<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
METAWAVE COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C> <C>
DELAWARE 3663 91-1673152
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
10735 WILLOWS ROAD NE
P.O. BOX 97069
REDMOND, WA 98073-9769
(425) 702-5600
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
ROBERT H. HUNSBERGER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
10735 WILLOWS ROAD NE
P.O. BOX 97069
REDMOND, WA 98073-9769
(425) 702-5600
(NAME, ADDRESS INCLUDING ZIP CODE AND TELEPHONE NUMBER INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
COPIES TO:
WILLIAM W. ERICSON JEFFREY D. SAPER
SONYA F. ERICKSON PATRICK J. SCHULTHEIS
JOHN W. ROBERTSON ROBERT G. DAY
VENTURE LAW GROUP WILSON SONSINI GOODRICH & ROSATI
A PROFESSIONAL CORPORATION PROFESSIONAL CORPORATION
4750 CARILLON POINT 650 PAGE MILL ROAD
KIRKLAND, WA 98033-7355 PALO ALTO, CA 94304-1050
(425) 739-8700 (650) 493-9300
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.0001...... 5,750,000 Shares $11.50 $66,125,000 $19,507
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 750,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JULY 22, 1998
5,000,000 SHARES
[LOGO OF METAWAVE COMMUNICATIONS CORPORATION]
COMMON STOCK
All of the 5,000,000 shares of Common Stock offered hereby are being sold by
Metawave Communications Corporation ("Metawave" or the "Company"). Prior to
this offering, there has been no public market for the Common Stock of the
Company. It is currently estimated that the initial public offering price will
be between $9.50 and $11.50 per share. See "Underwriting" for information
relating to the method of determining the initial public offering price. The
Company has applied to have the Common Stock listed on the Nasdaq National
Market under the symbol MTWV.
---------
THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
---------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share....................... $ $ $
- ------------------------------------------------------------------------------------------
Total(3)........................ $ $ $
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for information relating to indemnification of the
Underwriters.
(2) Before deducting estimated expenses payable by the Company estimated at
$825,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 750,000 additional shares of Common Stock solely to cover over-
allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
---------
The shares of Common Stock are offered by the several Underwriters subject to
prior sale, when, as and if delivered to and accepted by them, receipt and
subject to the right of the Underwriters to reject any order in whole or in
part and certain other conditions. It is expected that delivery of the shares
of Common Stock will be made, at the offices of BT Alex. Brown Incorporated,
Baltimore, Maryland, on or about , 1998.
BT ALEX. BROWN
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
, 1998
<PAGE>
[Inside front cover and gatefold graphics:
The global communications infrastructure including wireless communications is
enabling the worldwide evolution to the digital information age.
The number of worldwide wireless users in 1997 was over 194 million and is
expected to grow to approximately 550 million by the year 2001.
Metawave is dedicated to providing spectrum management solutions to enable
this growth to continue operations to increase capacity, coverage and cell
quality.
Graphic of frequency spectrum and artwork using a depiction of cellular
telephones and the cellular Block A frequency illustrating the Company's
current and potential technology, products and markets.]
The Company's current product offerings are for AMPs and AMPs/CDMA dual-mode
networks. The Company is also developing solutions for GSM and may in the
future undertake product development for TDMA.]
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and will
make available copies of quarterly reports for the first three quarters of
each fiscal year containing unaudited financial information.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS, IN CONNECTION WITH
THE OFFERING, FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
Metawave, Metawave Communications, SpotLight 2000, LampLighter, SiteNet and
Metawave's stylized cube logo are trademarks and service marks of the Company.
All other trademarks or service marks appearing in this prospectus are the
property of their respective owners.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. See "Risk Factors." Unless otherwise indicated, the
information in this Prospectus assumes (i) no exercise of the Underwriters'
over-allotment option, (ii) no exercise of outstanding warrants, (iii) the
filing of the Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate") authorizing a class of 15,000,000 shares of
undesignated Preferred Stock upon completion of this offering and (iv) the
automatic conversion of all outstanding shares of Series A, Series B, Series C
and Series D Preferred Stock into Common Stock upon completion of this
offering. See "Description of Securities" and "Underwriting." Each of the
Company's fiscal quarters is the 13-week period that ends on the Sunday nearest
the end of the last calendar month of such 13-week period. For convenience of
presentation, all fiscal periods in these financial statements are treated as
ending on a calendar month end. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Actual events or results could
differ materially from those expressed in or implied by these forward-looking
statements as a result of a number of factors, including those set forth under
"Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
Metawave Communications Corporation ("Metawave" or the "Company") designs,
develops, manufactures and markets spectrum management solutions for the
wireless communications industry. Metawave's spectrum management solutions,
consisting of smart antenna systems, applications software and engineering
services, enable cellular network operators to increase overall network
capacity, reduce network operation costs, better manage network infrastructure
and stimulate end user demand through improved system quality.
The Company's smart antenna systems utilize fixed beam-switching hardware and
software algorithms to reduce system interference in order to enable more
efficient utilization of finite radio frequency spectrum or "wireless
bandwidth." The Company's products offer highly integrated system solutions
that can reduce the need for costly infrastructure upgrades and additional cell
site deployments, thereby enabling cellular network operators to reduce
otherwise capital intensive outlays and to keep pace with subscriber growth.
The Company's technology is designed to be leveraged across a variety of the
market segments in the wireless communications industry, including the AMPS,
CDMA, GSM, PCS, TDMA and wireless local loop ("WLL") segments. The Company's
customers include ALLTEL Communications Inc. ("ALLTEL"), 360(degrees)
Communications Company ("360(degrees) Communications") and Millicom
International Cellular S.A. ("Millicom") affiliates, Telefonica Celular del
Paraguay S.A. ("Telefonica Celular") and OJSC St. Petersburg Telecom ("St.
Petersburg Telecom"). The Company has completed a field trial with AirTouch
Communications, Inc. ("AirTouch") and is currently conducting a field trial
with GTE Corporation ("GTE").
The worldwide demand for wireless communications services has grown
significantly, largely as a result of technological advancements, deregulation
and economies of scale that have substantially reduced the cost and improved
the quality and reliability of wireless services for the business and consumer
mass market. Increased demand for wireless services places a significant strain
on wireless network operators which have a fixed amount of radio frequency
spectrum or wireless bandwidth available to deliver wireless services. Unlike
traditional data and telephony communications bandwidth, which is an expandable
physical medium, wireless spectrum is generally allocated in fixed amounts by
governments in U.S. and foreign markets. Thus, the fundamental challenge for
wireless network operators is to increase capacity, coverage and call quality
within a fixed amount of wireless spectrum.
3
<PAGE>
To address capacity, coverage and call quality issues, cellular network
operators have begun to deploy more spectrum-efficient digital technologies.
However, because analog and digital technologies share the same fixed amount of
spectrum in a cellular network, cellular network operators must remove analog
channels to implement digital technologies, while simultaneously providing
analog cellular service to increasing numbers of subscribers. Traditionally,
cellular network operators have addressed capacity, coverage and call quality
problems by building new cell sites or adopting variations on antenna design
such as sectorized antennas.
Metawave's spectrum management platform, the Spotlight 2000 system, is a
multibeam smart antenna technology that enables the transition from traditional
wireless network infrastructure design to an architecture which actively
optimizes finite spectrum or wireless bandwidth. The SpotLight 2000 system is
compatible with the Motorola, Inc. ("Motorola") HDII and Lucent Technologies
Inc. ("Lucent") Series II base stations and AMPS and CDMA air interface
protocols. Metawave's spectrum management solutions provide cost-effective
capacity expansion, efficient conversion to digital network capability and
improved network performance. Metawave's SpotLight 2000 system is currently
deployed in cellular networks in North America, South America and Europe.
Metawave's objective is to be a leading provider of spectrum management
solutions to the worldwide wireless communications market. Key elements of the
Company's strategy include: (i) identifying rapidly growing wireless markets
and developing highly integrated solutions to their spectrum management
problems; (ii) building and expanding strategic customer relationships; (iii)
leveraging its proprietary core technology, which includes eight issued U.S.
patents and 25 pending patent applications, by investing substantial resources
in the research and product development necessary to address additional
markets; and (iv) offering system level solutions, including pre-sales system
planning, configurable products and on-site installation and optimization, that
enhance the performance of cellular operators' networks.
Metawave sells its products through a technical direct sales force supported
by systems engineers. Direct sales personnel are assigned on a customer account
basis and are responsible for generating product sales and providing product
and customer support. As of June 30, 1998, the Company had 200 employees,
including 43 in sales, marketing and customer support, located in the Company's
Redmond, Washington, Washington, D.C. and Dallas, Texas offices.
The Company's principal executive offices are located at 10735 Willows Road
NE, Redmond, Washington 98073-9769, and its telephone number is (425) 702-5600.
The Company was originally incorporated in the state of Washington in January
1995 and was reincorporated in the state of Delaware in July 1995.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company........... 5,000,000 shares
Common Stock to be outstanding after the
offering..................................... 21,166,277 shares(1)
Use of proceeds............................... Repayment of approximately
$16.2 million of outstanding
debt for working capital and
general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol........ MTWV
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 19,
1995 YEAR ENDED SIX MONTHS ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------- -------------------
1995 1996 1997 1997 1998
-------------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $ -- $ 1,291 $ 1,450 $ 392 $ 6,501
Gross profit (loss)..... -- 194 (278) (124) 105
Total operating
expenses............... 1,135 11,324 22,228 8,976 14,541
Loss from operations.... (1,135) (11,130) (22,506) (9,100) (14,436)
Other income (expense),
net.................... 135 335 402 173 (1,747)
------- -------- ---------- ------- ----------
Net loss................ $(1,000) $(10,795) $ (22,104) $(8,927) $ (16,183)
======= ======== ========== ======= ==========
Pro forma net loss per
share(2)............... $ (1.54) $ (1.01)
========== ==========
Weighted average common
shares and equivalents
pro forma(2)........... 14,383,284 16,060,815
========== ==========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 20,311 $ 52,111
Working capital........................................ 3,787 51,787
Total assets........................................... 46,557 78,357
Senior Secured Bridge Notes(3)......................... 29,708 13,508
Other debt, including capital lease obligations........ 5,392 5,392
Convertible and redeemable preferred stock............. 49,282 --
Convertible and redeemable preferred stock warrants.... 4,423 --
Accumulated deficit.................................... (50,082) (50,082)
Stockholders' equity (deficit)......................... $(48,797) $ 52,908
</TABLE>
- --------
(1) Based on the number of shares outstanding on June 30, 1998. Excludes as of
June 30, 1998, (i) 3,277,760 shares issuable upon exercise of outstanding
options at a weighted average exercise price of $1.49 per share (ii)
657,005 shares issuable upon exercise of outstanding warrants at a weighted
average exercise price of $0.60 per share and (iii) an aggregate of
2,010,639 shares available for future issuance of such options under the
Company's Amended and Restated 1995 Stock Option Plan (the "1995 Stock
Option Plan"), 1998 Stock Option Plan (the "1998 Stock Option Plan"), 1998
Directors' Stock Option Plan (the "Directors' Plan") and 1998 Employee
Stock Purchase Plan (the "Purchase Plan"). See "Management--Stock Plans,"
"Certain Relationships and Related Transactions," "Description of
Securities" and Notes 4 and 6 of Notes to Financial Statements.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
method employed to determine the number of shares used to compute per share
amounts.
(3) In April 1998, the Company issued $29.0 million in aggregate principal
13.75% Senior Secured Bridge Notes due April 28, 2000 (the "13.75% Senior
Secured Bridge Notes"). In connection with the 13.75% Senior Secured Bridge
Notes, the Company issued warrants to purchase an aggregate of 537,500
shares of Series D Preferred Stock at a purchase price of $0.01 per share
(the "Note Warrants"). See "Certain Relationships and Related
Transactions," "Description of Securities" and Note 4 of Notes to Financial
Statements.
(4) Adjusted to reflect (i) the sale and issuance of the shares of Common Stock
offered by the Company hereby at an assumed initial public offering price
of $10.50 per share and the application of the estimated net proceeds
therefrom; (ii) the conversion of convertible and redeemable Preferred
Stock into Common Stock and the conversion of Preferred Stock warrants into
Common Stock warrants, and (iii) the application of the estimated net
proceeds of the offering including the repayment of approximately $16.2
million of outstanding principal and the estimated accrued interest on the
Company's 13.75% Senior Secured Bridge Notes. See "Use of Proceeds" and
"Capitalization."
5
<PAGE>
RISK FACTORS
An investment in the shares offered hereby involves a high degree of risk.
The following risk factors should be considered carefully in addition to the
other information in this Prospectus before purchasing the shares of Common
Stock offered hereby. The discussion in this Prospectus contains certain
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus. The Company's actual results could differ materially from
those discussed herein. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed elsewhere
herein.
Limited Operating History; Accumulated Deficit; Anticipated Losses. The
Company was incorporated in 1995 and was in the development stage until late
1997, when it commenced shipments for commercial sale of its first spectrum
management system. From inception through June 30, 1998, the Company generated
total revenues of approximately $9.2 million, of which $6.5 million, or 70.6%,
was generated in the six months ended June 30, 1998. For the quarters ended
March 31, 1998 and June 30, 1998, the Company's net losses were $7.0 million
and $9.2 million, respectively and, at June 30, 1998, the Company had a
cumulative net loss of approximately $50.1 million. The revenue and profit
potential of the Company's business is unproven and the Company's limited
operating history makes its future operating results difficult to predict. The
Company believes that its growth and future success will be dependent upon the
widespread acceptance of the SpotLight 2000 system by cellular network
operators. Because the SpotLight 2000 system was only recently introduced, the
Company is unable to predict with any degree of certainty whether the system
will achieve market acceptance. There can be no assurance that the Company
will ever achieve profitability or significant revenues on a quarterly or an
annual basis. The Company intends to continue to make significant investments
in its operations, particularly to support product development, to increase
manufacturing capacity and to market new products. Accordingly, the Company
expects to continue to generate losses for the foreseeable future, even if
revenues increase. In view of the Company's limited production history, an
investment in the Common Stock offered hereby must be considered in light of
the problems, expenses, complications and delays frequently encountered in
connection with the development of new technologies, products, markets and
operations. As a result of the Company's net losses and limited operating
history, period-to-period comparisons of operating results may not be
meaningful and operating results from prior periods may not be indicative of
future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Significant Fluctuations in Operating Results. The Company will likely
experience significant fluctuations in its operating results on a quarterly
and an annual basis in the future. In connection with its efforts to increase
production of its recently introduced SpotLight 2000 system, the Company
expects to continue to make substantial investments in capital equipment, to
recruit and train additional personnel and to invest in facilities and
management information systems. These expenditures may be made in advance of,
and in anticipation of, increased sales and, therefore, gross profits may be
adversely affected by short-term inefficiencies associated with the addition
of equipment, personnel or facilities, and costs may increase as a percentage
of revenues from time-to-time on a periodic basis. As a result, the Company's
operating results will vary from period to period. Because of the limited size
of the Company's customer base and the large size of customer orders, revenues
derived from a small number of customers will likely represent a significant
portion of revenue in any given period. Accordingly, a decrease in demand for
the Company's systems from any customer for any reason is likely to result in
significant periodic fluctuations in revenue. In addition, most of the
Company's contracts contain conditional acceptance provisions for certain
product sales and the Company delays recognition of revenues that are subject
to such contingencies until all such conditions are satisfied. If the Company
could not satisfy conditions in such
6
<PAGE>
contracts or satisfaction of conditions were delayed for any reason, revenues
in any particular period could fall significantly below the Company's
expectations.
A delay in a shipment or customer acceptance of the Company's product near
the end of a particular quarter, due to, for example, an unanticipated
shipment rescheduling, cancellation or deferral by a customer, competitive or
economic factors, unexpected manufacturing, installation or other
difficulties, failure to satisfy customer acceptance conditions,
unavailability or delays in deliveries of components, subassemblies or
services by suppliers, or the failure to receive an anticipated order, may
cause revenue in a particular period to fall significantly below the Company's
expectations and may materially adversely affect the Company's business and
operating results for such period. A significant portion of the Company's
expenses are fixed in advance and based in large part on revenue forecasts. If
revenues do not meet the Company's expectations in any given period, the
adverse impact on operating results of such a shortfall may be magnified by
the Company's inability to adjust spending to compensate for the shortfall. In
addition, the Company plans to increase operating expenses to fund additional
research and development, sales and marketing and general and administrative
activities. To the extent that these expenses are not accompanied by an
increase in revenues, the Company's business and operating results would be
materially adversely affected.
Other factors that may cause the Company's revenue, gross profits and
results of operations to vary significantly from period to period include:
gain or loss by the Company of significant customers; delays in, or
prohibition of, installing the Company's systems due to topological or zoning
issues or customer installation schedules; the Company's ability to reduce
costs; existing and new product development; market acceptance and the timing
of availability of new products by the Company or its customers; changes in
pricing by the Company, its customers or suppliers; introduction and
enhancement of products by the Company and its competitors; increases in
warranty and customer support expenses; limitations on manufacturing capacity;
inventory obsolescence; introduction of new distribution and sales channels;
fluctuations in foreign currency exchange rates; delays or changes in
regulatory approval of the Company's systems or those of its customers;
natural disasters or adverse weather; and general economic and political
conditions. In addition, the Company's results of operations have been, and
will continue to be, influenced significantly by competitive factors including
the pricing and availability of, and demand for, competitive or substitute
products. It is likely that, in a future period, the Company's operating
results will not meet the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock could be
materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In addition, while the
Company's revenues have not been impacted by seasonality to date, the
telecommunications industry historically has been subject to some degree of
seasonality, with lower sales in the first calendar quarter. There can be no
assurance that the Company's business and operating results will not be
adversely affected by such seasonal fluctuations in the future.
The Company's current backlog consists of a relatively small number of
orders for its SpotLight 2000 system. Purchase orders are received and
accepted in advance of shipment and are generally cancelable prior to
shipment. As a result, backlog may not result in revenues and, as of any
particular date, may not be a reliable indicator of sales for any future
period. Furthermore, the Company intends to increase production capacity in
order to reduce the period of time between receipt and shipment of orders.
Thus, the Company does not expect backlog will remain at current levels as a
percentage of sales. Furthermore, due to the many factors affecting decisions
by customers to place orders and the impact of a small number of large orders,
backlog at any given time may fluctuate significantly. Such fluctuations may
adversely affect the Company's business and operating results. See "Business--
Sales, Marketing and Customer Support."
Significant Customer Concentration. The Company has derived a substantial
portion of its revenue from sales of the SpotLight 2000 system to a limited
number of cellular network operators, and the
7
<PAGE>
Company expects this customer concentration to continue for the foreseeable
future. To date, four customers have accounted for all of the Company's
product sales. For the six months ended June 30, 1998, three customers, St.
Petersburg Telecom, Telefonica Celular and ALLTEL, accounted for approximately
27.4%, 24.0% and 44.2%, respectively, of the Company's net revenues. Due to
the highly concentrated nature of the cellular industry and industry
consolidation, the Company believes that the number of potential customers for
future products, if any, will be small. In this regard, on July 1, 1998,
ALLTEL completed the acquisition of 360(degrees) Communications, another
customer of the Company. Failure by the Company to capture a significant
number of the cellular network operators as customers could have a material
adverse effect on the Company's business and operating results. The Company
expects that a small number of customers will continue to represent a
significant percentage of its total revenues for the foreseeable future,
although the companies that comprise the largest percentage of sales in any
given quarter may change from quarter to quarter. Because of the small size of
the Company's customer base, the loss of any customer or reduced demand for
systems from any customer, could have a material adverse effect on the
Company's business and operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Customers."
Uncertainty of Market Acceptance; Lengthy Sales Cycle. The Company's future
success will depend upon the degree of market acceptance of the Company's
spectrum management solutions. The Company believes that substantially all of
its revenues in the foreseeable future will be derived from sales of its
SpotLight 2000 system. In light of the recent introduction of the SpotLight
2000 system and the rapidly evolving nature of the wireless communications
industry, the Company is unable to predict with any degree of assurance
whether its current or future products will achieve market acceptance. There
can be no assurance that the Company will be able to reduce its reliance on
sales of its SpotLight 2000 system by developing interfaces to other wireless
protocols or base stations manufactured by vendors other than Motorola or
Lucent, or that if developed, such new system versions will achieve market
acceptance. If the SpotLight 2000 system fails to achieve broad market
acceptance, the Company's business and operating results would be materially
adversely affected. See "Business--Metawave Products."
In order for its spectrum management solutions to achieve market acceptance,
the Company must demonstrate to cellular network operators that the systems
provide a spectrum management solution that addresses the cellular network
operators' challenges of capacity, coverage and call quality in a cost-
effective manner. The Company must demonstrate product performance to a
cellular network operator based on such operator's unique network
configuration and specifications. The Company's ability to optimize its
product in any given cell site varies greatly depending on such operator's
specifications and the local geographical terrain. Typically, performance of
the Company's product must be accepted in an initial cell site or cluster of
cell sites prior to completing any additional sales to such cellular network
operator. If the Company's spectrum management solutions are not accepted by
cellular network operators in a timely manner, or at all, the Company's
business and operating results could be materially adversely affected. See "--
Risks Related to Base Station Manufacturers," "--Competition" and "Business--
Metawave Products."
