      Maintenance of workpapers - Notwithstanding the above, we may keep one
         archival set of our working papers from the Engagement, including
         working papers containing or reflecting confidential information, in
         accordance with our professional standards and internal policies.

5.       Termination

5.1      Termination of Engagement with notice - Either party may terminate the
         Engagement Contract for whatever reason upon written notice to the
         other party. Upon receipt of such notice, we will stop all work
         immediately. You will be responsible for all fees and expenses incurred
         by us through the date termination notice is received.

5.2      Continuation of terms -Clause 4 of the Letter of Engagement, and
         Clauses 1.1, 4, 6 and 7 of the Standard Terms and Conditions, shall
         survive the termination or expiration of the Engagement Contract and
         shall continue to bind both parties.

6.       Indemnification and Liability Limitation; Waiver of Jury Trial



                                       -2-

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6.1      Indemnification - You agree to indemnify and hold harmless FTI and its
         subsidiaries and affiliates and each of its and their officers,
         directors, principals, shareholders, agents, independent contactors and
         employees (collectively "Indemnified Persons") from and against any and
         all claims, liabilities, damages, obligations, costs and expenses
         (including reasonable attorneys' fees and expenses and costs of
         investigation) arising out of or relating to your retention of FTI, the
         execution and delivery of this Engagement Contract, the provision of
         Services or other matters relating to or arising from this Engagement
         Contract, except to the extent that any such claim, liability,
         obligation, damage, cost or expense shall have been determined by final
         non-appealable order of a court of competent jurisdiction to have
         resulted from the gross negligence or willful misconduct of the
         Indemnified Person or Persons in respect of whom such liability is
         asserted.

6.2      Limitation of liability - You agree that no Indemnified Person shall
         have any liability as a result of your retention of FTI, the execution
         and delivery of this Engagement Contract, the provision of Services or
         other matters relating to or arising from this Engagement Contract,
         other than liabilities that shall have been determined by final
         non-appealable order of a court of competent jurisdiction to have
         resulted from the gross negligence or willful misconduct of the
         Indemnified Person or Persons in respect of whom such liability is
         asserted. Without limiting the generality of the foregoing, in no event
         shall any Indemnified Person be liable for consequential, indirect or
         punitive damages, damages for lost profits or opportunities or other
         like damages or claims of any kind.

6.3      WAIVER OF JURY TRIAL - IN THE EVENT THAT DIFFERENCES CONCERNING THE
         SERVICES OR OTHER MATTERS ARISING HEREUNDER SHOULD ARISE THAT ARE NOT
         RESOLVED BY MUTUAL AGREEMENT, TO FACILITATE JUDICIAL RESOLUTION AND
         SAVE TIME AND EXPENSE, YOU AND FTI IRREVOCABLY AND UNCONDITIONALLY
         AGREE NOT TO DEMAND A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
         COUNTERCLAIM ARISING OUT OF OR RELATING TO THE SERVICES OR ANY SUCH
         OTHER MATTER.

7.       Governing Law and Jurisdiction-The Engagement Contract shall be
         governed by and interpreted in accordance with the laws of the State of
         New York, without giving effect to the choice of law provisions
         thereof. The United States District Court for the Southern District of
         New York and the appropriate Courts of the State of New York sitting in
         the Borough of Manhattan, City of New York shall have exclusive
         jurisdiction in relation to any claim, dispute or difference concerning
         the Engagement Contract and any matter arising from it. The parties
         submit to the jurisdiction of such Courts and irrevocably waive any
         right they may have to object to any action being brought in these
         Courts, to claim that the action has been brought in an inconvenient
         forum or to claim that those Courts do not have jurisdiction.

                                       -3-
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FTI CONSULTING, INC.

By:
   ----------------------------------
      Philip N. Seamon
      Senior Managing Director

Confirmation of  Standard Terms and Conditions
----------------------------------------------

We agree to engage FTI Consulting, Inc. upon the terms set forth in these
Standard Terms and Conditions as outlined above.

AM Communications, Inc.

By:
   ---------------------------------
      Howard Bashford
      Chief Financial Officer

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









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