Because the SpotLight 2000 system represents a new approach to increasing
network capacity and affects the key function of a cellular operator's
network, purchase of the SpotLight 2000 system is typically a strategic
decision that requires approval at senior levels of customers' organizations,
significant technical evaluation and a substantial commitment of customers'
personnel, financial and other resources. Historically, the Company has
conducted field trials and has been required to satisfy performance conditions
prior to the completion of a sale. For these and other reasons, the sales
process associated with the purchase of the Company's systems is typically
complex, lengthy and subject to a number of significant risks, including
changes in customers' budgets and approval at senior levels of customers'
organizations and approval by governmental agencies. In addition, given the
regional divisions of many cellular networks, an order from one region does
not necessarily result in subsequent orders from other regions of the same
cellular network without additional trials and substantial selling efforts by
the
8
<PAGE>
Company. The Company's sales cycle can last up to 18 months or more and varies
substantially from customer to customer. Because of the lengthy sales cycle
and the dependence of the Company's quarterly revenues upon a small number of
orders that represent large dollar amounts, if revenues from any order
forecasted for a particular quarter are not received in that quarter, the
Company's business and operating results could be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Sales, Marketing and Customer Support."
Dependence on Cellular Network Operator Capital Spending. The Company
expects that it will derive substantially all of its revenues for the
foreseeable future from sales of its SpotLight 2000 system to cellular network
operators. These operators are located in the United States and foreign
markets. Demand for the Company's products will depend to a significant degree
upon the magnitude and timing of capital spending by cellular network
operators for constructing, rebuilding or upgrading their systems. The capital
spending patterns of cellular network operators depend on a variety of
factors, including access to financing, the status of federal, local and
foreign government regulation and deregulation, changing standards for
cellular technology, overall demand for analog and digital cellular services,
competitive pressures and general economic conditions. In addition, capital
spending patterns in the cellular industry can be subject to some degree of
seasonality, with lower levels of spending in the first calendar quarter,
based on annual budget cycles. Capital spending levels in the U.S. cellular
industry have fluctuated significantly in the past, and there can be no
assurance that such fluctuations will not occur in the future. Any substantial
decrease or delay in capital spending by cellular network operators in the
United States or abroad would have a material adverse effect on the Company's
business and operating results.
Risk of Declining Prices; No Assurance of Cost Reductions. The Company
believes that for its systems to achieve broad market acceptance and to
compete effectively with alternative systems, the Company's average selling
prices must decline. The Company may be subject to price competition from base
station manufacturers which could lower base station prices thereby making the
addition of new base stations a more cost-effective alternative for cellular
network operators seeking increased capacity. In order to achieve lower
average selling prices without adversely affecting gross margins, the Company
must successfully reduce the manufacturing costs of its product through
engineering improvements and economies of scale in production and purchasing.
There can be no assurance that the Company will achieve cost savings at a rate
needed to keep pace with competitive pricing pressures. In addition, if the
cellular industry does not shift to digital protocols that yield higher
product margins for the Company, the Company's gross margins could be
adversely affected in future periods. To the extent that the Company is unable
to reduce costs sufficiently to offset declining average selling prices or the
mix of the Company's sales is comprised substantially of analog-based
technologies, the Company may not achieve positive gross margins. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Research and Development."
Risks Related to Base Station Manufacturers. The Company's product strategy
relies on ensuring the compatibility of the Company's systems with base
stations sold by cellular equipment manufacturers. The Company's product
strategy is competitive in some respects with such manufacturers, and it may
be difficult or impossible for the Company to obtain technical cooperation
from such manufacturers, which may be required to make the Company's systems
compatible with their base stations. The initial version of the SpotLight
system relied on analog technologies and did not require significant
cooperation from such base station manufacturers. As the cellular industry
continues the conversion to digital technologies, increased signal and
connection complexity may require the Company, at a minimum, to obtain
customer or manufacturer cooperation on technical specifications and may
possibly require the Company to obtain manufacturer cooperation to embed the
Company's systems in the base station equipment. There can be no assurance
that the Company will be able to obtain cooperation to make the Company's
products compatible with manufacturers' base stations on reasonable terms, or
at all, and the failure to do so could materially and adversely affect the
Company's business and operating results.
9
<PAGE>
Competition. The market for spectrum management solutions is relatively new
but is expected to become increasingly competitive. The Company's products
compete with other smart antenna systems and alternative wireless
infrastructure devices such as repeaters, cryogenic filters and tower-top
amplifiers. The Company believes the principal competitive factors are the
cost-effective delivery of increased capacity, expanded coverage and improved
call quality to cellular network operators. There can be no assurance that the
Company will compete favorably with respect to the foregoing factors.
The Company believes that base station manufacturers, who provide cellular
network capacity through sales of additional base stations, represent a
significant competitive threat to the Company. These manufacturers, including
Ericsson LM Telephone Co. ("Ericsson"), Lucent, Motorola, Nokia Corporation
("Nokia"), Northern Telecom, Ltd. ("Northern Telecom") and Siemens Corporation
("Siemens"), have long-term, established relationships with the cellular
network operators. Deployment of the Company's SpotLight 2000 system by
cellular network operators can improve base station performance, and therefore
may result in fewer sales opportunities for base station manufacturers. Smart
antenna technology represents an area of opportunity for such manufacturers.
The Company believes that certain of these manufacturers are developing smart
antenna systems and are likely to offer smart antenna capabilities in the
future. In addition to having more established relationships with cellular
network operators, these manufacturers have significantly greater financial,
technical, manufacturing, sales, marketing and other resources than the
Company and have significantly greater name recognition for their existing
products and technologies than has the Company.
The Company's current primary direct competitors for spectrum management
solutions are Celwave (a division of Radio Frequency Systems Inc., which is an
affiliate of Alcatel Alsthom S.A.), ArrayComm, Inc. and GEC-Marconi Hazeltine
Corporation. In addition, other companies, such as Raytheon E-Systems,
Watkins-Johnson Company, Texas Instruments Incorporated and ARGOSystems, Inc.
(a subsidiary of The Boeing Company), offer systems that utilize digital
signal processing and interference cancellation techniques to extend cell site
coverage and improve call quality. Several companies offer alternative
technologies such as cryogenic filters, tower-top low noise amplifiers and
repeaters that can be used to provide service in network coverage holes and
improve call quality. The Company may also face competition in the future from
new market entrants offering competing technologies.
The Company believes that its ability to compete in the future will depend
in part on a number of competitive factors outside its control, including the
development by others of products that are competitive with the Company's
products and the price at which others offer comparable products. To be
competitive, the Company will need to continue to invest substantial resources
in engineering, research and development and sales and marketing. There can be
no assurance that the Company will have sufficient resources to make such
investments or that the Company will be able to make the technological
advances necessary to remain competitive. Accordingly, there can be no
assurance that the Company will be able to compete successfully in the future.
See "Business--Competition."
Management of Growth; New Management Team. The growth of the Company's
operations has placed, and is expected to continue to place, a significant
strain on the Company's financial and management resources as well as its
product design, manufacturing, sales and customer support capabilities. In May
1998, the Company moved to significantly larger facilities to accommodate the
Company's expanded research and development and manufacturing needs. As the
Company expands its operations to multiple locations, including
internationally, management of the Company's operations will become
increasingly complex. To manage its anticipated growth, the Company must,
among other things, continue to implement and improve its operational,
financial and management information systems, hire and train additional
qualified personnel, continue to expand and upgrade core technologies and
effectively manage multiple relationships with various customers, suppliers
and other third parties. The Company recently upgraded its financial and
accounting software to an enterprise resource planning software package that
integrates manufacturing, finance and sales order management. The Company
anticipates that additional upgrades to its management information systems
will be required in the near future to address
10
<PAGE>
the expected increased volume and complexity of the Company's transactions.
There can be no assurance that the Company will successfully integrate the
newly purchased software with its existing systems or that the integration of
the new systems will not cause unanticipated system disruptions, slower
response times, degradation in levels of performance or reliability, impaired
quality of production, and delays in reporting accurate financial information.
Failure to successfully implement and integrate these systems, procedures and
controls to effectively manage the Company's growth in operations in a timely
manner could have a material adverse effect on the Company's business and
operating results.
From January 1, 1997 to June 30, 1998, the Company expanded from 91 to 200
employees. A majority of the Company's executive officers joined the Company
within the last 18 months and many of these officers have no prior experience
as executive officers of publicly traded companies. The Company's new
employees include the Chief Executive Officer and Chief Financial Officer as
well as a number of other key managerial, technical and operations personnel
who have not yet been fully integrated into the Company, and the Company
expects to add additional key personnel in the near future. There can be no
assurance that the Company's current and planned personnel will be adequate to
support the Company's future operations, that management will be able to hire,
train, retain, motivate and manage required personnel or that Company
management will be able to successfully identify, manage and exploit existing
and potential market opportunities. If the Company is unable to manage growth
effectively, its business and operating results will be materially adversely
affected.
Rapid Technological Change and Requirement for Frequent New Product
Introductions. The Company's future success will depend in large part on its
ability to develop new products designed to operate with different digital
technologies such as CDMA and GSM as well as across other principal
manufacturer base stations. There can be no assurance that the Company will
successfully develop and introduce such products in a timely manner. In this
regard, the Company is currently conducting trials of its recently developed
dual-mode AMPS/CDMA based SpotLight 2000 system. There can be no assurance
that the trials will be successful or that the cellular network operators will
accept the product.
The market for the Company's current products and planned future products is
subject to rapid technological change, frequent new product introductions and
enhancements, product obsolescence, changes in customer requirements and
evolving industry standards. To be competitive, the Company must successfully
develop, introduce and sell new products or product enhancements that respond
to changing customer requirements on a timely and cost-effective basis. The
Company's success in developing new and enhanced products will depend on a
variety of factors, many of which are beyond the Company's control. Such
factors include the timely and efficient completion of system design; the
timely and efficient implementation of assembly, calibration and test
processes; sourcing of components; the development and completion of related
software; the reliability, cost and quality of new products; the degree of
market acceptance; and the development and introduction of competitive
products by competitors. The Company has experienced and may continue to
experience delays in development and introduction of products. In addition,
the Company may be required to obtain licenses to intellectual property rights
held by third parties to develop new products or product enhancements and
there can be no assurance that such licenses will be available on acceptable
terms, if at all. The inability of the Company to introduce in a timely manner
new products or product enhancements that contribute to sales could have a
material adverse effect on the Company's business and operating results. In
addition, changes in manufacturing operations to incorporate new products and
processes could cause disruptions in production of existing products, which,
in turn, could adversely affect customer relationships and the market's
acceptance of the Company's products, and have a material adverse effect on
the Company's business and operating results. See "Business--Research and
Development" and "--Manufacturing."
Limited Manufacturing Experience; No Assurance of Successful Expansion of
Operations. The Company's manufacturing operations consist primarily of
supplier and commodity management and assembling finished goods from
components and subassemblies purchased from outside suppliers.
11
<PAGE>
Because the Company configures each SpotLight 2000 system to meet customer
specifications, the Company's ability to achieve manufacturing efficiencies by
assembling products before orders are received is limited. The Company intends
to expand its manufacturing capacity by purchasing additional equipment,
hiring additional personnel, further developing its proprietary test software
to improve productivity, increasing the efficiency of its production
processes, and, in certain instances, subcontracting additional assembly,
calibration and testing processes. If the Company is to achieve its
objectives, it will also be required to significantly expand its sales,
marketing and customer support capabilities. The Company intends to
subcontract a significant portion of its field installation work to third
parties. There can be no assurance that the Company will be successful in
identifying subcontractors with adequate experience or will be able to retain
experienced subcontractors on acceptable terms, if at all, or that the Company
will effectively manage multiple subcontractors working on multiple
installation projects. Due to the Company's limited experience with large
scale operations, there can be no assurance that the Company will be able to
develop internally, or contract with third parties for, additional
manufacturing capacity and field support on acceptable terms, that it will be
able to maintain the quality of its products as production increases, or that
it will develop the administrative and other structures necessary to support
expanded operations. The Company's success depends on its ability to
significantly increase its production capacity and field support.
The Company's arrangements with its customers typically require that orders
be shipped not more than 90 days after the order. There can be no assurance
that the Company will be able to increase its production capacity at an
acceptable cost or rapidly enough to fill its orders. The failure to assemble
and ship products on a timely basis could damage relationships with customers
and result in cancellation of orders or lost orders, which would have a
material adverse effect on the Company's business and operating results. See
"Business--Manufacturing."
The Company currently manufactures all of its products in a single facility
in Redmond, Washington. If the Company's facilities or the facilities of its
suppliers were incapable of operating, even temporarily, or were unable to
operate at or near full capacity for any extended period, the Company's
business and operating results could be materially adversely affected. In
connection with its capacity expansion, the Company may seek to develop one or
more additional manufacturing facilities, including, possibly, facilities
located outside the Redmond, Washington area. Although there can be no
assurance that such a facility will be added, the operation of any such
facility would significantly increase the complexity of the Company's
operations.
No Assurance of Product Quality, Performance and Reliability. Manufacturing
and installing the Company's SpotLight 2000 system is a complex process and
requires significant expertise. Because of the Company's limited operating
history and the short time that the SpotLight 2000 system has been in
production, the Company's personnel have limited experience in installing and
integrating the Company's systems. If the Company were unable to successfully
and efficiently deploy its systems in the field, or were unable to attract and
retain the required trained technicians to deploy products in the field, the
Company's business and operating results would be materially adversely
affected.
The Company's ability to achieve future revenue growth will depend in
significant part upon its ability to obtain and fulfill orders from, maintain
good relationships with and provide support to existing and new customers, and
to manufacture products on a timely and cost-effective basis to meet stringent
customer performance requirements and shipment and delivery dates. Because of
the Company's limited operating history and the short time that the SpotLight
2000 system has been in production, there can be no assurance that problems
will not occur with respect to the integration, quality, performance and
reliability of the Company's systems. If such problems occur, the Company
could experience significant warranty claims or increased costs or delays in,
cancellations of, or rescheduling of orders or shipments, any of which could
have a material adverse effect on the Company's business and operating
results.
Dependence on Attraction and Retention of Key Personnel. The Company's
future operating results depend in significant part upon the continued
contributions of each of its key technical and senior
12
<PAGE>
management personnel, including Douglas O. Reudink, the Company's founder and
Chief Technical Officer, each of whom would be difficult to replace, as there
is a limited number of people with the necessary skills and experience to
develop and manufacture the Company's products. The Company has not entered
into employment agreements with any of its employees other than severance
arrangements with Richard Henderson, Robert H. Hunsberger, Vito E. Palermo and
Dr. Reudink. See "Management--Severance Arrangements." Except for Dr. Reudink,
the Company has not entered into any non-competition agreements with any of
its employees. The Company does not maintain key-man life insurance on any of
its key technical or senior management personnel. In addition, the Company
anticipates that it will need additional management personnel if it is to be
successful in increasing production capacity and the scale of its operations.
There can be no assurance that it will be able to obtain and retain such
personnel on acceptable terms.
The Company's future operating results also depend in significant part upon
its ability to attract and retain qualified engineering, manufacturing,
quality assurance, sales, marketing and customer support personnel.
Competition for such personnel, particularly qualified engineers, is intense.
The Company has experienced difficulties in recruiting sufficient numbers of
qualified engineers, and there can be no assurance that the Company will be
successful in attracting or retaining such personnel. There may be only a
limited number of persons with the requisite skills to serve in these
positions, particularly in the market where the Company is located, and it may
be increasingly difficult for the Company to hire such personnel over time. As
the Company's product development efforts relate to cellular standards that
are widely deployed in foreign countries, the Company may be required to
recruit foreign engineers who have expertise in such standards. Current U.S.
immigration laws restrict the Company's ability to hire foreign employees,
which could have a material adverse effect on the Company's product
development efforts. The loss of any key employee, the failure of any key
employee to perform in his or her current position, the Company's inability to
attract and retain skilled employees as needed or the inability of the
officers and key employees of the Company to expand, train and manage the
Company's employee base could materially adversely affect the Company's
business and operating results. See "Business--Employees" and "Management."
Sole Source Suppliers; Dependence on Key Suppliers. Certain parts and
components used in the Company's products, including linear power amplifiers
supplied by Powerwave Technologies, Inc. ("Powerwave") are presently only
available from a sole source. In addition, the Company is currently dependent
upon Sanmina Corporation ("Sanmina") as the primary source for the supply of
the Company's printed circuit board assemblies. Certain other parts and
components used in the Company's products are available from a limited number
of sources. The Company's reliance on these sole or limited source suppliers
involves certain risks and uncertainties, including the possibility of a
shortage or the discontinuation of certain key components and reduced control
over delivery schedules, manufacturing capability, quality and cost. Any
reduced availability of such parts or components when required could
materially impair the Company's ability to manufacture and deliver its
products on a timely basis and result in the cancellation of orders, which
could have a material adverse effect on the Company's business and operating
results. In addition, the purchase of certain key components involves long
lead times and, in the event of unanticipated increases in demand for the
Company's products, the Company may be unable to obtain such components in
sufficient quantities to meet its customers' requirements. The Company does
not have guaranteed supply arrangements with any of its sole or limited source
suppliers, does not maintain an extensive inventory of parts or components and
customarily purchases sole or limited source parts and components pursuant to
purchase orders. Business disruptions, quality issues, production shortfalls
or financial difficulties of a sole or limited source supplier could
materially and adversely affect the Company by increasing product costs, or
eliminating or delaying the availability of such parts or components. In such
event, the inability of the Company to develop alternative sources of supply
quickly and on a cost-effective basis could materially impair the Company's
ability to manufacture and deliver its products on a timely basis and could
have a material adverse effect on its business and operating results. See
"Business--Manufacturing."
13
<PAGE>
Dependence on Growth of Cellular Communications Market. The future operating
results of the Company will depend to a significant extent upon the continued
growth and increased availability and acceptance of cellular communications
services internationally and in the United States. There can be no assurance
that the volume and variety of cellular services or the markets for and
acceptance of such services will grow, or that such services will create a
demand for the Company's systems. If the cellular communications market fails
to grow, or grows more slowly than anticipated, the Company's business and
operating results may be materially adversely affected.
The cellular communications industry has developed different technologies
and standards based on the type of service provided and geographical region.
There is uncertainty as to whether all existing cellular technologies will
continue to achieve market acceptance in the future. If a digital technology
for which the Company develops a product is not widely adopted, the potential
size of the market for the Company's product will be limited, and the Company
may not recover the cost of development of such product. Further, the Company
may not be able to re-direct its development efforts toward digital cellular
technologies that do sustain market acceptance in a timely manner, which would
have a material adverse effect on the Company's business and operating
results.
Need for Additional Capital. The Company requires substantial working
capital to fund its business and expects to use a portion of the net proceeds
of this offering to fund its operating losses. The Company has experienced
negative cash flow from operations since inception and expects to continue to
experience significant negative cash flow from operations for the foreseeable
future. The Company's future capital requirements will depend upon many
factors, including the success or failure of the Company's efforts to expand
its production, sales and marketing efforts, the status of competitive
products, and the requirements of the Company's efforts to develop new
products and product enhancements. The Company believes that current capital
resources, together with the estimated net proceeds from this offering, are
adequate to fund its operations for at least twelve months. Thereafter, the
Company may be required to raise additional capital. There can be no assurance
that additional financing will be available to the Company on acceptable
terms, if at all, or that such financing may not result in further dilution to
existing stockholders. The Company may be required to obtain funds through its
arrangements with partners or others that may require the Company to
relinquish rights to certain of its technologies or potential products or
other assets. If adequate funds are not available, the Company may be required
to delay, scale back or eliminate expansion of its production, administration
or research and development programs. Any inability to obtain needed financing
by the Company could have a material adverse effect on its business and
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Risks Associated with International Markets. Approximately 51.5% of net
revenue for the six months ended June 30, 1998 was from sales of the Company's
SpotLight 2000 system to customers located outside of the U.S. For the quarter
ended June 30, 1998, 39.0% of net revenue was related to the sale of the
SpotLight 2000 system to a single customer in Paraguay.
Although the Company believes that international sales will decline as a
percentage of net revenues over time, the Company anticipates that
international sales will continue to account for a significant portion of its
revenue for the foreseeable future. To date, the Company's international sales
have been denominated in U.S. dollars; however, in the future a portion of the
Company's international sales may be denominated in foreign currencies. The
Company does not currently engage in foreign currency hedging transactions as
all sales to date have been in U.S. dollars. However, if a material amount of
future sales are denominated in foreign currency, a decrease in the value of
foreign currencies relative to the United States dollar could result in losses
from such transactions. In such event, the Company might seek to limit its
exposure to foreign currency transactions by engaging in hedging activities.
There can be no assurance that any such activity would be successful in
avoiding exchange-related losses. With respect to the Company's international
sales that are United States dollar denominated, an increase in the relative
value of the U.S. dollar could make the Company's systems less price-
competitive, or could cause
14
<PAGE>
customers to renegotiate prices for subsequent purchases, both of which could
have a material adverse effect upon the Company's business and operating
results. Additional risks inherent in the Company's international business
activities include delays due to customs inspections and procedures, changes
in regulatory requirements, tariffs and other trade barriers, political and
economic instability in developing countries, difficulties in staffing and
managing foreign operations, difficulties in managing distributors,
potentially adverse tax consequences, the burden of complying with a wide
variety of complex foreign laws and treaties, difficulties in obtaining
necessary equipment authorizations and the possibility of difficulty in
accounts receivable collections. Distribution and sales agreements entered
into with foreign customers may be governed by foreign laws which may differ
significantly from U.S. laws. Therefore, the Company may be limited in its
ability to enforce its rights under such agreements and to collect damages, if
awarded. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business and operating results.
To date, the Company has sold its products directly to cellular network
operators. In the future, it may be desirable to establish distribution
relationships in the international market. The Company has not established any
distribution relationships and there can be no assurance that the Company will
be able to establish such distribution relationships on acceptable terms, if
at all. The failure to establish any distribution relationships, or the
failure to implement an alternative distribution strategy in a cost-effective
manner, or any delays in establishing such channels, could reduce or eliminate
the Company's opportunity to sell its systems in foreign markets, which could
have a material adverse effect on the Company's business and operating
results. Further, if the Company is unable to produce and sell its systems at
margins that permit it to provide distribution partners with a sufficient
financial incentive to distribute the Company's systems without adversely
affecting the Company's profitability, the Company's distribution strategy
could adversely affect the Company's business and operating results.
Risks Associated with Potential Acquisitions. The Company intends to review
acquisition prospects that would complement its existing product offerings,
augment its market coverage or enhance its technological capabilities.
Although the Company has no current agreements or negotiations underway with
respect to any material acquisitions, the Company may make acquisitions of
businesses, products or technologies in the future. However, there can be no
assurance that the Company will be able to locate suitable acquisition
opportunities. Future acquisitions by the Company could result in potentially
dilutive issuances of equity securities, large write-offs, the incurrence of
debt and contingent liabilities or amortization expenses related to goodwill
and other intangible assets, any of which could materially adversely affect
the Company's operating results or the price of the Company's Common Stock.
Further, acquisitions entail numerous operational risks, including
difficulties in the assimilation of operations, potential loss of key
employees, technologies, products and the information systems of the acquired
companies, diversion of management's attention from other business concerns
and risks of entering geographic and business markets in which the Company has
no or limited prior experience. Since the Company has not made any material
acquisitions in the past, no assurance can be given as to the ability of the
Company to successfully integrate any businesses, products, technologies or
personnel that might be acquired in the future, and the failure of the Company
to do so could have a material adverse effect on the Company's business and
operating results.
Government Regulation. Wireless communications are subject to extensive
regulation by foreign and U.S. laws and international treaties. The Company's
systems must conform to certain international and domestic regulations
established to, among other things, avoid interference among users of
frequencies. In order for the Company's products to be used, regulatory
approval must be obtained. This governmental approval process frequently
involves substantial delay which could result in the cancellation,
postponement or rescheduling of orders by the Company's customers, which in
turn may have a material adverse effect on the sale of systems by the Company
to such customers. The Company believes that its SpotLight 2000 system
currently complies with all applicable U.S. and foreign regulations in
countries in which its sales are material. However, changes in these
regulations, the need to comply with regulations
15
<PAGE>
in additional countries in the event of sales to cellular network operators in
those countries, or a failure to obtain necessary approvals or permits in
connection with sales to cellular network operators in a country could
preclude sales of the Company's products to such operators or could require
the Company to change the features of its SpotLight 2000 system and thereby
incur substantial costs and experience delays in system installation or
operation.
The regulatory environments in which the Company operates are subject to
significant change. Regulatory changes, which are affected by political,
economic and technical factors, could significantly affect the Company's
operations by increasing or reallocating the amount of spectrum available to
wireless operators, restricting network development efforts by the Company's
customers or end users, making current systems obsolete, increasing the
opportunity for additional competition or requiring the Company's products to
comply with new regulations. Any such regulatory changes could have a material
adverse effect on the Company's business and operating results. The Company
might deem it necessary or advisable to modify its systems to operate in
compliance with such regulations. Such modifications could be expensive and
time-consuming. See "--Risks Associated with International Markets" and
"Business--Government Regulation."
Uncertainty Regarding Protection of Intellectual Property. The Company
relies on a combination of patent, trade secret, copyright and trademark
protection, nondisclosure agreements and other measures to protect its
proprietary rights. The Company currently has eight issued U.S. patents and 25
pending U.S. patent applications. The Company's future success will depend in
large part on its ability to obtain patent protection in the U.S. and foreign
markets, to defend patents once obtained, to maintain trade secrets and to
operate without infringing upon the patents and proprietary rights of others.
The patent positions of companies in the worldwide wireless communications
industry, including the Company, are generally uncertain and involve complex
legal and factual questions. There can be no assurance that any issued patents
owned by or licensed to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company. Further, there can be no assurance that patents
will issue from any patent applications or that, if patents do issue, the
claims allowed would be sufficiently broad to protect the Company's
technology. In addition, there can be no assurance that patents issued in the
U.S. will receive corresponding patent protection in foreign markets or that
the Company will pursue similar patent protection in all foreign markets.
Patents and patent applications relating to products used in the wireless
communications industry are numerous and current and potential competitors and
other third parties may have filed or may in the future file applications for,
or may have been issued or in the future may be issued, patents or may obtain
additional proprietary rights relating to products used or proposed to be used
by the Company. The Company may not be aware of all patents or patent
applications that may materially affect the Company's ability to make, use or
sell any current or future products. From time to time, third parties have
asserted patent, copyright and other intellectual property rights to
technologies that are important to the Company. The Company expects that it
will increasingly be subject to infringement claims as the number of products
and competitors in the spectrum management market grows and the functionality
of products overlaps. Third parties may assert infringement claims against the
Company in the future, and such assertions could result in costly litigation
or require the Company to obtain a license to intellectual property rights of
such parties. There can be no assurance that any such licenses would be
available on terms acceptable to the Company, if at all. Any failure to obtain
a license from any third party asserting claims in the future or defense of
any third party lawsuit could have a material adverse effect on the Company's
business and operating results.
The Company also relies on unpatented trade secrets to protect its
proprietary technology, and there can be no assurance that others will not
independently develop or otherwise acquire the same or substantially
equivalent technologies or otherwise gain access to the Company's proprietary
technology or disclose such technology or that the Company can ultimately
protect its rights to such unpatented
16
<PAGE>
proprietary technology. Further, third parties may obtain patent rights to
such unpatented trade secrets, which patent rights could be used to assert
infringement claims against the Company. The Company also relies on
confidentiality agreements with its employees, suppliers, consultants and
customers to protect its proprietary technology. There can be no assurance
that these agreements will not be breached, that the Company would have
adequate remedies for any breach or that the Company's trade secrets will not
otherwise become known to or be independently developed by competitors.
Failure to obtain or maintain patent and trade secret protection, for any
reason, could have a material adverse effect on the Company's business and
operating results. See "Business--Intellectual Property."
Year 2000 Compliance. Many existing computer systems and applications, and
other control devices, use only two digits to identify a year in the date
field, without considering the impact of the upcoming change in the century.
As a result, such systems and applications could fail or create erroneous
results unless corrected so that they can process data related to the year
2000. The Company relies on its systems, applications and devices in operating
and monitoring all major aspects of its business, including financial and
accounting systems, customer services, networks and telecommunications
equipment and end products. The Company also relies, directly and indirectly,
on external systems of business enterprises such as customers, suppliers,
creditors, financial organizations, and of governmental entities, both
domestic and international, for accurate exchange of data. The Company's
current estimate is that the costs associated with the year 2000 issue, and
the consequences of incomplete or untimely resolution of the year 2000 issue,
will not have a material adverse effect on the result of operations or
financial position of the Company in any given year. However, despite the
Company's efforts to address the year 2000 impact on its internal systems, the
Company has not fully identified such impact or whether it can resolve it
without disruption of its business and without incurring significant expense.
In addition, even if the internal systems of the Company are not materially
affected by the year 2000 issue, the Company could be affected through
disruption in the operation of the enterprises with which the Company
interacts.
No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering, there has been no public market for the Common Stock. The initial
public offering price of the Common Stock will be determined by negotiations
between the Company and the Representatives of the Underwriters and may not be
indicative of the market price for the Common Stock in the future. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. There can be no assurance that an active
trading market will develop or be sustained after this offering. The Company
believes that factors such as announcements of developments related to the
Company's business, announcements of technological innovations or new products
or enhancements by the Company or its competitors, sales by competitors,
including sales to the Company's customers, sales of the Company's Common
Stock into the public market, including by members of management, developments
in the Company's relationships with its customers, partners, distributors and
suppliers, shortfalls or changes in revenues, gross profits, earnings or
losses or other financial results from analysts' expectations, regulatory
developments, fluctuations in results of operations, and general conditions in
the Company's market, of the markets served by the Company's customers, or the
economy could cause the price of the Company's Common Stock to fluctuate,
perhaps substantially. In addition, in recent years the stock market, in
general, and the market for shares of small capitalization and technology
stocks in particular, have experienced extreme price fluctuations, which have
often been unrelated to the operating performance of affected companies. There
can be no assurance that the market price of the Company's Common Stock will
not experience significant fluctuations in the future, including fluctuations
that are unrelated to the Company's performance. Such fluctuations could
materially adversely affect the market price of the Company's Common Stock.
Broad Discretion of Management to Allocate Offering Proceeds. The Company
will use approximately $16.2 million to repay one-half of the outstanding
principal and estimated interest on its 13.75% Senior Secured Bridge Notes and
the remaining $31.8 million for working capital and other general corporate
purposes including working capital to fund anticipated operating losses and
capital
17
<PAGE>
expenditures. The Company may, when and if the opportunity arises, use a
portion of the proceeds to acquire or invest in complimentary business,
products or technologies. The Company's management will have broad discretion
to allocate the remaining proceeds of this offering, and the amounts actually
expended for each use listed above may vary significantly depending on a
number of factors, including the amount of future revenues, the amount of cash
generated or used by the Company's operations, the progress of the Company's
product development efforts, technological advances, and the status of
competitive products. There can be no assurance that the proceeds will be
utilized in a manner that the stockholders deem optimal, or that the proceeds
can or will be invested to yield a significant return.
Shares Eligible for Future Sale After the Offering. Sales of substantial
amounts of Common Stock in the public market after this offering or the
anticipation of such sales could materially affect then prevailing market
prices. All of the 5,000,000 shares offered hereby may be resold immediately
in the public market. Beginning 90 days after the date of this Prospectus,
approximately 298,155 additional shares may be resold in the public market.
Beginning 180 days after the date of this Prospectus, upon expiration of pre-
existing lock-up agreements and lock-up agreements between the representatives
of the Underwriters and officers, directors and certain stockholders of the
Company, approximately 915,774 total shares will be eligible for sale without
restriction under Rule 144(k) or Rule 701 under the Securities Act of 1933, as
amended (the "Securities Act"), and 14,941,348 shares will be eligible for
sale subject to compliance with the restrictions of Rule 144 and, under
certain circumstances, Rule 701 under the Securities Act. Any early release of
the lock-up agreement by the Underwriters, which, if granted, could permit
sales of a substantial number of shares and could adversely affect the trading
price of the Company's shares, may not be accompanied by an advance public
announcement by the Company. Holders of approximately 15,338,305 shares of
Common Stock and the holders of the Note Warrants (the "Registrable
Securities") also will have the right to include such shares in any future
registration of securities effected by the Company and to require the Company
to register their shares for future sale, subject to certain exceptions. See
"Description of Securities--Registration Rights of Certain Holders" and
"Shares Eligible for Future Sale."
Control by Existing Stockholders. Following the completion of this offering,
members of the Board of Directors and the officers of the Company, together
with entities that may be deemed affiliates of or related to such persons or
entities, will beneficially own approximately 58.4% (approximately 56.5% on a
fully diluted basis, assuming the exercise of all warrants and vested and
unvested options held by such persons and outstanding at June 30, 1998) of the
outstanding shares of Common Stock of the Company. Accordingly, these
stockholders are able to significantly influence the election of the members
of the Company's Board of Directors and significantly influence the outcome of
corporate actions requiring stockholder approval, such as mergers and
acquisitions. This level of ownership may have a significant effect in
delaying, deferring or preventing a change in control of the Company and may
adversely affect the voting and other rights of other holders of Common Stock.
See "Management--Directors and Executive Officers," "--Principal Stockholders"
and "Description of Capital Stock."
Effect of Certain Charter and Bylaw Provisions. Certain provisions of the
Company's Restated Certificate of Incorporation and Bylaws may have the effect
of making it more difficult for a third party to acquire or of discouraging a
third party from attempting to acquire, control of the Company. Such
provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock. Certain of these
provisions allow the Company to issue up to 15,000,000 shares of Preferred
Stock and fix the rights and preferences thereof without any vote or further
action by the stockholders, eliminate the right of stockholders to act by
written consent without a meeting and eliminate cumulative voting in the
election of directors. The rights of holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred
Stock that may be issued in the future. These provisions may make it more
difficult for stockholders to take certain corporate actions and could have
the effect of delaying or preventing a change in control of the Company.
Certain provisions of Delaware law and Washington law applicable to the
Company could also delay or make more difficult a merger, tender offer or
proxy contest involving the Company. Such provisions include Section
18
<PAGE>
203 of the Delaware General Corporation Law, which prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years unless certain conditions are met, and
Chapter 23B.19 of the Washington Business Corporation Act, which prohibits a
corporation operating in Washington from engaging in certain significant
business transactions with a person or group of persons who beneficially own
10% of the voting securities of such corporation for a period of five years
unless certain conditions are met. After the five-year period, such
significant business transaction must still comply with certain fair price
provisions of such statute. See "Management" and "Description of Securities--
Anti-Takeover Provisions of Delaware and Washington Law and Charter
Documents."
Immediate and Substantial Dilution. Investors in Common Stock in this
offering will experience immediate dilution in the net tangible book value of
their shares. At the initial public offering price of $10.50 per share,
dilution to new investors will be $8.00 per share. Additional dilution will
occur upon exercise of outstanding stock options and warrants. If the Company
seeks additional capital in the future, the issuance of shares or convertible
debt to obtain such capital may lead to further dilution. See "Dilution."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale and issuance of the 5,000,000
shares of Common Stock offered hereby, at an assumed initial public offering
price of $10.50 per share, are estimated to be $48.0 million ($55.3 million if
the Underwriters' over-allotment option is exercised in full). The Company
will use approximately $16.2 million of the net proceeds to repay one-half of
the outstanding principal and estimated accrued interest on its 13.75% Senior
Secured Bridge Notes and the remaining proceeds for general corporate
purposes, including working capital to fund anticipated operating losses and
capital expenditures. The Company may, when and if the opportunity arises, use
a portion of the proceeds to acquire or invest in complimentary business,
products or technologies. The Company's management will have broad discretion
to allocate the remaining proceeds of this offering, and the amounts actually
expended for each use listed above may vary significantly depending on a
number of factors, including the amount of future revenues, the amount of cash
generated or used by the Company's operations, the progress of the Company's
product development efforts, technological advances, and the status of
competitive products. Pending such uses, the Company intends to invest such
funds in short-term, investment grade, interest-bearing obligations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock or other securities. The Company currently anticipates that its will
retain all of its future earnings for use in the expansion and operation of
its business and does not anticipate paying cash dividends in the foreseeable
future. See Note 5 of Notes to Financial Statements.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998 (i) on an actual basis the conversion of convertible and redeemable
Preferred Stock to Common Stock and the conversion of Preferred Stock warrants
to Common Stock warrants, and the receipt by the Company of the net proceeds
from the sale of the 5,000,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $10.50 per share, (ii)
and as adjusted to give effect to the sale by the Company of the 5,000,000
shares of Common Stock offered hereby at an assumed offering price of $10.50
per share, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company, and the
application of the estimated proceeds therefrom as set forth in "Use of
Proceeds." This table should be read in conjunction with the Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30,
1998
-----------------
AS
ACTUAL ADJUSTED
------- --------
(IN THOUSANDS)
<S> <C> <C>
13.75% Senior Secured Bridge Notes........................... $29,708 $13,508
Other debt, including capital lease obligations.............. 5,392 5,392
Convertible and redeemable preferred stock................... 49,282 --
Convertible and redeemable preferred stock warrants.......... 4,423 --
Stockholders' equity:........................................
Preferred stock, 20,000,000 shares authorized, 13,130,350
shares which have been designated as convertible and
redeemable, actual; 15,000,000 shares authorized, none
issued or outstanding, as adjusted........................ -- --
Common stock, 40,000,000 shares authorized, 3,035,927
shares issued and outstanding, actual; 150,000,000 shares
authorized, 21,166,277 shares issued and outstanding, as
adjusted(1)............................................... 2,162 103,867
Deferred stock compensation.................................. (877) (877)
Accumulated deficit.......................................... (50,082) (50,082)
------- -------
Total stockholders' equity (deficit)..................... (48,797) 52,908
------- -------
Total capitalization..................................... $40,008 $71,808
======= =======
</TABLE>
- --------
(1) Based on the number of shares outstanding on June 30, 1998. Excludes as of
June 30, 1998 (a) 3,277,760 shares issuable upon exercise of outstanding
options at a weighted average exercise price of $1.49 per share as of June
30, 1998, (b) 657,005 shares issuable upon exercise of outstanding
warrants at a weighted average exercise price of $0.60 per share as of
such date and (c) an aggregate of 2,010,639 shares available for future
issuance of stock options under the 1995 Stock Option Plan, the 1998 Stock
Option Plan, the Directors' Plan and the Purchase Plan. See "Management--
Stock Plans" and Note 6 of the Notes to Financial Statements.
21
<PAGE>
DILUTION
As of June 30, 1998, the Company had a pro forma net tangible book value of
approximately $4.9 million, or $0.30 per share of Common Stock. Pro forma net
tangible book value represents total tangible assets less total liabilities
divided by the pro forma number of shares of Common Stock outstanding,
assuming the conversion of convertible and redeemable Preferred Stock to
Common Stock and the conversion of Preferred Stock warrants to Common Stock
warrants. Without taking into account any other changes in the pro forma net
tangible book value after June 30, 1998, other than to give effect to the
receipt by the Company of the net proceeds from the sale of the 5,000,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $10.50 per share, and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company, the pro forma net tangible book value at June 30, 1998 would
have been approximately $52.9 million, or $2.50 per share. This represents an
immediate increase in net tangible book value of $2.20 per share to existing
stockholders and an immediate dilution of $8.00 per share to new investors
purchasing shares in this offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $10.50
Pro forma net tangible book value per share as of June 30,
1998........................................................ $0.30
Increase per share attributable to new investors............. 2.20
-----
Pro forma net tangible book value per share after the offering. 2.50
------
Dilution per share to new investors............................ $ 8.00
======
</TABLE>
The following table summarizes, on a pro forma basis, as of June 30, 1998,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by (i) existing
stockholders and (ii) new investors (before deducting estimated underwriting
discounts and commissions and offering expenses payable by the Company):
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ -------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 16,166,277 76.4% $ 49,562,804 48.6% $ 3.07
New investors............... 5,000,000 23.6 52,500,000 51.4% 10.50
---------- ----- ------------ -----
Total..................... 21,166,277 100.0% $102,062,804 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) Based on the pro forma number of shares outstanding on June 30, 1998.
Excludes as of June 30, 1998 (a) 3,277,760 shares issuable upon exercise
of outstanding options at a weighted average exercise price of $1.49 per
share as of June 30, 1998, (b) 657,005 shares issuable upon exercise of
outstanding warrants at a weighted average exercise price of $0.60 per
share as of such date and (c) an aggregate of 2,010,639 shares available
for future issuance under the 1995 Stock Option Plan, the 1998 Stock
Option Plan, the Directors' Plan and the Purchase Plan. See "Management--
Stock Plans" and Note 6 of Notes to Financial Statements.
22
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data for the period from January 19, 1995
(inception) to December 31, 1995, and for the years ended December 31, 1996
and 1997 and the balance sheet data as of December 31, 1996 and 1997, have
been derived from the audited financial statements of the Company included
elsewhere in this Prospectus that have been audited by Ernst & Young LLP,
independent auditors. The balance sheet data as of December 31, 1995 have been
derived from the audited financial statements of the Company not included
herein. The statement of operations data for the six months ended June 30,
1997 and 1998 and the balance sheet data at June 30, 1998 are derived from
unaudited financial statements included elsewhere in this Prospectus and
contain all adjustments, consisting of normal recurring accruals, necessary
for a fair presentation of the financial position and results of operations
for such periods. The results of operations for the six months ended June 30,
1998 are not necessarily indicative of results to be expected for the full
fiscal year. The data set forth below should be read in conjunction with the
financial statements of the Company, including the notes thereto, and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 19, 1995 YEAR ENDED SIX MONTHS ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------ -----------------
1995 1996 1997 1997 1998
---------------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $ -- $ 1,291 $ 1,450 $ 392 $ 6,501
Cost of sales........... -- 1,097 1,728 516 6,396
------- -------- -------- ------- --------
Gross profit (loss)..... -- 194 (278) (124) 105
------- -------- -------- ------- --------
Operating expenses:
Research and
development............ 883 7,186 13,083 5,365 8,025
Sales and marketing..... 84 1,704 5,383 2,244 4,087
General and
administrative......... 168 2,434 3,762 1,367 2,429
------- -------- -------- ------- --------
Total operating
expenses............... 1,135 11,324 22,228 8,976 14,541
------- -------- -------- ------- --------
Loss from operations.... (1,135) (11,130) (22,506) (9,100) (14,436)
Other income (expense),
net.................... 135 335 402 173 (1,747)
------- -------- -------- ------- --------
Net loss................ $(1,000) $(10,795) $(22,104) $(8,927) $(16,183)
======= ======== ======== ======= ========
Pro forma net loss per
share(1)............... $ (1.54) $ (1.01)
======== ========
Weighted average common
shares and equivalents
pro forma(1)........... 14,383 16,061
======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1998
--------------------------- ----------------------
1995 1996 1997 ACTUAL PRO FORMA(2)
------- -------- -------- -------- ------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.............. $ 1,422 $ 19,092 $ 13,334 $ 20,311 20,311
Working capital........... 4,280 17,722 15,677 3,787 3,787
Total assets.............. 6,135 21,747 22,575 46,557 46,557
13.75% Senior Secured
Bridge Notes............. -- -- -- 29,708 29,708
Other debt................ 128 2,319 4,147 5,392 5,392
Convertible and redeemable
preferred stock.......... 5,500 30,100 49,282 49,282 --
Convertible and redeemable
preferred stock
warrants................. -- -- 128 4,423 --
Accumulated deficit....... (1,000) (11,795) (33,899) (50,082) (50,082)
Stockholders' equity
(deficit)................ (990) (11,785) (33,136) (48,797) 4,908
</TABLE>
- --------
(1) See Note 1 of Notes to Financial Statements for an explanation of the
method employed to compute per share amounts to determine the number of
shares used in computing pro forma net loss per share.
(2) Adjusted to reflect the conversion of convertible and redeemable Preferred
Stock into Common Stock and the conversion of Preferred Stock warrants to
Common Stock warrants. See "Description of Securities."
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
included elsewhere in this Prospectus. The discussion in this Prospectus
contains forward-looking statements that involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to such
differences include those discussed in "Risk Factors," as well as those
discussed elsewhere herein. See "Risk Factors."
OVERVIEW
Metawave designs, develops, manufactures and markets spectrum management
solutions for the wireless communications industry. Metawave's spectrum
management solutions, consisting of smart antenna systems, applications
software and engineering services, enable cellular network operators to
increase overall network capacity, reduce network operation costs, better
manage network infrastructure and stimulate end user demand through improved
system quality. Using its proprietary technologies, the Company has developed
products that address the capacity, coverage, and call quality problems faced
by cellular network operators.
The Company was incorporated in January 1995. Net revenue since inception
has been attributable to an engineering consulting contract in 1996, services
rendered by the Company's Network Services division during 1997 and sales of
the SpotLight 2000 system during the six months ended June 30, 1998. The
Company's Network Services division was discontinued during the first quarter
of 1998. Since inception, the Company has incurred significant losses and as
of June 30, 1998, had an accumulated deficit of $50.1 million.
From inception through June 30, 1998, the Company's operating activities
related primarily to conducting research and development, building market
awareness, recruiting management and technical personnel and building an
operating infrastructure. In 1997, the Company hired a new Chief Executive
Officer and a new Chief Financial Officer and added managerial personnel in
the engineering, product management, sales and administrative areas. Shipment
for commercial sale of the SpotLight 2000 system began late in the fourth
quarter of 1997. Since launching its SpotLight 2000 system, the Company has
increased operating expenditures in an effort to increase sales and expand
manufacturing capacity. In light of the progression of the Company from a
development stage to an operating stage during the past two years, the Company
believes that period to period comparisons of its financial results should not
be relied upon as an indicator of future performance.
There are two components of net revenue attributable to the SpotLight 2000
system, product revenue and service revenue. Product revenue is comprised of
both the sale of hardware and the licensing of software. Service revenue is
derived from installation, consulting services and maintenance contracts. The
Company believes that substantially all of its revenues in the foreseeable
future will be derived from sales of its SpotLight 2000 system. Sales cycles
can be lengthy and the related contracts typically include performance
specifications and customer acceptance conditions in connection with the
initial sale of each system to each customer. The Company recognizes net
revenue when the product has been shipped and all customer acceptance
conditions have been satisfied. The Company recognizes service revenue when
the services have been performed. If the Company does not satisfy conditions
in such contracts or satisfaction of conditions is delayed, revenues in any
particular period could fall significantly below the Company's expectations.
Contract terms, including pricing and acceptance criteria, will typically vary
depending upon the order, and the nature and extent of installation and
consulting services. Consequently, net revenue may vary from quarter to
quarter depending on the length of the sales cycle
24
<PAGE>
and the applicable contract terms. If anticipated sales and shipments in any
quarter do not occur when expected, expenses and inventory levels could be
disproportionately high.
Cost of sales typically consists of material components, manufacturing
assembly and test, and overhead expenses. The Company believes that for its
SpotLight 2000 system to achieve broad market acceptance and compete
effectively with alternative systems, the Company's average selling prices
must decline. In order to achieve lower average selling prices without
adversely affecting gross profits, the Company must successfully reduce the
manufacturing costs of its product through engineering improvements and
economies of scale in production and purchasing. There can be no assurance,
however, that the Company will be able to achieve cost savings at a rate
necessary to keep pace with competitive pricing pressures. The Company expects
that its gross margins will continue to be affected by a variety of other
factors, including increased investment in manufacturing facilities and
equipment, changes in labor costs, changes in product mix due to a shift from
analog-only to analog/CDMA dual-mode system sales, changes in warranty expense
or inventory obsolescence, increased sourcing and changes in prices of
components and subassemblies from third party manufacturers and increased
price competition.
The Company's manufacturing operations consist primarily of supplier and
commodity management and assembling finished goods from components and
subassemblies purchased from outside suppliers. In May 1998, the Company moved
to significantly larger facilities to accommodate the Company's current
research, development and manufacturing needs in the near term. The Company
plans to further expand its manufacturing capacity in the future if and to the
extent the Company's products achieve market acceptance and demand increases.
If such expansion occurs, substantial investments in additional capital
equipment and the recruiting and training of additional personnel will be
required, which may include increased sourcing of components from third
parties as well as increased system integration and full-configuration testing
or investment in additional manufacturing facilities. See "Risk Factors--
Limited Manufacturing Experience; No Assurance of Successful Expansion of
Operations."
The Company recently upgraded its financial and accounting software to an
enterprise resource planning software package that integrates manufacturing,
finance and sales order management. The Company anticipates that additional
upgrades to its management information systems will be required in the near
future to address the expected increased volume and complexity of the
Company's transactions. See "Risk Factors--Management of Growth; New
Management Team."
Research and development expense consists principally of salaries and
related personnel expenses, consultant fees and prototype expenses related to
the design, development, testing and enhancement of the Company's SpotLight
2000 system. As of June 30, 1998, all research and development costs had been
expensed as incurred. The Company believes that continued investment in
research and development is critical to attaining its strategic product and
cost reduction objectives and, as a result, expects these expenses to increase
significantly in absolute dollars in the future. Sales and marketing expense
consists of salaries, sales commissions and related expenses for personnel
engaged in marketing, sales and field service support functions, as well as
promotional expenditures. The Company expects sales and marketing expense to
increase significantly in absolute dollars in the future. General and
administrative expense consists primarily of salaries and personnel related
expenses, recruiting expenses, professional fees and other general corporate
expenses. The Company expects general and administrative expense to increase
in absolute dollars as the Company adds personnel and incurs additional costs
related to the growth of its business and operation as a public company.
The revenue and profit potential of the Company's business is unproven and
the Company's limited operating history makes its future operating results
difficult to predict. The Company believes that its growth and future success
will be dependent upon the broad acceptance of the SpotLight 2000 system by
cellular network operators. Because the SpotLight 2000 system was only
recently introduced, the Company is unable to predict with any degree of
certainty whether it will achieve market acceptance.
25
<PAGE>
There can be no assurance that the Company will ever achieve profitability or
significant revenues on a quarterly or an annual basis. Because of the limited
size of the Company's customer base and the large size of customer orders,
revenues derived from a small number of customers will likely represent a
significant portion of revenue in any given period. Thus, a decrease in demand
for the Company's systems from any customer for any reason is likely to result
in significant periodic fluctuations in revenue. Due to the highly
concentrated nature of the cellular industry, the Company believes that the
number of potential customers for future products, if any, will be small.
Failure by the Company to capture a significant number of the cellular network
operators as customers could have a material adverse effect on the Company's
business and operating results. See "Risk Factors--Limited Operating History;
Accumulated Deficit; Anticipated Losses," "--Significant Fluctuations in
Operating Results," "--Significant Customer Concentration" and "--Uncertainty
of Market Acceptance; Lengthy Sales Cycle."
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Net Revenue. Net revenue for the six months ended June 30, 1998 was $6.5
million, substantially all of which was derived from sales of the Motorola
HDII analog version of the Spotlight 2000 system to three customers. Net
Revenue for the six months ended June 30, 1997 was $392,000 all of which was
service revenue. International sales were 51.5% of net revenue for the six
months ended June 30, 1998. Although the Company anticipates that
international sales will continue to account for a significant portion of its
sales, the Company expects international sales to decrease as a percentage of
net revenue.
Gross Profit (Loss). Cost of sales was $6.4 million and gross profit was
$105,000 for the six months ended June 30, 1998. Gross profit was adversely
affected by unabsorbed fixed manufacturing overhead costs due to the expansion
of manufacturing capacity in advance of unit sales volume increases.
Additionally, increases to the warranty and inventory obsolescence reserves
negatively impacted gross profit. Cost of sales was $516,000 and gross profit
(loss) was $(124,000) for the six months ended June 30, 1997. Cost of sales in
this period reflected the direct costs of the Network Services division
related supplies and expenses, and gross profit (loss) was adversely affected
by these relatively high fixed costs.
Research and Development. For the six months ended June 30, 1998, research
and development expense was $8.0 million, of which $5.0 million was payroll
and benefits. For the six months ended June 30, 1997, research and development
expense was $5.4 million, of which $3.4 million was payroll and benefits. The
increase in research and development expense was primarily attributable to
increased staffing, prototype material costs and other associated expenses
relating to enhancing the features and functionality of the SpotLight 2000
system.
Sales and Marketing. For the six months ended June 30, 1998, sales and
marketing expense was $4.1 million, of which $2.2 million was payroll and
benefits. For the six months ended June 30, 1997, sales and marketing expense
was $2.2 million, of which $1.4 million was payroll and benefits. The increase
in sales and marketing expense was primarily attributable to expansion of the
Company's direct sales force, as well as increased public relations and other
promotional expenditures.
General and Administrative. For the six months ended June 30, 1998, general
and administrative expense was $2.4 million, of which $1.8 million was
payroll, $360,000 was in connection with certain patent license agreements and
$255,000 was stock compensation charges. For the six months ended June 30,
1997, general and administrative expense was $1.4 million, of which
$1.2 million was payroll and related expenses. The increase in general and
administrative expense was primarily attributable to increased personnel and
facility expenses necessary to support the Company's growth. The stock
compensation charge for the six months ended June 30, 1998 also contributed to
the increase over the prior year.
Deferred Stock Compensation. In connection with the grant of certain stock
options during 1997, the Company recorded aggregate deferred stock
compensation of approximately $1.9 million,
26
<PAGE>
representing the difference between the deemed value of the Common Stock for
accounting purposes and the option exercise price of such options at the date
of grant. Such amount is recorded as deferred stock compensation and amortized
ratably over the vesting period as stock compensation expense. For the six
months ended June 30, 1998, stock compensation expense was $328,000. For the
six months ended June 30, 1997, the Company recorded deferred stock
compensation of $224,000 and amortized a stock compensation expense of
$22,000. For the year ended December 31, 1997, the aggregate stock
compensation expense was $676,000.
Interest Expense and Net Other Income. Interest expense increased to $2.2
million for the six months ended June 30, 1998, compared to $236,000 for the
six months ended June 30, 1997. The increase was primarily attributable to the
$2.0 million interest expense and associated fees to secure the $29.0 million
of 13.75% Senior Secured Bridge Notes. Net other income consists primarily of
earnings on the Company's cash and cash equivalents and short-term
investments. Net other income increased to $484,000 for the six months ended
June 30, 1998, from $409,000 for the six months ended June 30, 1997. The
increase was attributable to higher average cash and cash equivalent balances.
Income Taxes. The Company has had a net loss for each period since
inception. As of June 30, 1998, the Company had approximately $39.3 million of
net operating loss carryforwards and $1.0 million of research and development
credit carryforward for federal income tax purposes, which begin to expire in
2009. The Company has provided a full valuation allowance on the deferred tax
asset, consisting primarily of net operating loss carryforward, because of
uncertainty regarding its realizability. See Note 7 of Notes to Financial
Statements.
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (INCEPTION PERIOD)
Net Revenue. Net revenue for 1997 and 1996 was $1.5 million and $1.3
million, respectively, and was attributable to services provided by the
Network Services division in 1997 and a one-time engineering consulting
contract in 1996. During 1995, the Company was primarily engaged in product
development and accordingly, recorded no revenue. The Network Services
division was discontinued in March 1998.
Gross Profit (Loss). Cost of sales was $1.7 million and gross profit (loss)
was $(278,000) for the year ended December 31, 1997. Gross profit (loss) in
1997 was adversely affected by the high fixed cost of the Network Services
division during its initial year of operation. Cost of sales in this period
consists primarily of direct labor and materials related to services rendered
in generating the revenue for the period. Cost of sales was $1.1 million and
gross profit was $194,000 for the year ended December 31, 1996. Gross profit
in 1996 was attributable to a one-time engineering consulting contract.
Research and Development. Research and development expense was $13.1
million, $7.2 million and $883,000 in 1997, 1996 and 1995, respectively. The
increases in research and development expense were primarily attributable to
increased staffing and associated costs related to product development. During
1997, research and development expense also included the design and
development of manufacturing infrastructure that was initially used for
prototyping activities.
Sales and Marketing. Sales and marketing expense was $5.4 million, $1.7
million and $84,000 in 1997, 1996 and 1995, respectively. The increases in
sales and marketing expense were primarily attributable to expansion of the
Company's direct sales force and costs associated with initial field trials of
the SpotLight 2000 system.
General and Administrative. General and administrative expense was $3.8
million, $2.4 million and $168,000 in 1997, 1996 and 1995, respectively. The
increases in general and administrative expense were primarily attributable to
increased payroll and related expenses in hiring additional personnel and
increased occupancy expenses necessary to support the Company's growth.
Interest Expense and Net Other Income. Interest expense was $449,000,
$150,000 and $22,000 in 1997, 1996 and 1995, respectively. The increases in
interest expense were primarily attributable to increased capital lease
obligations and notes payable. Net other income was $851,000, $485,000 and
27
<PAGE>
$157,000 in 1997, 1996 and 1995, respectively. The increases in net other
income were primarily attributable to interest income resulting from higher
cash and cash equivalent balances and short-term investments.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly statement of
operations data for the six quarters ended June 30, 1998. In the opinion of
management, this information has been prepared substantially on the same basis
as the audited financial statements appearing elsewhere in this Prospectus,
and all necessary adjustments, (consisting only of normal recurring
adjustments) have been included in the amounts stated below to present fairly
the unaudited quarterly results. The quarterly data should be read in
conjunction with the audited financial statements of the Company and the notes
thereto appearing elsewhere in this Prospectus. Such quarterly operating
results are not necessarily indicative of the operating results for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
JUNE SEPT. DEC. JUNE
MARCH 31, 30, 30, 31, MARCH 31, 30,
1997 1997 1997 1997 1998 1998
--------- ------- ------- ------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue............. $ 129 $ 263 $ 547 $ 511 $ 2,538 $ 3,963
Cost of sales........... 114 402 557 655 2,910 3,486
------- ------- ------- ------- ------- -------
Gross profit (loss)..... 15 (139) (10) (144) (372) 477
------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 2,693 2,672 3,559 4,159 3,575 4,450
Sales and marketing... 922 1,322 1,753 1,385 1,996 2,091
General and
administrative....... 655 712 1,073 1,322 1,044 1,385
------- ------- ------- ------- ------- -------
Total operating
expenses........... 4,270 4,706 6,385 6,866 6,615 7,926
------- ------- ------- ------- ------- -------
Operating loss.......... (4,255) (4,845) (6,395) (7,010) (6,987) (7,449)
Other income, net....... 204 205 191 250 165 319
Interest expense........ (99) (136) (90) (124) (152) (2,079)
------- ------- ------- ------- ------- -------
Net loss................ $(4,150) $(4,776) $(6,294) $(6,884) $(6,974) $(9,209)
======= ======= ======= ======= ======= =======
Pro forma net loss per
share.................. $ (0.31) $ (0.36) $ (0.43) $ (0.43) $ (0.44) $ (0.57)
======= ======= ======= ======= ======= =======
</TABLE>
The Company's net revenue for the quarters in 1997 consisted primarily of
service revenue. Net revenue for the quarters ended March 31, 1998 and June
30, 1998 was primarily attributable to sales of the Company's SpotLight 2000
system.
The significant fluctuations in the Company's historical quarterly operating
results are principally a function of the fact that the Company was a
development stage company through the latter part of the fourth quarter of
1997. These fluctuations are largely explained by significant increases and
large variations in expenses incurred in connection with the transition from
development stage to operating stage. Operating expense increased in each
quarter, primarily reflecting the increased expenditures related to the
Company's product development and its expanding workforce.
The Company will likely experience significant fluctuations in its operating
results on a quarterly and an annual basis in the future. In connection with
its efforts to increase production of its recently introduced SpotLight 2000
system, the Company expects to continue to make substantial investments in
capital equipment, to recruit and train additional personnel and to invest in
facilities and management information systems. These expenditures may be made
in advance of, and in anticipation of, increased sales and, therefore, gross
profits may be adversely affected by short-term inefficiencies associated with
the addition of equipment, personnel or facilities and costs may increase as a
percentage of revenues from time to time on a periodic basis. As a result, the
Company's operating results will vary from period to
28
<PAGE>
period. Because of the limited size of the Company's customer base and the
large size of customer orders, revenues derived from a small number of
customers will likely represent a significant portion of revenue in any given
period. Accordingly, a decrease in demand for the Company's systems from any
customer for any reason is likely to result in significant periodic
fluctuations in revenue. In addition, most of the Company's contracts contain
conditional acceptance provisions for certain product sales and the Company
delays recognition of revenues that are subject to such contingencies until
all such conditions are satisfied. If the Company could not satisfy conditions
in such contracts or satisfaction of conditions were delayed for any reason,
revenues in any particular period could fall significantly below the Company's
expectations. Many other factors may affect the Company's business and
operating results in future periods. See "Risk Factors--Limited Operating
History; Accumulated Deficit; Anticipated Losses" and "--Significant
Fluctuations in Operating Results."
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and software used by many companies may need
to be upgraded to comply with such year 2000 requirements. In 1998 the Company
installed an enterprise resource planning system that the vendor warrants is
year 2000 compliant. The Company's current estimate is that the costs
associated with the year 2000 issue, and the consequences of incomplete or
untimely resolution of the year 2000 issue, will not have a material adverse
effect on the result of operations or financial position of the Company in any
given year. However, despite the Company's efforts to address the year 2000
impact on its internal systems, the Company has not fully identified such
impact or whether it can resolve it without disruption of its business and
without incurring significant expense. In addition, even if the internal
systems of the Company are not materially affected by the year 2000 issue, the
Company could be affected through disruption in the operation of the
enterprises with which the Company interacts. See "Risk Factors--Year 2000
Compliance."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private sales of Preferred Stock and Common Stock, the issuance of debt
instruments, capital leases arrangements and borrowings under various lines of
credit. Net proceeds from these transactions totaled $85.8 million as of June
30, 1998.
For the six months ended June 30, 1998, net cash used in operating
activities was $20.8 million resulting from a net loss of $16.2 million and
increases of $8.1 million in inventories offset by decreases of $4.9 million
in accounts payable, accrued liabilities and other liabilities. Net cash used
in operating activities was $23.6 million, $10.2 million and $309,000 in 1997,
1996 and 1995, respectively. For 1997, cash used in operating activities
resulted from a net loss of $22.1 million and increases of $4.1 million in
inventories, $1.3 million in accounts receivable and $34,000 in prepaid
expenses and deposits partially offset by increases of $926,000 in accounts
payable, accrued liabilities and other liabilities and $1.8 million in
depreciation and amortization. For 1996, cash used in operating activities
resulted from a net loss of $10.8 million and increases of $67,000 in accounts
receivable and $222,000 in prepaid expenses partially offset by increases of
$906,000 in accounts payable, accrued liabilities and other liabilities and
$520,000 in depreciation and amortization. Cash used in operating activities
in 1995 was attributable to a net loss of $1.0 million and an increase of
$55,000 in prepaid expenses partially offset by an increases of $206,000 in
accounts payable, accrued liabilities and other liabilities and $19,000 in
depreciation and amortization.
Net cash provided by (used in) investing activities of $(504,000),
$(621,000), $3.1 million and $(3.8 million) for the six months ended June 30,
1998 and the years ended December 31, 1997, 1996 and 1995, respectively, was
primarily related to purchases of property and equipment and purchases of
short term investments offset by maturities of short term investments. The
large increases in working capital on a period-to-period basis are a direct
result of the rapid growth of the Company in support of the product
development and sales and marketing efforts as well as the development of an
operational infrastructure to
29
<PAGE>
support the sales of product in the recent quarters. Such growth has required
the Company to purchase additional equipment and software and increase purchase
of materials, which resulted in corresponding increases in inventories and
accounts payable.
Cash provided by (used in) financing activities of $28.2 million for the six
months ended June 30, 1998 consisted of $29.0 million in proceeds from issuance
of 13.75% Senior Secured Bridge Notes offset by $130,000 in payments on debt
securities and $717,000 in principal payments on capital lease obligations.
Cash provided by financing activities of $18.4 million in 1997 consisted
primarily of $19.2 million in net proceeds from the issuance of Series D
Preferred Stock. Cash provided by financing activities of $24.8 million in 1996
was primarily from net proceeds of $24.6 million from the issuance of Series B
and C Preferred Stock and $500,000 of proceeds from the issuance of a note
payable. Cash provided by financing activities of $5.5 million in 1995
consisted primarily of $5.5 million in net proceeds from the issuance of Series
A Preferred Stock.
In April 1998, the Company issued $29.0 million in aggregate principal 13.75%
Senior Secured Bridge Notes due April 28, 2000 to certain institutional and
corporate investors. The 13.75% Senior Secured Bridge Notes are secured by the
Company's personal property and intellectual property. The Company is required
to comply with certain covenants and certain reporting requirements determined
by the noteholders. On April 28, 1999 and each 180-day period thereafter until
the 13.75% Senior Secured Bridge Notes are repaid in full, the interest rate
will increase by 200 basis points up to a maximum of 18.0%. In addition, the
Company issued the Note Warrant to purchase an aggregate of 537,500 shares of
Series D Preferred Stock at a purchase price of $0.01 per share. The Note
Warrants expire on April 28, 2000. Pursuant to the terms of the 13.75% Senior
Secured Bridge Notes, upon the closing of this offering, the Company is
obligated to repay one-half of the aggregate principal amount of the 13.75%
Senior Secured Bridge Notes outstanding, together with accrued but unpaid
interest thereon. The remaining outstanding 13.75% Senior Secured Bridge Notes
are redeemable at the Company's option at any time prior to the maturity date.
Upon the closing of this offering, the Company has the right to redeem all of
the 13.75% Senior Secured Bridge Notes, Note Warrants and to repurchase any
stock issued upon exercise of the Note Warrants for an aggregate redemption
price of $40.6 million.
The Company has a credit facility with a commercial bank, which provides for
a revolving credit line of $7.5 million to support working capital with a $3.0
million sublimit for issuance of trade-related commercial and standby letters
of credit, which matures on October 14, 1999. Outstanding balances on the
credit line bear interest at the bank's prime rate and are secured by the
Company's accounts receivable and inventory. As of the date hereof, no amounts
were outstanding under this revolving credit line secured by accounts
receivable and $2.5 million is outstanding related to issuance of a standby
letter of credit. See Note 4 of Notes to Financial Statements.
The Company has several capital leases with terms ranging from 36 to 48
months. At June 30, 1998, the Company's outstanding capital lease obligations
were $5.1 million, accruing interest at rates ranging from 7.25% to 14.50%. On
April 17, 1998, the Company entered into an additional $3,500,000 capital lease
line with a 36 month term. See Note 8 of Notes to Financial Statements.
As of June 30, 1998, the Company had $20.3 million of cash and cash
equivalents. As of June 30, 1998, the Company's principal commitments consisted
of accounts payable, current debt payable, convertible and redeemable preferred
stock and obligations outstanding under operating and capital leases. Although
the Company has no material commitments for capital expenditures, management
anticipates a substantial increase in its capital expenditures and lease
commitments consistent with anticipated growth in operations, infrastructure
and personnel. The Company may establish additional field service and customer
support locations, which would require it to commit to additional lease
obligations. In the future, the Company may support larger inventories in order
to provide shorter lead times to customers and achieve purchasing efficiencies.
30
<PAGE>
The Company will use approximately $16.2 million of the net proceeds
received from this offering to repay one-half of the outstanding principal and
estimated accrued interest on the 13.75% Senior Secured Bridge Notes and the
remaining proceeds of $31.8 million will be used for general corporate
purposes, including working capital to fund anticipated operating losses and
capital expenditures. See "Use of Proceeds." Following the expected
application of the estimated net proceeds of this offering together with
repayments of debt prior to this offering the Company will have $14.5 million
in outstanding principal 13.75% Senior Secured Bridge Notes.
The Company believes that the net proceeds from this offering, together with
its cash and cash equivalents, will be sufficient to meet its capital
requirements for at least twelve months. The Company's future capital
requirements will depend upon many factors, including the success or failure
of the Company's efforts to expand its production, sales and marketing
efforts, the status of competitive products and the requirements of the
Company's efforts to develop new products and product enhancements. To the
extent that the funds generated by this offering, together with existing
resources and future earnings, are insufficient to fund the Company's future
activities, the Company may need to raise additional funds through public or
private financing. There can be no assurance that additional financing will be
available to the Company on acceptable terms, or at all, or that such
financing would not result in further dilution to existing stockholders. See
"Use of Proceeds."
31
<PAGE>
BUSINESS
OVERVIEW
Metawave designs, develops, manufactures and markets spectrum management
solutions for the wireless communications industry worldwide. Metawave's
spectrum management solutions, consisting of smart antenna systems,
applications software and engineering services, enable cellular network
operators to increase overall network capacity, reduce network operation costs,
better manage network infrastructure and stimulate end user demand through
improved system quality. Using its proprietary technologies, the Company has
developed products that address the capacity, coverage and call quality
problems faced by cellular network operators.
The Company's smart antenna systems utilize fixed beam-switching hardware and
software algorithms to reduce system interference in order to enable more
efficient utilization of finite radio frequency spectrum or "wireless
bandwidth." The Company's products offer highly integrated system solutions
that can reduce the need for costly infrastructure upgrades and additional cell
site deployments, thereby enabling cellular network operators to reduce
otherwise capital intensive outlays and to keep pace with subscriber growth.
The Company's technology is designed to be leveraged across a variety of the
market segments in the wireless communications industry, including the AMPS,
CDMA, GSM, PCS, TDMA and WLL segments.
The Company's customers include ALLTEL, 360(degrees) Communications and
Millicom affiliates, Telefonica Celular and St. Petersburg Telecom. The Company
has completed a field trial with AirTouch and is currently conducting a field
trial with GTE.
INDUSTRY BACKGROUND
The worldwide demand for wireless communications services has grown
significantly in recent years, largely as a result of technological
advancements and economies of scale that have substantially reduced the cost
and improved the quality and reliability of wireless services for the business
and consumer mass market. In addition, worldwide deregulation of the wireless
communications industry and increased government allocation of spectrum have
resulted in wider availability of wireless radio frequency and increased
competition among existing and new wireless network operators, further reducing
cost to the end user and stimulating demand. According to Dataquest, the number
of cellular and PCS subscribers increased 45% in 1997, from 134 million to 194
million, and is projected to be approximately 550 million by 2001.
The demand for wireless communications services is expected to continue to
grow rapidly, as communications technology is driving the evolution of the
digital information age. The convergence of data communications, telephony and
wireless communications is straining public and private networks worldwide and
requiring the development of new technologies in order to enable the rate of
change to continue. Devices with wireless access such as mobile phones and palm
computers and the combination of wireless and internet protocol-based LAN
infrastructure may enable mobile customers to access services such as web
initiated telephony, unified messaging and advanced conferencing.
The need for mobile communications ubiquity places a significant strain on
wireless service providers given the fixed amount of radio frequency spectrum
or wireless bandwidth available to deliver wireless services. Unlike
traditional data and telephony communications bandwidth, which is a physical
medium, wireless spectrum is an invisible medium and is generally allocated in
fixed amounts by governments in U.S. and foreign markets. Traditional methods
used in data and telephony networks for increasing available bandwidth through
the adoption of new technologies, such as frame or cell based switching or
dense wave division multiplexing, generally do not apply in wireless networks.
Thus, the fundamental challenge for wireless network operators is to increase
capacity, coverage and call quality within a fixed amount of wireless spectrum.
32
<PAGE>
To address capacity, coverage and call quality issues, wireless operators
have begun to deploy more spectrum-efficient digital technologies such as CDMA,
GSM and TDMA since the late 1980s. However, because analog and digital cellular
networks share the same fixed amount of spectrum, cellular network operators
must remove analog channels to implement digital technology. To install one
CDMA carrier into a network, an operator must clear 15 percent of its existing
analog spectrum. Removal of analog spectrum creates additional capacity
constraints within an existing analog network that is already nearing capacity
limits from the growing demand for analog minutes of use. As digital traffic
grows within analog systems, additional digital carriers must be added,
requiring more analog channels to be cleared. According to the Cahners In-Stat
Group, clearing analog spectrum to accommodate digital growth is expected to
continue for the next five to seven years as demand for digital capacity
increases.
The need to provide analog cellular service to increasing numbers of
subscribers while simultaneously clearing fixed spectrum for digital deployment
creates numerous challenges for cellular network operators. Traditionally,
operators of 800 MHz cellular networks addressed capacity, coverage and call
quality problems by building new cell sites. According to the Cellular
Telecommunication Industry Association ("CTIA"), wireless network operators
added approximately 21,000 new cell sites worldwide in 1997. However,
constructing a new site, including land, building and equipment, can cost up to
$1,000,000, and technical factors such as frequency reuse limitations diminish
the marginal benefits of adding cell sites to networks. For example, building
cell sites closer together increases interference and noise in the network,
which reduces capacity and call quality, exacerbating the very problems the
additional cell sites are intended to resolve. Cellular network operators also
face significant community resistance arising from environmental concerns and
aesthetic objections to the appearance of cell site towers.
In addition to building more cell sites, cellular network operators have
adopted variations on antenna design. Traditionally, operators used omni-
directional (360(degrees)) antennas, which receive and transmit in all
directions around a cell site. This has the advantage of making all radio
channels available to any cellular caller, but has the disadvantage of being
susceptible to interference from all directions. In areas where interference is
a problem, cellular network operators have often installed sectorized antennas,
usually consisting of a suite of three antennas, each covering a different
120(degrees) sector around a cell site. While sectorized antennas reject
signals from outside their sector, decreasing the overall level of interference
within a cell site, they can also reduce cell site capacity because each radio
channel is permanently allocated to a specific sector, and therefore cannot be
reused to cover other sectors.
The growing demand for wireless services and the difficulties encountered by
cellular network operators in building additional cell sites and implementing
digital technologies contribute to the need for a cost-effective solution to
capacity, coverage and call quality problems. Cellular network operators need
solutions that work within the framework of intense wireless service
competition and reduced capital budgets. As they seek to provide ubiquitous
wireless service and support increased subscriber demand, cellular network
operators must address the fundamental challenge of achieving maximum capacity
from finite spectrum resources. Metawave believes that the growing demand for
wireless services as well as the set of technological problems and economic
constraints imposed by finite spectrum resources presents an attractive market
opportunity for providers of spectrum management solutions.
THE METAWAVE SOLUTION
Metawave's spectrum management solutions, consisting of smart antenna
systems, applications software and engineering services, enable cellular
network operators to increase overall network capacity, reduce network
operation costs, better manage network infrastructure and stimulate end user
demand through improved system quality. The Company's initial spectrum
management platform, the SpotLight 2000 system, is a multibeam smart antenna
technology that is compatible with the Motorola HDII and Lucent Series II base
stations and AMPS and CDMA air interface protocols. The SpotLight 2000 system
divides the cell site coverage pattern into 12 fixed beams and incorporates
electronics and software to
33
<PAGE>
create the optimum signal for each radio in the cell site. The Company's
spectrum management solutions provide cellular network operators with the
following benefits:
Cost-Effective Capacity Expansion. The SpotLight 2000 system enables cellular
network operators to increase the capacity of their networks without the
increased network complexity and expenses associated with new cell site
development. The SpotLight 2000 system integrates narrow-beam antennas with RF
signal-processing hardware and beam-switching algorithms to provide stronger
signal reception and reduced interference. This enables cellular network
operators to more efficiently allocate radio frequencies and thereby increase
network capacity. The SpotLight 2000 system can be installed in a single cell
site or in multiple sites in a network. The system can be used to increase
analog capacity only or can be deployed in a dual-mode configuration to
simultaneously increase both analog and CDMA capacity. Based on field trials,
the Company estimates that the SpotLight 2000 system, when installed in a
network of cell sites, can improve analog capacity by as much as 100% and, when
used in a dual-mode system, can improve CDMA capacity by up to 40%.
Efficient Conversion to Digital Network Capability. The SpotLight 2000 system
enables cellular network operators to use existing cell site infrastructure to
support current traffic levels with less of their allocated spectrum and fewer
channels. As a result, the SpotLight 2000 system facilitates the transition
from frequency-intensive analog service to more spectrum-efficient digital
service. Operators can use the SpotLight 2000 system to clear spectrum for the
first and each subsequent CDMA carrier while maintaining analog capacity and
service quality.
Improved Network Performance. By providing a stronger signal and by reducing
interference, the SpotLight 2000 system can improve coverage in certain
portions of a cell site's geographic footprint, such as the interior of
buildings, where coverage is often insufficient. This stronger signal and
reduced interference can improve network quality. In addition, the SpotLight
2000 system provides RF engineers with the ability to measure and report
performance statistics in 30(degrees) increments around the cell site. Using
this data, engineers can better isolate specific network performance metrics
and determine optimum sector configurations.
STRATEGY
The Company's objective is to be a leading provider of spectrum management
solutions to the worldwide wireless communications market. The Company's
strategy to achieve this objective incorporates the following key elements:
Provide Solutions to High-Growth Wireless Communications Markets. The Company
seeks to identify rapidly growing wireless markets and to develop highly
integrated solutions to spectrum management problems in those markets. The
Company designed the SpotLight 2000 system initially for use in AMPS cellular
networks. In order to address the capacity and system quality problems facing
AMPS operators implementing CDMA digital technologies, the Company has
leveraged the SpotLight 2000 system technology to develop a dual-mode solution
that incorporates CDMA and AMPS protocols. The Company intends to explore other
high-growth markets such as GSM, PCS, TDMA and WLL and, if appropriate, to
develop similar solutions for such markets.
Build and Expand Strategic Customer Relationships. Metawave is dedicated to
serving those cellular network operators which the Company believes are most
likely to adopt and promote the Company's solution across their networks. The
Company uses a direct sales model and has established significant field
engineering expertise that enables the Company to install and optimize its
equipment within customers' cell sites. The Company's system engineers work
closely with the Company's direct sales personnel and customers to ensure that
the Company's product performance is optimized for each operator's network. In
addition, the Company has developed expertise in assisting cellular network
operators in planning and improving overall network performance.
34
<PAGE>
Leverage Proprietary Core Technology. The Company seeks to continue to build
its core technology, which includes eight issued and 25 pending patents, and to
invest substantial resources in technology research and product development.
The Company has leveraged its core technology and expanded its customer base by
modifying its SpotLight 2000 system for use with the Lucent Series II base
station in addition to the Motorola HDII base station for which it was
initially developed. The Company is currently modifying the SpotLight 2000
system to interface with equipment made by other manufacturers, such as the
Ericsson 882 and Motorola SC2450 and SC9600 base stations, and intends to
expand into new technology markets by developing spectrum management solutions
for the GSM, PCS, TDMA and WLL markets, as appropriate. To facilitate the
adoption and deployment of the Company's spectrum management solutions, the
Company intends to develop stand-alone products and applications that are
readily installed in existing or new cell sites. The Company may establish
strategic relationships both to develop new technologies and to expand into new
markets.
Focus on Highly Integrated System Solutions. The Company seeks to offer
system level products that enhance the performance of cellular network
operators' base station equipment. The Company will provide highly integrated
solutions that include pre-sales system planning, products configurable to
specific base station requirements and on-site installation and optimization
services to ensure a high level of system performance. The Company's highly
integrated system approach differentiates it from the component level product
offerings currently available in the market.
MARKETS
Today's wireless communications industry is characterized by several
protocols that divide the industry into broad markets. Currently, networks
based on the AMPS and GSM protocols have the greatest number of subscribers
and, correspondingly, the largest number of cell sites. The Company expects
digital technologies to grow rapidly and account for increased levels of
infrastructure spending. Many analog cellular network operators are migrating
their analog networks to digital to increase capacity and improve their
competitive position relative to emerging PCS providers. Regardless of the
protocol adopted or the frequency band used, the Company believes wireless
network operators worldwide will need to address capacity, coverage or call
quality issues.
Analog Cellular Market. The analog cellular market consists of operators that
provide cellular service within the 800 MHz and 900 MHz frequency bands using
analog technology. The predominant analog protocol is AMPS, which according to
the Strategis Group serves 71.0% of total analog subscribers worldwide. In
areas of the world where digital technology has not yet been introduced, AMPS
networks are growing to serve continued subscriber demand. In areas where
deployment of digital service is underway or planned, maintaining analog
capacity, coverage and call quality during this transition is essential. In
addition to currently serving the majority of subscribers and minutes of use in
North America, AMPS technology will also serve digital customers in cases where
they roam to other networks, in areas where digital service is not yet in place
and in circumstances where digital capacity is not sufficient to carry the
level of traffic. AMPS cellular phones also remain significantly less expensive
than digital and dual-mode phones. For these reasons, the Company believes the
migration to digital service will be an extended process. Moreover, the Company
believes that cellular network operators may be reluctant to allow AMPS service
quality to deteriorate during this process due to the presence of significant
competition from other cellular and emerging PCS operators. The Company's
SpotLight 2000 system enables cellular network operators to provide enhanced
capacity, coverage and call quality to facilitate this transition to digital
service.
CDMA Digital Cellular Market. The CDMA digital cellular market consists of
operators overlaying CDMA technology onto existing AMPS technology in the 800
MHz frequency band. To deploy a single CDMA carrier, cellular network operators
must clear a portion of spectrum (approximately 15% in North and South America)
that was previously utilized for AMPS service. This involves taking analog
channels off the air, exacerbating capacity shortages and deteriorating network
quality. Approximately half of the
35
<PAGE>
cellular networks in North America are ultimately expected to migrate to CDMA
technology as are many cellular network operators in South America. Cellular
network operators must separately optimize the CDMA portion of their network in
order to achieve the necessary capacity and performance. The Company's
SpotLight 2000 system provides additional analog capacity facilitating spectrum
clearing without adversely affecting capacity or network quality. The SpotLight
2000 system also provides additional CDMA capacity to manage the transition
from analog-only networks to dual-mode networks.
GSM Market. The GSM market consists of networks that operate at 900 MHz and
1800 MHz. GSM was the first widely implemented digital technology and is
deployed in 110 countries, predominantly in Europe and Asia. As the most widely
deployed digital technology, GSM served 48.5 million subscribers at the end of
1997, according to the Strategis Group, and Allied Business Intelligence
estimates that GSM will account for over 50% of worldwide wireless subscribers
by 2000. GSM is not as spectrally efficient as other digital technologies.
Consequently, GSM networks are beginning to experience capacity constraints,
particularly in heavily subscribed areas. The Company believes that these
capacity shortfalls will become more common. The Company is currently
developing a product to provide cost-effective spectrum management solutions
for GSM network operators.
TDMA Market. The TDMA digital cellular market consists of operators
overlaying TDMA technology onto existing AMPS technology in the 800 MHz
frequency band. The TDMA market represented approximately 50% of the North
American digital cellular market, as well as a significant portion of the South
American market at the end of 1997, according to the Strategis Group. TDMA
operates on analog channels, and therefore can reduce analog capacity. As
subscriber growth continues on these networks, the capacity gains of TDMA may
not be sufficient to accommodate subscriber growth. Although the Company
currently has no TDMA solution under development, the Company believes that its
technology is applicable to the issues facing TDMA operators. The Company
continues to evaluate the economic viability of a TDMA solution and may in the
future undertake product development for TDMA.
PCS Market. In 1995 and 1996, the U.S. government auctioned new licenses at
frequencies of 1900 MHz, known as PCS. These licenses represent 120 MHz of new
spectrum compared to 50 MHz of spectrum held by the existing cellular network
operators. In doing so, the government opened up each wireless market to new
competitors. These new PCS operators represent a significant competitive threat
to cellular network operators. Since entering the market in 1997, deployed PCS
networks currently provide coverage to geographic regions covering
approximately 75% of the U.S. population and, according to The Yankee Group,
PCS accounted for 20% of all new wireless accounts in the United States in
1997. PCS operators deploy digital networks, using CDMA, TDMA or GSM
technology, which offer enhanced services, better security and more capacity
than analog networks. In addition, customer churn has intensified as a result
of new consumer choices. As these networks grow, it is expected that they will
experience capacity and optimization issues similar to cellular networks. The
Company continues to evaluate potential spectrum management solutions for PCS.
36
<PAGE>
The following table presents a summary of the principal wireless protocols,
geographic markets and estimated subscribers as of December 31, 1997.
<TABLE>
<CAPTION>
PREDOMINANT
GEOGRAPHIC ESTIMATED SUBSCRIBERS
MARKET PROTOCOL REGIONS WORLDWIDE, 1997(2)
<S> <C> <C> <C>
Analog Cellular AMPS (Advanced Mobile North America 68,421,482
Phone Services)(1) Latin America
Asia
----------------------------------------------------------------------------
TACS/ETACS (Total Access Europe 21,366,610
Communications System) Asia
----------------------------------------------------------------------------
NMT (Nordic Mobile Telephone) Europe 4,933,956
Asia
- -----------------------------------------------------------------------------------------------
Digital Cellular CDMA (Code Division Multiple Access)(1) North America 3,963,162
Latin America
Asia
----------------------------------------------------------------------------
TDMA (Time Division Multiple Access) North America 6,721,635
Latin America
Asia
----------------------------------------------------------------------------
GSM (Global System for Mobile Europe 48,495,238
Communications) Asia
----------------------------------------------------------------------------
PDC (Pacific Digital Cellular) Japan 21,959,350
- -----------------------------------------------------------------------------------------------
PCS/Other PCN/DCS-1800 (Digital Europe 5,065,119
Communications System) Asia
----------------------------------------------------------------------------
PCS 1900 North America 1,319,138
----------------------------------------------------------------------------
TDMA (1.9 GHz) North America 834,141
----------------------------------------------------------------------------
CDMA (1.9 GHz) North America 2,197,355
Asia
----------------------------------------------------------------------------
PHS (Personal Handyphone System) Asia 8,161,656
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Indicates markets the Company's products currently address. There can be
no assurance that the Company will be successful in developing products
for other markets. See "Risk Factors--Rapid Technological Change and
Requirement for Frequent New Product Introductions."
(2) As reported by the Strategis Group, 1997.
METAWAVE PRODUCTS
The Company has developed spectrum management solutions, consisting of smart
antenna systems, applications software and engineering services, that enable
cellular network operators to increase overall network capacity, reduce network
operation costs, better manage network infrastructure and stimulate end user
demand through improved system quality. The Company's initial spectrum
management platform, the SpotLight 2000 system, is a multibeam smart antenna
technology that interfaces with Motorola HDII and Lucent Series II base
stations and is compatible with AMPS and CDMA air interface protocols.
Metawave's proprietary spectrum management solutions enable the transition
from traditional wireless network infrastructure designs to an architecture
which actively optimizes finite spectrum or wireless bandwidth, thereby
enhancing the performance and increasing overall network capacity of the
cellular
37
<PAGE>
operator's network. The architecture, shown in the figure below, adds smart
antenna performance to the cellular operator's network.
[GRAPHIC APPEARS HERE]
SpotLight Platform. The Company's SpotLight 2000 smart antenna system was
initially designed for use in AMPS networks and was first shipped for
commercial sale in November 1997. The second generation SpotLight 2000 system
was designed as a dual-mode system and is currently in field trials. The
SpotLight 2000 system divides cell site antennas into 12 beams and incorporates
electronics and software to optimize the signal for each radio in the cell
site, resulting in increased network capacity and improved call quality.
Designed for 800 MHz networks, the SpotLight 2000 system currently provides
solutions for AMPS networks or dual-mode AMPS and CDMA networks.
Based on field trials, the Company estimates that the SpotLight 2000 system,
when installed in a network of cell sites, can improve analog capacity by as
much as 100% and, when used in a dual-mode system, can improve CDMA capacity by
up to 40% without increasing the number of cell sites. Accordingly, the
SpotLight 2000 system is a cost-effective tool for clearing spectrum of analog
use to accommodate the transition of networks to digital service. Capacity is
increased by allowing for tighter re-use of frequency or by obtaining increased
trunking efficiency or a combination of both.
The Spotlight 2000 system interfaces with base stations by coupling directly
to the I/O ports of base station radios and by processing transmit and receive
signals through its smart antenna spectrum management system. The Company
provides all necessary hardware and software to process transmit and receive
signals, including Spectrum Management Units ("SMUs"), linear power amplifiers,
filters and other equipment, including base station antennas.
38
<PAGE>
As the SpotLight 2000 system reduces interference in a network through
implementation of smart antennas, more channels can be added to each cell site
because frequencies can be reused more times over a given area, thereby
increasing network capacity. In areas where interference is a problem, cellular
network operators have often installed sectorized antennas, usually consisting
of a suite of three antennas, each covering a 120(degrees) sector around a cell
site. Sectorization reduces the amount of interference received by a given cell
site radio. The SpotLight 2000 system's 12 beam smart antenna has four times
the interference rejection potential of a three-sector antenna. As shown in the
figure below, the 12 beam antenna rejects potential signal interference that is
outside the caller's narrow 30(degrees) beam, reducing network interference.
This enables a cellular network operator to reuse the same frequencies more
often over a given service area, thereby adding more channels to each cell
site.
INTERFERENCE ISOLATION
[GRAPHIC APPEARS HERE]
Trunking efficiency represents a statistical measure of the call carrying
capacity of a set of channels. Trunking efficiency is increased whenever a
greater number of channels is made available for use by a group of subscribers
at a given location and time. Conventional three-sector antennas tend to reduce
capacity because they restrict the callers in any given sector to the cell site
radio channels assigned to that sector. In contrast, the SpotLight 2000
system's SMU's permit any caller in any beam to be assigned to any cell site
radio, thereby increasing the trunking efficiency and the cell site's capacity.
The primary interface between the SpotLight 2000 system and the cell site is
the set of RF connections between the transmit and receive terminals on cell
site radios and the SpotLight 2000 system's SMUs, which contain the core of
SpotLight's smart antenna capability. While any call is active, the SMUs
continuously measure call quality and make adjustments in beam assignment to
maintain the best possible call quality.
Through the SpotLight 2000 system, cellular network operators deploying dual-
mode smart antenna systems can use a single set of antennas for both their
analog and CDMA networks, and can optimize each network's performance
independently.
The SpotLight 2000 system also increases CDMA capacity because it allows
operators to manage and distribute traffic loading more effectively. The
geographic distribution of traffic loading across a CDMA network or within a
single cell varies considerably. In a typical three-sector cell, the traffic
density in the most heavily loaded sector is often significantly higher than
the least-loaded sector. As a result, some cells may have sectors that are
fully loaded with cellular traffic while other sectors of the same cell are
well below peak loading and have spare capacity. On a network scale, high
cellular traffic areas, such as highway interchanges, urban centers and
shopping centers, can become "hot spots" that strain network capacity even as
network resources go unused in low cellular traffic areas. This variability in
traffic density creates network inefficiencies and lower network capacity,
particularly in CDMA networks.
To address traffic loading, the SpotLight 2000 system controls the
transmission and reception of CDMA radio signals by base stations through a
process called sector synthesis. The SpotLight 2000 system
39
<PAGE>
adapts the sector coverage of the base stations' CDMA radios to the local
traffic patterns around cell sites. The system's phased-array antenna makes it
possible to create custom sector antenna patterns of varying degrees though an
embedded software-driven process. Optimization of the SpotLight 2000 system for
CDMA requires information about the CDMA signals on the network, which the CDMA
equipment within the system gathers through the antennas. Sector synthesis
occurs through software algorithms, which can be modified remotely to respond
to changing local traffic patterns in real time. Through sector synthesis,
cellular network operators also optimize their CDMA networks with increased
flexibility and precision, enhancing network capacity and performance in
response to changing traffic patterns as well as local terrain and variable RF
conditions, as illustrated in the following diagram.
SECTOR SYNTHESIS
[GRAPHIC APPEARS HERE]
Other Spectrum Management Products. The SpotLight 2000 system can be
administered and monitored locally or remotely through LampLighter, SpotLight
2000's system configuration product. LampLighter, a Windows-based software
tool, configures the SpotLight 2000 system for optimal cell site performance.
In addition, LampLighter allows real time monitoring of system performance
through graphical displays and log files.
In addition to the configuration capabilities of LampLighter, the Company
offers networked access to the SpotLight 2000 system configuration with its
SiteNet software product. SiteNet also provides a means for centralized
collection and analysis of RF performance statistics in analog and CDMA
networks. Cellular network operators can use the networked configuration
capability, as well as networked RF performance statistics, to attain remote
control of antenna operations across a network of SpotLight 2000 systems.
CORE TECHNOLOGY
The Company believes that one of its key competitive advantages is its
investment and expertise in the core technologies that enable efficient
spectrum management of wireless communications networks. Spectrum management
encompasses a number of technical components, including advanced antenna
concepts, radiowave propagation models, network performance monitoring tools,
common air interface knowledge and communications systems hardware
implementations. These core competencies, when applied in combination, allow
cellular network operators to optimize capacity, coverage and quality across
their networks. The Company has developed, and continues to expand upon, the
following four fundamental technical elements:
Phased-Array Antenna Systems. The Company has developed phased-array antenna
systems that provide compact beam-forming within a single structure. The
antenna systems make use of uniform linear
40
<PAGE>
or cylindrical arrays with a combination of both ground-based and tower-based
feed networks. The Company has designed antennas to synthesize multiple narrow
fixed-beams, which can be used to track individual users within a cell site.
In addition, the Company has developed beam-forming techniques to allow the
coverage area of a cell site to be customized. The phased-array antenna
technology can be scaled to a variety of gains and to span a broad range of
frequencies. The basic implementations are protocol independent, and as such
can be applied to analog, TDMA and CDMA and other wireless networks. The
phased-array technology is extendible to as many as 128 simultaneous narrow
fixed-beams for high density applications or high bit rate services. Phased-
array antenna technology has potential applications in ground-based mobile
radio (cellular, PCS, enhanced specialized mobile radio ("SMR")), two-way
paging, local multipoint distribution service ("LMDS") as well as in emerging
satellite-based wireless services.
Multibeam Hardware Architectures. The Company has developed cost-effective
hardware implementations of the complex circuitry necessary to support the
operation of multibeam systems on high-traffic cell sites. The hardware
architecture can be organized into several key subsystems: beam switching
matrices, ultra-linear amplification, beam-forming feed structures, array
calibration circuitry and performance measuring receivers. The Company has
designed compact high-density RF switch matrices for use in fast beam-
switching applications. The Company's beam-switching technology is modular,
reliable and readily adaptable to both TDMA and analog protocols, where rapid
beam switching is required. The Company holds proprietary technology for the
implementation of modular, scalable architectures that support beam-switching
and beam-forming. The Company has developed proprietary hardware techniques
for feeding and calibrating phased-arrays integrated into existing cell site
configurations. To monitor the radio environment, the Company has developed
high-speed, frequency-agile scanning receivers designed to accurately operate
over various channel bandwidths. The Company's controlled impedance circuit
board designs implement low-loss routing of hundreds of microwave signal paths
while maintaining low voltage standing wave ratio ("VSWR") and minimal
crosstalk. Additionally, the Company has patents related to architectures to
implement beam-switching for the CDMA protocol. The Company's spatial
technology allows the simultaneous operation of multiple protocols (for
example AMPS/CDMA or AMPS/TDMA) through the same physical antenna structure,
while maintaining independent optimization of the performance for each
protocol.
Real-Time Network Control Algorithms. The Company has developed algorithms
to control beam switching hardware based upon extensive drive testing, data
gathering, statistical analysis and propagation modeling in complex, real-
world radio environments. These algorithms make real-time decisions about
which beams best serve each user, how often to update beam selections and how
to mitigate interference from other users on the same or adjacent channels.
The Company has patents related to cellular beam spectrum management and
forward-looking interference cancellation technology. In addition, the Company
has developed expertise in the optimization of cellular network performance
for AMPS/NAMPS and CDMA protocols. Such expertise allows network control
algorithms to be customized based on the specific protocol and network
deployment scenario. The Company has also developed internal software tools
for performance modeling cellular networks. These proprietary tools allow
evaluation of new algorithms for spectrum management on mixed analog and
digital cellular networks.
Adaptive Beam-Forming Techniques. The Company designs and builds antenna
systems with a broad range of standard and custom beam types and shapes using
adaptive beam-forming technology. With respect to CDMA, the Company's system
makes use of the phased-array antenna to create custom sector antenna patterns
though an embedded software-driven process known as sector synthesis. Under
software control, independent selection of sector azimuth pointing angles,
beamwidths and per-beam gains can provide flexibility to fine-tune network
performance. With sector synthesis, cellular network operators can create
completely different sector mappings for AMPS and CDMA, thus allowing
independent network optimization while sharing the cell site's equipment,
including antennas. Adaptive beam-forming systems can monitor traffic loading
and interference levels and then respond by implementing changes designed to
equalize traffic loads and reduce interference.
41
<PAGE>
CUSTOMERS
Metawave works closely with its customers to establish long-term
relationships and to provide opportunities to expand the delivery of its
spectrum management solutions to these customers. Since 1996, the Company has
conducted field trials with a number of cellular network operators to test its
technology and to demonstrate the SpotLight 2000 system's capability to these
customers. These trials are an essential element in the Company's sales cycle.
Late in the fourth quarter of 1997, the Company began commercial shipment of
the Motorola HD-II analog-only version of its SpotLight 2000 system. In early
1998, the Company began field trials to demonstrate the capability of its
SpotLight 2000 Lucent Series II system for both analog and CDMA.
The following table sets forth a list of companies that have purchased or
are evaluating the purchase of the SpotLight 2000 system as of June 30, 1998.
<TABLE>
<CAPTION>
CUSTOMER OR PROSPECTIVE
CUSTOMER LOCATION SALES STATUS
<S> <C> <C>
ALLTEL(1) Augusta, Georgia Commercial Sale
Columbia, South Carolina Commercial Sale(2)
Savannah, Georgia Commercial Sale
Springfield, Missouri Commercial Sale
- --------------------------------------------------------------------------------
360(degrees)
Communications(1) Ft. Walton, Florida Commercial Sale(2)
- --------------------------------------------------------------------------------
Millicom--Telefonica Paraguay Commercial Sale
Celular
- --------------------------------------------------------------------------------
Millicom--St. Petersburg
Telecom St. Petersburg, Russia Commercial Sale
- --------------------------------------------------------------------------------
AirTouch San Diego, California Field Trial Completed 1997
- --------------------------------------------------------------------------------
GTE Fremont, California Field Trial In Process
- --------------------------------------------------------------------------------
</TABLE>
(1) On July 1, 1998, ALLTEL completed the acquisition of 360(degrees)
Communications.
(2) These sales are conditional upon the achievement of certain performance
criteria set forth in the sales contracts. No revenue is recognized by the
Company until all customer acceptance conditions have been met.
There can be no assurance that successful completion of a given field trial
will result in a system sale. The sale of the Company's products is subject to
numerous risks and uncertainties. In order for its products to achieve market
acceptance, the Company must demonstrate to cellular network operators that
the products provide a spectrum management solution that addresses the
cellular network operators' challenges of capacity, coverage and call quality
in a cost-effective manner. The Company must demonstrate product performance
to a cellular network operator based on such operator's needs and
specifications and the difficulty in optimizing the Company's product in any
given cell site varies greatly depending on such operator's specifications and
the geographical terrain. Typically, performance of the Company's product must
be accepted in an initial cell site or cluster of cell sites prior to
completing any additional sales to such cellular network operator. If the
Company's products are not accepted by cellular network operators in a timely
manner, or at all, the Company's business and operating results will be
materially adversely affected. See "Risk Factors--Uncertainty of Market
Acceptance; Lengthy Sales Cycle," "--Dependence on Cellular Network Operator
Capital Spending" and "--Competition."
During the six months ended June 30, 1998, sales to St. Petersburg Telecom,
Telefonica Celular and ALLTEL accounted for 95.7% of net revenue. Sales to
these three customers are expected to continue to account for a substantial
majority of sales through the remainder of fiscal 1998. The loss of any of
these customers, or a significant loss, reduction or rescheduling of orders
from any of these customers, could have a material adverse effect on the
Company's business and operating results. See "Risk Factors--Significant
Customer Concentration" and "--Dependence on Growth of Cellular Communications
Market."
42
<PAGE>
SALES, MARKETING AND CUSTOMER SUPPORT
Metawave sells its products through a technical direct sales force supported
by systems engineers. Direct sales personnel are assigned on a customer
account basis and are responsible for generating product sales, providing
product and customer support and soliciting customer feedback for product
development. In addition, sales personnel receive support from the Company's
marketing organization.
The Company's marketing efforts are primarily focused on establishing and
developing long-term relationships with potential customers. As is customary
in the industry, sales are made through standard purchase orders which can be
subject to cancellation, postponement or other types of delays. While certain
customers provide the Company with forecasted needs, they are not bound by
such forecasts. Historically, the Company has conducted field trials and has
been required to satisfy performance conditions prior to the completion of a
sale. For these and other reasons, the sales process associated with the
purchase of the Company's systems is typically complex, lengthy (up to 18
months or more) and subject to a number of significant risks, including
changes in customers' budgets and approval at senior levels of customers'
organizations and approval by governmental agencies. See "Risk Factors--
Uncertainty of Market Acceptance; Lengthy Sales Cycle."
International sales of the Company's products accounted for 51.5% for the
six-month period ended June 30, 1998. There were no international sales for
the years ended December 31, 1995, 1996 and 1997. Foreign sales of the Company
products may be subject to national security and export regulations and may
require the Company to obtain a permit or license. See "Risk Factors--
Government Regulation." The Company has not experienced any material
difficulty in obtaining required permits or licenses. Installation and
operation of the Company's products may also require approval from
governmental agencies in these countries. Foreign sales are also subject to
risks related to political instability and economic downturns in foreign
nations. The Company's foreign customers typically pay for the Company's
products with U.S. dollars. As such, a strengthening of the U.S. dollar as
compared to a foreign customers' local currency would effectively increase the
price of the Company's products for that customer, thereby making the
Company's products less attractive to such customers. See "Risk Factors--Risks
Associated with International Markets."
The Company's customer support organization performs network design, product
installation, network optimization, training, consulting and repair and
maintenance services to support its SpotLight 2000 system. The Company offers
consulting services to optimize the network following the SpotLight 2000
system installation. Optimizing a network requires expertise in RF network
design, individual network peculiarities and knowledge of the SpotLight 2000
system capabilities. The Company offers repair and maintenance services. The
Company's warranties vary by customer and range from 12 to 18 months. Warranty
obligations and other maintenance services for the Company's products are
performed at the Company's headquarters in Redmond, Washington.
As of June 30, 1998, the Company had approximately $5.0 million of
unrecognized revenue for customer sales that are subject to the satisfaction
of customer acceptance conditions set forth in the sales agreements related
thereto. In addition, the Company's backlog of orders was approximately
$802,000 on June 30, 1998, compared to no backlog of orders on June 30, 1997.
The Company includes in backlog only customer commitments for which it has
received signed purchase orders and scheduled shipment dates within the
following six months. The Company intends to increase its manufacturing
capacity and believes that backlog will decrease, as a percentage of sales, as
the Company becomes able to fill orders on a more timely basis. Moreover,
product orders in the Company's current backlog are subject to changes in
delivery schedules or to cancellation at the option of the purchaser without
significant penalty. Accordingly, although useful for scheduling production,
backlog as of any particular date may not be a reliable measure of sales for
any future period. See "Risk Factors--Significant Fluctuations in Operating
Results."
Because of the limited size of the Company's customer base and the
relatively large dollar amount of customer orders, revenues derived from a
small number of customers will likely represent a significant
43
<PAGE>
portion of revenue in any given period. A decrease in demand for the Company's
systems from any customer for any reason is likely to result in significant
periodic fluctuations in revenue. Due to the highly concentrated nature of the
cellular industry, the Company believes that the number of potential customers
for future products, if any, will be small. Failure by the Company to capture
a significant number of the cellular network operators as customers could have
a material adverse effect on the Company's business and operating results. See
"Risk Factors--Significant Fluctuations in Operating Results," "--Significant
Customer Concentration."
RESEARCH AND DEVELOPMENT
The Company's research and development efforts focus primarily on enhancing
the features and functionality, improving the quality and reducing the
manufacturing cost of the SpotLight 2000 system. The Company's efforts also
focus on using existing product architecture and technology to maintain
commonality and minimize time-to-market for new product enhancements and
technology platforms. The Company is investing resources in extending the
SpotLight 2000 system to other principal manufacturers' base station equipment
both in the United States and abroad. The Company is also investing resources
in the development of a spectrum management platform for GSM and in early-
stage research regarding CDMA for PCS and TDMA.
Research and development expenses were approximately $883,000, $7.2 million
and $13.1 million for the fiscal years ended December 31, 1995, 1996 and 1997,
respectively, and $8.0 million for the six months ended June 30, 1998. The
Company believes that continued investment in research and development is
critical to attaining its strategic objectives and, as a result, expects
research and development expenses to increase in absolute dollars for the
foreseeable future. As of June 30, 1998, 91 employees were engaged in the
Company's research, development and product management efforts.
The market for the Company's current product and planned future products is
subject to rapid technological change, frequent new product introductions and
enhancements, product obsolescence, changes in customer requirements and
evolving industry standards. To be competitive, the Company must successfully
develop, introduce and sell new products or product enhancements that respond
to changing customer requirements on a timely and cost-effective basis. The
Company's success in developing new and enhanced products will depend on a
variety of factors, many of which are beyond the Company's control. Such
factors include the timely and efficient completion of system design; the
timely and efficient implementation of assembly, calibration and test
processes; sourcing of components; the development and completion of related
software; the reliability, cost and quality of new products; the degree of
market acceptance; and the development and introduction of competitive
products by competitors. The inability of the Company to introduce in a timely
manner new products or product enhancements that contribute to sales could
have a material adverse effect on the Company's business and operating
results. See "Risk Factors--Rapid Technological Change and Requirement for
Frequent New Product Introductions."
MANUFACTURING
The Company relies to a substantial extent on outside suppliers to
manufacture many of the components and subassemblies used in the SpotLight
2000 system. The Company's manufacturing operations consist primarily of
supplier and commodity management and assembling finished goods from
components and subassemblies purchased from such outside suppliers. The
Company monitors quality at each stage of the production process, including
the selection of component suppliers, the assembly of finished goods and final
testing, packaging and shipping. The Company considers quality, cost and
timing of delivery in selecting its component suppliers. Final assembly,
system integration and full-configuration testing operations are performed at
the Company's headquarters in Redmond, Washington.
Certain parts and components used in the Company's products, including
linear power amplifiers supplied by Powerwave, are presently only available
from a sole source. In addition, the Company is
44
<PAGE>
currently dependent upon Sanmina as the primary source for the supply of the
Company's printed circuit board assemblies. Certain other parts and components
used in the Company's products are available from a limited number of sources.
The Company's reliance on these sole source or limited source suppliers
involves certain risks and uncertainties, including the possibility of a
shortage or discontinuation of certain key components and reduced control over
delivery schedules, manufacturing capability, quality and cost. Any reduced
availability of such parts or components when required could materially impair
the Company's ability to manufacture and deliver its products on a timely
basis and result in the cancellation of orders which could have a material
adverse effect on the Company's business and operating results. See "Risk
Factors--Sole Source Suppliers; Dependence on Key Suppliers."
The Company has had only limited experience manufacturing and arranging for
the manufacture of its products, and there can be no assurance that the
Company or any manufacturer of the Company's products will be successful in
increasing its manufacturing volume. The Company may need to procure
additional manufacturing facilities and equipment, adopt new inventory
controls and procedures, substantially increase its personnel and revise its
quality assurance and testing practices, and there can be no assurance that
any of these efforts will be successful. See "Risk Factors--Limited
Manufacturing Experience; No Assurance of Successful Expansion of Operations"
and "--Risks Associated with International Markets."
COMPETITION
The market for spectrum management solutions is relatively new but is
expected to become increasingly competitive. The Company's products compete
with other smart antenna systems and alternative wireless infrastructure
devices such as repeaters, cryogenic filters and tower-top amplifiers. The
Company believes that the principal competitive factors are the cost-effective
delivery of increased capacity, expanded coverage and improved system quality
to cellular network operators. There can be no assurance that the Company will
compete favorably with respect to the foregoing factors.
The Company believes that base station manufacturers, who provide cellular
network capacity through sales of additional base stations, represent a
significant competitive threat to the Company. These manufacturers, including
Ericsson, Lucent, Motorola, Nokia, Northern Telecom and Siemens, have
long-term, established relationships with the cellular network operators.
Deployment of the Company's SpotLight 2000 system by cellular network
operators can improve base station performance, and therefore may result in
fewer sales opportunities for base station manufacturers. Smart antenna
technology represents an area of opportunity for such manufacturers. The
Company believes that certain of these manufacturers are developing smart
antenna systems and are likely to offer smart antenna capabilities in the
future. In addition to having more established relationships with cellular
network operators, these manufacturers have significantly greater financial,
technical, manufacturing, sales, marketing and other resources than the
Company and significantly greater name recognition for their existing products
and technologies than the Company.
The Company's current primary direct competitors for spectrum management
solutions are Celwave (a division of Radio Frequency Systems Inc. which is an
affiliate of Alcatel Alsthom S.A.), ArrayComm, Inc. and GEC-Marconi Hazeltine
Corporation. In addition, other companies, such as Raytheon E-Systems,
Watkins-Johnson Company, Texas Instruments Incorporated and ARGOSystems, Inc.
(a subsidiary of the Boeing Company), offer systems that utilize digital
signaling processing and interference cancellation techniques to extend cell
site coverage and improve call quality. Several companies offer alternative
technologies such as cryogenic filters, tower-top low noise amplifiers and
repeaters that can be used to provide service in network coverage holes and
improve call quality. The Company may also face competition in the future from
new market entrants offering competing technologies.
The Company believes that its ability to compete in the future will depend
in part on a number of competitive factors outside its control, including the
development by others of products that are competitive with the Company's
products and the price at which others offer comparable products. To
45
<PAGE>
be competitive, the Company will need to continue to invest substantial
resources in research and development and sales and marketing. There can be no
assurance that the Company will have sufficient resources to make such
investments or that the Company will be able to make the technological
advances necessary to remain competitive. Accordingly, there can be no
assurance that the Company will be able to compete successfully in the future.
See "Risk Factors--Competition."
INTELLECTUAL PROPERTY
The Company relies on a combination of patent, trade secret, copyright and
trademark protection, nondisclosure agreements and other measures to protect
its proprietary rights. The Company currently has eight issued U.S. patents
and 25 pending U.S. patent applications. The Company's future success will
depend in large part on its ability to obtain patent protection, in the U.S.
and other world markets to defend patents once obtained, to maintain trade
secrets and to operate without infringing upon the patents and proprietary
rights of others. The patent positions of companies in the worldwide wireless
communications industry, including the Company, are generally uncertain and
involve complex legal and factual questions. There can be no assurance that
any issued patents owned by or licensed to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will
provide competitive advantages to the Company. Further, there can be no
assurance that patents will issue from any patent applications or that, if
patents do issue, the claims allowed would be sufficiently broad to protect
the Company's technology. In addition, there can be no assurance that patents
issued in the U.S. will receive corresponding patent coverage in foreign
markets or that the Company will pursue similar patent coverage in all foreign
markets.
Patents and patent applications relating to products used in the worldwide
wireless communications industry are numerous and current and potential
competitors and other third parties may have filed or may in the future file
applications for, or may have been issued or in the future may be issued,
patents or may obtain additional proprietary rights relating to products used
or proposed to be used by the Company. The Company may not be aware of all
patents or patent applications that may materially affect the Company's
ability to make, use or sell any current or future products. From time to
time, third parties have asserted patent, copyright and other intellectual
property rights to technologies that are important to the Company. The Company
expects that it will increasingly be subject to infringement claims as the
number of products and competitors in the spectrum management market grows and
the functionality of products overlaps. Third parties may assert infringement
claims against the Company in the future, and such assertions could result in
costly litigation or require the Company to obtain a license to intellectual
property rights of such parties. There can be no assurance that any such
licenses would be available on terms acceptable to the Company, if at all. Any
failure to obtain a license from any third party asserting claims in the
future or defense of any third party lawsuit could have a material adverse
effect on the Company's business and operating results.
The Company also relies on unpatented trade secrets to protect its
proprietary technology, and there can be no assurance that others will not
independently develop or otherwise acquire the same or substantially
equivalent technologies or otherwise gain access to the Company's proprietary
technology or disclose such technology or that the Company can ultimately
protect its rights to such unpatented proprietary technology. Further, third
parties may obtain patent rights to such unpatented trade secrets, which
patent rights could be used to assert infringement claims against the Company.
The Company also relies on confidentiality agreements with its employees,
vendors, consultants and customers to protect its proprietary technology.
There can be no assurance that these agreements will not be breached, that the
Company would have adequate remedies for any breach or that the Company's
trade secrets will not otherwise become known to or be independently developed
by competitors. Failure to obtain or maintain patent and trade secret
protection, for any reason, could have a material adverse effect on the
Company's business and operating results. See "Risk Factors--Uncertainty
Regarding Protection of Intellectual Property."
46
<PAGE>
GOVERNMENT REGULATION
Wireless communications are subject to extensive regulation by foreign and
U.S. laws and international treaties. The Company's systems must conform to
certain international and domestic regulations established to, among other
things, avoid interference among users of frequencies. In order for the
Company's products to be used, regulatory approval must be obtained. This
governmental approval process frequently involves substantial delay which
could result in the cancellation, postponement or rescheduling of products by
the Company's customers, which in turn may have a material adverse effect on
the sale of systems by the Company to such customers. The Company believes
that its SpotLight 2000 system currently complies with all applicable U.S. and
foreign regulations in countries in which its sales are material, but changes
in these regulations, the need to comply with regulations in additional
countries in the event of sales into those countries, or a failure to obtain
necessary approvals or permits in connection with sales to service providers
in a country could require the Company to change the features of its SpotLight
2000 system and thereby incur substantial costs and experience delays in
system installation or operation. Regulatory bodies frequently promulgate new
standards and regulations for wireless communications systems and products. To
the extent that the Company's customers are delayed in deploying these
cellular systems as a result of such new standards or regulations, the Company
could experience delays in orders. These delays could have a material adverse
effect on the Company's business and operating results.
The regulatory environment in which the Company operates is subject to
significant change. Regulatory changes, which are affected by political,
economic and technical factors, could significantly affect the Company's
operations by restricting network development efforts by the Company's
customers or end users, making current systems obsolete or increasing the
opportunity for additional competition. Any such regulatory changes could have
a material adverse effect on the Company's business and operating results. The
Company might deem it necessary or advisable to modify its systems to operate
in compliance with such regulations. Such modifications could be expensive and
time-consuming. See "Risk Factors--Government Regulation."
EMPLOYEES
As of June 30, 1998, the Company had 200 employees of which 91 were
primarily engaged in research, development and product management, 34 in
manufacturing, 43 in sales, marketing and customer support and 32 in general
and administration. The Company has no collective bargaining agreement with
its employees and the Company has never experienced a work stoppage. The
Company believes that its employee relations are good. See "Risk Factors--
Management of Growth; New Management Team" and "--Dependence on Attraction and
Retention of Key Personnel."
FACILITIES
The Company is headquartered in Redmond, Washington, where it leases an
aggregate of approximately 96,000 square feet, housing its principal
administrative, sales and marketing, customer support and manufacturing
facilities. The Company's lease for such facility expires on May 31, 2005 and
the Company has an option to renew such lease for two additional five year
terms. In addition, the Company has sales and service offices in Dallas and
Washington, D.C. that are subject to short-term leases.
47
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
June 30, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
President, Chief Executive Officer and
Robert H. Hunsberger..... 51 Director
Chief Technical Officer and Chairman of the
Douglas O. Reudink....... 59 Board
Senior Vice President, Chief Financial Officer
Vito E. Palermo.......... 34 and Secretary
Richard Henderson........ 37 Vice President of Sales and Marketing
Ray K. Butler............ 40 Vice President of Engineering
Mark P. Johnson.......... 39 Vice President of Manufacturing
Robert N. Shuman......... 37 Vice President of Product Management
Bandel L. Carano(1)...... 36 Director
Bruce C. Edwards(2)...... 44 Director
David R. Hathaway(1)..... 54 Director
Scot B. Jarvis(1)........ 37 Director
Jennifer Gill Roberts(2). 35 Director
David A. Twyver.......... 51 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Robert H. Hunsberger has served as President and Chief Executive Officer of
Metawave since July 1997. From 1995 to July 1997, Mr. Hunsberger served as
Senior Vice President and General Manager of Siemens Business Communications
Systems, Inc., a telecommunications company and a wholly owned subsidiary of
Siemens Corporation. From 1981 to 1995, Mr. Hunsberger held various executive
positions at Northern Telecom Inc. ("Nortel"), a telecommunications company,
including Vice President of Sales and Marketing of its wireless networks
division from 1993 to 1995 and Vice President of Market Development of its
wireless networks division and Vice President of Cellular Systems from 1991 to
1993. Mr. Hunsberger graduated from the University of Virginia with a B.S. in
Commerce and received an M.B.A. from Arizona State University.
Douglas O. Reudink co-founded Metawave in 1995 and has served as Chief
Technical Officer of the Company since its inception and as Chairman of the
Board of Directors of Metawave since April 1997. From 1991 to 1995, Dr.
Reudink served as Director of Wireless Planning at US WEST NewVector Group,
Inc., a wireless telecommunications company. From 1986 to 1991, he served as
Director of Laboratories of the High Technology Center at The Boeing Company,
an aerospace company. Prior to 1986, Dr. Reudink served 20 years at the Bell
Laboratories division of AT&T Corporation, a telecommunications company
("AT&T"), in various research and management positions. Dr. Reudink holds more
than 30 patents and has published more than 50 technical papers. He is
currently a Fellow of the Institute of Electrical and Electronics Engineers.
Dr. Reudink graduated from Linfield College with a B.S. in Physics and
received a Ph.D. in Mathematics from Oregon State University.
Vito E. Palermo has served as Senior Vice President, Chief Financial Officer
and Secretary of Metawave since January 1997. From 1992 to 1996, Mr. Palermo
served in various positions at Bay Networks, Inc., a networking communications
company, most recently serving as Vice President and Corporate Controller and
previously serving as Director of Technology Finance, Corporate Financial and
Planning Manager, and Manufacturing and Customer Service Controller. From 1986
to 1992, Mr. Palermo held several financial management positions at the
Digital Equipment Corporation, a computer hardware and software company. Mr.
Palermo graduated from California State University at Chico with a B.S. in
Business Administration and received an M.B.A. from St. Mary's College.
48
<PAGE>
Richard Henderson has served as Vice President of Sales and Marketing of
Metawave since December 1997. From 1984 to 1997, Mr. Henderson held various
sales and marketing positions at Nortel, most recently serving as Vice
President of Marketing Operations from 1996 to 1997 and Sales Account Director
from 1992 to 1995. Mr. Henderson graduated from Texas A&M University with a
B.S. in Industrial Engineering and received an M.B.A. from the University of
Dallas.
Ray K. Butler has served as Vice President of Engineering of Metawave since
December 1997 and Director of Systems Engineering and Architecture from
January 1997 to December 1997. From 1985 to 1997, Mr. Butler held various
management positions at the Bell Laboratories division of AT&T (which division
became part of Lucent in 1996), most recently serving as Technical Manager of
the Cell Site HW Systems Engineering Group. Mr. Butler graduated from Brigham
Young University with a B.S. in Electrical Engineering and received an M.S. in
Electrical Engineering from Polytechnic University.
Mark P. Johnson has served as Vice President of Manufacturing of Metawave
since 1996 and as Director of Operations from 1995 to 1996. From 1994 to 1995,
Mr. Johnson was Director of Manufacturing at NeoPath, Inc., a medical products
company. From 1989 to 1994, he served in various management positions at
Motorola Inc., a telecommunications company, most recently serving as
Operations Manager. From 1980 to 1988, Mr. Johnson held various management
positions at Intermec Technologies Corporation, a computer hardware company,
most recently serving as Manufacturing Manager. Mr. Johnson graduated from the
University of Washington with a B.S. in Mechanical Engineering.
Robert N. Shuman has served as Vice President of Product Management of
Metawave since December 1997 and Director of Product Management from March
1997 to December 1997. From 1992 to 1997, Mr. Shuman held various positions at
Lucent, most recently serving as Product Team Leader for CDMA. Mr. Shuman
graduated from Tufts University with a B.S. in Mechanical Engineering and
received an M.S. in Mechanical Engineering from Stanford University.
Bandel L. Carano has served as a director of Metawave since 1995. Mr. Carano
has been a general partner of Oak Investment Partners, a venture capital firm
("Oak"), since 1987. Mr. Carano currently serves as a member of the Investment
Advisory Board of the Stanford University Engineering Venture Fund. Mr. Carano
also serves as a member of the Board of Directors of Netopia, Inc., Polycom,
Inc. and PulsePoint Communications, as well as several private companies. Mr.
Carano graduated from Stanford University with a B.S. in Electrical
Engineering and received an M.S. in Electrical Engineering from Stanford
University.
Bruce C. Edwards has served as a director of Metawave since May 1998. Mr.
Edwards has served as President, Chief Executive Officer and a member of the
Board of Directors of Powerwave since February 1996. Mr. Edwards was Executive
Vice President, Chief Financial Officer and a director of AST Research, Inc.
("AST"), a personal computer company, from 1994 to December 1995 and Senior
Vice President of Finance and Chief Financial Officer of AST from 1988 to
1994. Mr. Edwards also serves as a member of the Board of Directors of Diamond
Multimedia Systems, Inc. and HMT Technology Corporation. Mr. Edwards graduated
from Rider University with a B.S. in Commerce and received an M.B.A. from the
New York Institute of Technology.
David R. Hathaway has served as a director of Metawave since 1995. Mr.
Hathaway has been a general partner of the venture capital firms Venrock
Associates ("Venrock") and Venrock Associates II, L.P. since 1980 and 1995,
respectively. Mr. Hathaway serves as a member of the Board of Directors of
several private companies. Mr. Hathaway graduated from Yale University with a
B.A. in American Studies.
Scot B. Jarvis has served as a director of Metawave since February 1998. Mr.
Jarvis is a co-founder and managing member of Cedar Grove Partners, LLC, a
privately owned investment company. From 1994 to 1997, Mr. Jarvis was
Executive Vice President of Nextlink Communications, Inc., a wireless service
49
<PAGE>
operator ("Nextlink"). From 1994 to 1996, Mr. Jarvis was Vice President-
Operations of Eagle River, Inc., an investment company. From 1985 to 1994, Mr.
Jarvis held several management positions at AT&T Wireless Services, Inc.,
formerly McCaw Cellular Communications Inc. ("McCaw Cellular"), most recently
serving as Vice President of McCaw Development Corporation from 1993 to 1994
and Vice President of McCaw Cellular from 1985 to 1994. Mr. Jarvis serves as a
member of the Board of Directors of Nextlink and PulsePoint Communications.
Mr. Jarvis graduated from the University of Washington with a B.A. in Business
Administration.
Jennifer Gill Roberts has served as a director of Metawave since 1995. Ms.
Roberts has been a general partner of Sevin Rosen Funds, a venture capital
firm ("Sevin Rosen"), since 1994. From 1993 to 1994, she was a senior
associate at Technology Venture Investors, a venture capital firm. Ms. Roberts
serves as a member of the Board of Directors of several private companies. Ms.
Roberts graduated from Stanford University with a B.S. in Electrical
Engineering and received an M.S. in Electrical Engineering from the University
of Texas and an M.B.A. from Stanford University.
David A. Twyver has served as a director of Metawave since May 1998. From
1996 to 1997, Mr. Twyver served as Chief Executive Officer of Teledesic
Corporation, a satellite telecommunications company. From 1984 to 1996, Mr.
Twyver served in several management positions at Nortel, most recently serving
as President of the Wireless Networks division from 1993 to 1996. Mr. Twyver
serves as a member of the Board of Directors of Innova Corporation. Mr. Twyver
graduated from the University of Saskatchewan with a B.S. in Mathematics and
Physics.
BOARD COMPOSITION
The Company's Bylaws currently provide for a Board of Directors consisting
of nine members. All directors hold office until the next annual meeting of
stockholders of the Company and until their successors have been duly elected
and qualified. The officers of the Company are appointed annually and serve at
the discretion of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The members of the Audit Committee are Mr. Edwards and Ms. Roberts. The
Audit Committee reviews the results and scope of the audit and other services
provided by the Company's independent accountants.
The members of the Compensation Committee are Messrs. Carano, Hathaway and
Jarvis. The Compensation Committee reviews and approves the compensation and
benefits for the Company's executive officers, administers the Company's stock
purchase and stock option plans and makes recommendations to the Board of
Directors regarding such matters.
BOARD COMPENSATION
Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings and the grant of stock options, directors are not
compensated for their services as directors, except for Messrs. Jarvis,
Edwards and Twyver who each receive $1,000 for each Board meeting attended and
$500 for each committee meeting attended. Directors who are employees of the
Company are eligible to participate in the 1995 Stock Option Plan, the 1998
Stock Option Plan and the Purchase Plan. Directors who are not employees of
the Company are eligible to participate in the Directors' Plan. See "Stock
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of Messrs. Carano, Hathaway or Jarvis has at any time been an officer
or employee of the Company or any subsidiary of the Company. See "Certain
Relationships and Related Transactions" for a description of certain
transactions and relationships between the Company and Messrs. Carano,
Hathaway and Jarvis and entities affiliated with them.
50
<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by the Delaware General Corporation Law (the
"DGCL"). The DGCL provides that a director of a corporation will not be
personally liable for monetary damages for breach of such individual's
fiduciary duties as a director except for liability (i) for any breach of such
director's duty of loyalty to the Company or to its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or
a knowing violation of law, (iii) for unlawful payments of dividends or
unlawful stock repurchases or redemptions or (iv) for any transaction from
which a director derives an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers and may indemnify its other employees and agents to the fullest
extent permitted by law. The Company believes that indemnification under its
Bylaws covers at least negligence and gross negligence on the part of an
indemnified party. The Company's Bylaws also permit the Company to advance
expenses incurred by an indemnified party in connection with the defense of
any action or proceeding arising out of such party's status or service as a
director, officer, employee or other agent of the Company upon an undertaking
by such party to repay such advances if it is ultimately determined that such
party is not entitled to indemnification, such advancement of expenses is
subject to authorization by the Board of Directors in the case of non-
executive officers, employees and agents.
The Company has entered into separate indemnification agreements with each
of its directors and officers. These agreements require the Company, among
other things, to indemnify such director or officer against expenses
(including attorney's fees), judgments, fines and settlements (collectively,
"Liabilities") paid by such individual in connection with any action, suit or
proceeding arising out of such individual's status or service as a director or
officer of the Company (other than Liabilities arising from willful misconduct
or conduct that is knowingly fraudulent or deliberately dishonest) and to
advance expenses incurred by such individual in connection with any proceeding
against such individual with respect to which such individual may be entitled
to indemnification by the Company. The Company believes that its Certificate
of Incorporation and Bylaw provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.
The Company also maintains directors' and officers' liability insurance.
At present the Company is not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of the Company where
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.
51
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded to, earned by,
or paid to the Company's Chief Executive Officer, the Company's four other
most highly compensated executive officers, the Company's former Chief
Executive Officer and two other former officers whose total cash compensation
exceeded $100,000 during the year ended December 31, 1997 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
---------------- -----------------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION ($)(1) ($)(2) (#) ($)(3)
--------------------------- -------- ------- ---------- ------------
<S> <C> <C> <C> <C>
Robert H. Hunsberger, President and
Chief Executive Officer.............. $144,918 $ -- 900,000 $ 50,660
Douglas O. Reudink, Chairman and Chief
Technology Officer................... 173,545 2,100 -- 2,466
Vito E. Palermo, Senior Vice President
and Chief Financial Officer.......... 143,794 7,500 200,000 169,633
Ray K. Butler, Vice President of
Engineering.......................... 108,238 6,900 100,000 40,322
Robert N. Shuman, Vice President of
Product Management................... 67,649 5,600 100,000 60,129
Thomas Huseby, former Chief Executive
Officer(4)........................... 7,431 -- -- 121,807
James J. Daley, former Vice
President(4)......................... 107,953 -- -- 137,318
Harold Carey, former Vice
President(4)......................... 110,001 32,356 -- 63,026
</TABLE>
- --------
(1) Mr. Hunsberger's employment began on July 28, 1997 and his base salary on
an annualized basis was $220,000 with additional monthly payments in the
aggregate amount of $54,167 for the year ended December 31, 1997. Mr.
Palermo's employment began on January 20, 1997 and his base salary on an
annualized basis, at year end, was $160,000 with additional monthly
payments in the aggregate amount of $7,500 paid in the first six months of
1997. Mr. Butler's employment began on January 27, 1997 and his base
salary on an annualized basis, at year-end, was $120,000. Mr. Shuman's
employment began on March 31, 1997 and his base salary on an annualized
basis, at year-end, was $120,000.
(2) Bonus represents the amount earned by the employee in 1997.
(3) Consists of relocation and temporary living expenses and life insurance
premiums paid by the Company, and with respect to Mr. Huseby and Mr.
Daley, includes severance payments of $121,281 and $97,268, respectively.
(4) Mr. Huseby resigned as Chief Executive Officer of the Company on January
7, 1997. Mr. Daley resigned from the Company on August 29, 1997. Mr. Carey
resigned from the Company on March 17, 1998.
52
<PAGE>
The following table shows certain information regarding stock options
granted to the Named Executive Officers during the year ended December 31,
1997. No stock appreciation rights were granted to these individuals during
the year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME(1) GRANTED(2) IN 1997(3) SHARE DATE 5% 10%
------- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Hunsberger.... 900,000 44.3% $0.62 7/28/07 $2,374,010 $4,110,736
Vito E. Palermo......... 135,000 6.6% $0.62 1/20/07 52,638 133,396
65,000 3.2% $0.62 5/22/07 171,456 296,887
Ray K. Butler........... 14,000 0.7% $0.62 1/27/07 5,459 13,834
18,000 0.9% $0.62 4/01/07 18,160 35,527
68,000 3.3% $3.36 12/16/07 143,690 364,138
Robert N. Shuman........ 15,000 0.7% $0.62 4/01/07 15,133 29,606
10,000 0.5% $1.20 10/21/07 20,578 39,875
75,000 3.7% $3.36 12/16/07 158,481 401,623
</TABLE>
- --------
(1) None of Dr. Reudink and Messrs. Huseby, Daley and Carey received any stock
option grants during the year ended December 31, 1997.
(2) These stock options, which were granted under the 1995 Stock Option Plan,
become vested at a rate of 25% of the total number of shares of Common
Stock subject to the option on the first anniversary of the date of grant,
and 1/48th of the total number of shares subject to the grant each month
thereafter, as long as the optionee remains an employee with, consultant
to, or director of the Company. The exercise price per share of each
option was equal to the fair market value on the date of grant as
determined by the Board of Directors at such time.
(3) Based on an aggregate of 2,031,268 options granted by the Company during
the year ended December 31, 1997 to employees of the Company, including
the Named Executive Officers.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
OPTION EXERCISES AND HOLDINGS
There were no option exercises by the Named Executive Officers during fiscal
year 1997 other than an exercise by Mr. Daley of options to purchase 49,327
shares with a value realized of $41,928. The following table provides certain
summary information concerning the shares of Common Stock represented by
outstanding stock options held by each of the Named Executive Officers as of
December 31, 1997.
53
<PAGE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
DECEMBER 31, DECEMBER 31,
1997(2) 1997 ($)(3)
------------ -------------------
NAME(1) VESTED UNVESTED VESTED UNVESTED
------- ------ -------- -------- ----------
<S> <C> <C> <C> <C>
Robert H. Hunsberger....................... -- 900,000 -- $8,892,000
Douglas O. Reudink......................... -- -- -- --
Vito E. Palermo............................ -- 200,000 -- $1,976,000
Ray K. Butler.............................. -- 100,000 -- $ 801,680
Robert N. Shuman........................... -- 100,000 -- $ 776,700
Harold Carey............................... 35,578 78,272 $351,511 $ 773,327
</TABLE>
- --------
(1) As a result of his separation from the Company, all unexercised options
held by Mr. Daley had expired as of December 31, 1997. Mr. Huseby did not
hold any options as of December 31, 1997.
(2) All options to be granted under the 1998 Stock Option Plan and all options
granted after July 15, 1997 under the 1995 Stock Option Plan may be
exercised immediately upon grant and prior to full vesting, subject to the
optionee's entering into a restricted stock purchase agreement with the
Company with respect to any unvested shares. Under such agreement, the
optionee grants the Company an option to repurchase any unvested shares at
their original purchase price in the event the optionee's employment or
consulting relationship with the Company is terminated. The Company's
right of repurchase lapses as the shares vest in a series of equal monthly
or annual installments in accordance with the vesting schedule of the
exercised options.
(3) Based on an assumed initial public offering price of $10.50 per share,
minus the exercise price, multiplied by the number of shares underlying
the option.
The Company has not granted options to purchase Common Stock to any of the
Named Executive Officers in 1998.
SEVERANCE ARRANGEMENTS
The Company has entered into severance arrangements with Douglas O. Reudink,
Chief Technical Officer, Robert H. Hunsberger, President and Chief Executive
Officer, Vito E. Palermo, Senior Vice President and Chief Financial Officer,
and Richard Henderson, Vice President of Sales and Marketing.
On July 7, 1995, in connection with the Series A Preferred Stock financing,
the Company entered into an agreement with Dr. Reudink which provides that if
the Company were to terminate his employment without cause after July 7, 1996,
the Company would be obligated to make a lump-sum payment to Dr. Reudink equal
to six months' of his then-current base salary and to provide benefits for six
months following termination. In connection with this agreement, Dr. Reudink
entered into a one-year non-competition agreement effective upon the
termination of his employment with the Company.
On June 27, 1997, in connection with the employment of Mr. Hunsberger, the
Company entered into an arrangement with Mr. Hunsberger which provides that if
the Company were to terminate his employment without cause, the Company would
be obligated to make a lump-sum payment to Mr. Hunsberger equal to twelve
months' of his then-current base salary and provide benefits for twelve months
following termination.
On July 23, 1997, in connection with the employment of Mr. Palermo, the
Company entered into an agreement with Mr. Palermo which provides that if the
Company were to terminate his employment without cause after January 20, 1998,
the Company would be obligated to make a lump-sum payment to Mr. Palermo equal
to six months' of his then-current base salary and 50% of his target bonus, if
any, for the year in which the termination occurs and to provide benefits for
six months following termination. In addition, Mr. Palermo's stock options
would continue to vest in accordance with the Company's 1995 Stock Option
Plan, as amended from time to time, during the period that Mr. Palermo would
receive continued benefits from the Company. Mr. Palermo's voluntary
resignation will not constitute termination without cause unless Mr. Palermo
were to resign for good reason, in which case the Company would be
54
<PAGE>
obligated to make a lump-sum payment to Mr. Palermo equal to nine months' of
his then-current base salary and to pay for the reasonable cost of relocating
Mr. Palermo back to his primary residence. If the Company were to terminate
Mr. Palermo within six months following certain changes in control of the
Company, the Company would pay to Mr. Palermo an amount equal to twelve
months' of his then-current base salary and 100% of his target bonus for the
year in which the change in control transaction occurs. In addition, Mr.
Palermo's outstanding unvested stock options would vest during such period in
accordance with the Company's stock option plan as in effect at that time.
On October 29, 1997, in connection with the employment of Mr. Henderson, the
Company entered into an agreement with Mr. Henderson which provides that if
the Company were to terminate his employment without cause, the Company would
be obligated to make a lump-sum payment to Mr. Henderson equal to six months'
of his then-current base salary.
STOCK PLANS
1998 Stock Option Plan and 1995 Third Amended and Restated Stock Option
Plan. The 1998 Stock Option Plan (the "1998 Stock Option Plan") was adopted by
the Board of Directors in May 1998 and is expected to be approved by the
stockholders of the Company prior to the completion of this offering. A total
of 850,000 shares of Common Stock has been reserved for issuance under the
1998 Stock Option Plan, and, as of June 30, 1998, all such shares remained
available for grant under the 1998 Stock Option Plan. On the first trading day
of each of the five calendar years beginning in 1999 and ending in 2003, the
number of shares reserved for issuance under the 1998 Stock Option Plan shall
automatically be increased by an amount equal to three percent (3%) of the
Company's outstanding Common Stock, up to a maximum of 1,000,000 shares in any
calendar year, or such lower amount as determined by the Board of Directors.
The 1995 Third Amended and Restated Stock Option Plan (the "1995 Stock
Option Plan") was originally adopted by the Board of Directors in August 1995
and was approved by the stockholders of the Company in January 1996. The 1995
Stock Option Plan was amended by the Board of Directors in December 1995,
February 1997, July 1997 and May 1998 and such amendments were approved by the
stockholders in January 1996, February 1997 and July 1997. A total of
4,150,000 shares of Common Stock has been reserved for issuance under the 1995
Stock Option Plan, and, as of June 30, 1998, 435,189 options remain available
for grant under such plan.
Both the 1998 Stock Option Plan and the 1995 Stock Option Plan provide for
the grant to employees of the Company (including officers and employee
directors) of "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") and for the grant
of nonstatutory stock options to employees, officers, directors (including
non-employee directors) and consultants of the Company. To the extent an
optionee would have the right in any calendar year to exercise for the first
time one or more incentive stock options for shares having an aggregate fair
market value (under all plans of the Company and determined for each share as
of the date the option to purchase the share was granted) in excess of
$100,000, any such excess options shall be treated as nonstatutory options.
Both the 1998 Stock Option Plan and the 1995 Stock Option Plan are
administered by the Board of Directors or a committee of the Board of
Directors (the "Administrator"). The Administrator determines the terms of
options granted under the 1998 Stock Option Plan and 1995 Stock Option Plan,
including the number of shares subject to the option, exercise price, term and
exercisability. The exercise price of all incentive stock options granted
under either the 1998 Stock Option Plan or 1995 Stock Option Plan must be at
least equal to the fair market value of the Common Stock of the Company on the
date of grant. The exercise price of any incentive stock option granted to an
optionee who owns stock representing more than 10% of the voting power of the
Company's outstanding capital stock (a "10% Stockholder") must be at least
equal to 110% of the fair market value of the Common Stock on the date of
grant. The
55
<PAGE>
exercise price of all nonstatutory stock options cannot be less than 85% of
the fair market value of the Common Stock of the Company on the date of grant,
except in the case of 10% Stockholders, in which case the exercise price
cannot be less than 110% of the fair market value of the Common Stock. Payment
of the exercise price, subject to approval by the Administrator, may be made
in cash, check, promissory note, delivery of shares of the Company's Common
Stock, subject to certain conditions, net exercise of the option, delivery of
an irrevocable subscription agreement that obligates the option holder to take
and pay for the shares issuable upon exercise not more than 12 months after
the date of delivery of the subscription agreement, any combination of the
foregoing, or other consideration approved by the Administrator. The term of
options granted under either the 1998 Stock Option Plan or the 1995 Stock
Option Plan may not exceed 10 years; provided, however, that the term of an
incentive stock option granted to a 10% stockholder may not exceed five years.
An option may not be transferred by the optionee other than by will or the
laws of descent or distribution. Each option may be exercised during the
lifetime of the optionee only by such optionee or by a permitted transferee.
Options granted to each employee under either the 1998 Stock Option Plan or
the 1995 Stock Option Plan generally become exercisable at the rate of 25% of
the total number of shares subject to the options after the first anniversary
following the date of grant, with 1/48th vesting monthly thereafter.
The Board of Directors has the authority to amend or terminate both the 1998
Stock Option Plan and the 1995 Stock Option Plan as long as such action does
not adversely affect any outstanding option and provided that, to the extent
necessary and desirable to comply with Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or Section 422 of the Code,
stockholder approval shall be obtained for any amendment to either the 1998
Stock Option Plan or the 1995 Stock Option Plan. If not terminated earlier,
the 1998 Stock Option Plan will terminate in 2008 and the 1995 Stock Option
Plan will terminate in 2007.
With respect to all options granted under the 1998 Stock Option Plan and
those options granted on or after February 12, 1997 under the 1995 Stock
Option Plan, in the event of certain changes in control of the Company (a
"Corporate Transaction"), an optionee is, provided such optionee is employed
at the time such Corporate Transaction occurs, entitled to accelerated vesting
of one year if such optionee has been employed by the Company less than two
years or accelerated vesting of two years if such optionee has been employed
by the Company for two years or more as of the date of the Corporate
Transaction; provided, however, this acceleration shall not occur if the
Administrator determines that the Board, the acquiring person or the surviving
corporation, as the case may be, has made equitable and appropriate provision
for the assumption of existing options or substitution of new options on terms
which are equivalent to the foregone option.
The Board has the discretion to authorize the issuance of unvested shares of
Common Stock pursuant to the exercise of all stock options granted under the
1998 Stock Option Plan and any stock options granted after July 15, 1997 under
the 1995 Stock Option Plan. If the optionee ceases to be employed by or
provide services to the Company, all shares of Common Stock issued on exercise
of a stock option which are unvested at the time of cessation shall be subject
to repurchase by the Company at the exercise price paid for such shares (the
"Company Repurchase Right"). The terms and conditions upon which the
repurchase rights are exercisable by the Company are determined by the Board
and set forth in the agreement evidencing such right. The Board has
discretionary authority to cancel the Company's outstanding repurchase rights
with respect to the shares purchased or purchasable under an option granted
pursuant to such plans. In the event of a Corporate Transaction, if vesting of
the options accelerates, the repurchase rights of the Company with respect to
shares previously acquired on exercise of options granted under such plans
shall terminate.
1998 Employee Stock Purchase Plan. The Company's Purchase Plan was adopted
by the Board of Directors in May 1998 and will be submitted for approval by
the stockholders prior to completion of this offering. A total of 500,000
shares of Common Stock has been reserved for issuance under the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the Code,
generally will be
56
<PAGE>
implemented in a series of offering periods of 12 months duration with new
offering periods (other than the first offering period) commencing on or about
February 1 and August 1 of each year. Each offering period will consist of two
consecutive purchase periods of six months duration, with the last day of each
period being designated a purchase date. However, the first such offering
period is expected to commence on the date of this Offering and continue
through July 31, 1999, with the first purchase date occurring on January 31,
1999, and subsequent purchase dates to occur every six months thereafter. The
Purchase Plan will be administered by the Board of Directors or by a committee
appointed by the Board of Directors. Employees (including officers and
employee directors) of the Company, or of any subsidiary designated by the
Board of Directors, are eligible to participate if they are employed by the
Company or any such subsidiary for at least 20 hours per week and more than
five months per year. The Purchase Plan permits eligible employees to purchase
Common Stock through payroll deductions, which may not exceed 15% of an
employee's compensation, at a price equal to the lower of 85% of the fair
market value of the Company's Common Stock at the beginning of the offering
period or the purchase date; provided, however, an employee shall not be
permitted to purchase more than 2,500 shares of Common Stock in any single
purchase period. If the fair market value of the Common Stock on a purchase
date is less than the fair market value at the beginning of the offering
period, a new 12-month offering period will automatically begin on the first
business day following the purchase date with a new fair market value.
Employees may end their participation in the offering at any time during the
offering period, and an employee's participation ends automatically on
termination of employment with the Company. In addition, participants may
decrease their level of payroll deductions once during an offering period.
The Purchase Plan provides that in the event of a merger of the Company with
or into another corporation or a sale of substantially all of the Company's
assets, each right to purchase Common Stock under the plan will be assumed or
an equivalent right substituted by the successor corporation unless the Board
of Directors shortens the offering period so that employees' rights to
purchase stock under the plan are exercised prior to the merger or sale of
assets. On the first trading day of each of the five calendar years beginning
in 1999 and ending in 2003, the number of authorized shares shall
automatically increase by an amount equal to two percent (2%) of the Company's
outstanding Common Stock, up to a maximum of 375,000 shares in any calendar
year, or such lower amount as determined by the Board of Directors. The Board
of Directors has the power to amend or terminate the Purchase Plan as long as
such action does not adversely affect any outstanding rights to purchase stock
thereunder. If not terminated earlier, the Purchase Plan will have a term of
20 years.
1998 Directors' Stock Option Plan. The Directors' Plan was adopted by the
Board of Directors in February 1998 and approved by the stockholders on April
20, 1998. A total of 300,000 shares of Common Stock has been reserved for
issuance under the Directors' Plan. The Directors' Plan provides for the
automatic grant of nonstatutory stock options to nonemployee directors of the
Company. The Directors' Plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the Board of Directors.
The Directors' Plan provides that each person who becomes a nonemployee
director of the Company after the date of this offering shall be granted a
nonstatutory stock option to purchase 25,000 shares of Common Stock (the
"First Option") on the date on which the optionee first becomes a nonemployee
director of the Company. However, for individuals already serving as
nonemployee directors as of the date of this offering, the First Option shall
be an option to purchase 18,000 shares of Common Stock, except in the case of
Messrs. Jarvis, Edwards and Twyver who were granted options to purchase
25,000 shares of Common Stock on February 12, 1998, May 19, 1998 and May 19,
1998, respectively. Thereafter, on the date of each annual meeting of the
Company's stockholders following which a nonemployee director is serving on
the Board of Directors, each nonemployee director (including directors who
were not granted a First Option prior to the date of such annual meeting)
shall be granted an option to purchase 7,000 shares of Common Stock (a
"Subsequent Option") if, on such date, he or she has served on the Company's
Board of Directors for at least six months.
57
<PAGE>
The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee director, but does
specify the number of shares that may be included in any grant and the method
of making a grant. No option granted under the Directors' Plan is transferable
by the optionee other than by will or the laws of descent or distribution or
pursuant to a qualified domestic relations order, or to a family trust or
family limited partnership established by the optionee, a member of optionee's
immediate family or to a partnership or other entity of which optionee is a
general partner or plays a similar role. Each option is exercisable, during
the lifetime of the optionee, only by such optionee or by a permitted
transferee. Provided an individual remains a director, the Directors' Plan
provides that each First Option and Subsequent Option shall become exercisable
in installments cumulatively as to 25% of the total number of shares subject
to the Option on the first anniversary of the date of grant of the Option and
1/48th of the total number of shares subject to the Option each month
thereafter. The exercise price of all stock options granted under the
Directors' Plan shall be equal to the fair market value of a share of the
Company's Common Stock on the date of grant of the option. The fair market
value of any option granted concurrently with the initial effectiveness of the
Purchase Plan shall be the Price to Public set forth in the final prospectus
relating to this offering. Options granted under the Directors' Plan have a
term of ten years.
In the event of a Corporate Transaction, an optionee is, provided such
optionee continues to serve as a director until such Corporate Transaction
occurs, entitled to accelerated vesting of one year if such optionee has been
a director of the Company less than two years or accelerated vesting of two
years if such optionee has been a director of the Company for more than two
years as of the date of the Corporate Transaction; provided, however, this
acceleration shall not occur if the Administrator determines that the Board,
the acquiring person or the surviving corporation, as the case may be, has
made equitable and appropriate provision for the assumption or substitution of
new options on terms which are equivalent to the foregone option. The Board of
Directors may amend or terminate the Directors' Plan; provided, however, that
no such action may adversely affect any outstanding option, and the provisions
regarding the grant of options under the plan may be amended only once in any
six-month period, other than to comport with changes in the Code. If not
terminated earlier, the Directors' Plan will have a term of ten years.
401(k) Plan. The Company maintains a 401(k) plan that covers all employees
who satisfy certain eligibility requirements relating to minimum age, length
of service and hours worked. Under the profit-sharing portion of the plan, the
Company may make an annual contribution for the benefit of eligible employees
in an amount determined by the Board of Directors. The Company has not made
any such contribution to date. Under the 401(k) plan, eligible employees may
make pretax elective contributions of up to 15% of their compensation, subject
to maximum limits on contributions prescribed by law.
58
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALES OF EQUITY SECURITIES
Certain stock option grants to directors and executive officers of the
Company are described herein under the caption "Management--Executive
Compensation."
Since July 1995, the Company has issued, in private placement transactions,
shares of Preferred Stock as follows: an aggregate of 5,500,000 shares of
Series A Preferred Stock at $1.00 per share beginning in July 1995, an
aggregate of 2,740,743 shares of Series B Preferred Stock at $3.375 per share
beginning in May 1996, an aggregate of 2,491,880 shares of Series C Preferred
Stock at $6.16 per share beginning in October 1996 and an aggregate of
2,397,727 shares of Series D Preferred Stock at $8.00 per share in August
1997.
Listed below are those directors, executive officers and five percent
stockholders who have made equity investments in the Company during the last
three fiscal years. The Company believes that the shares issued in these
transactions were sold at the then fair market value and that the terms of
these transactions were no less favorable than the Company could have obtained
from unaffiliated third parties.
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
COMMON PREFERRED PREFERRED PREFERRED PREFERRED AGGREGATE
INVESTOR(1) STOCK STOCK STOCK STOCK STOCK CONSIDERATION
----------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Entities affiliated with
Venrock Associates(2).. -- 1,833,334 888,889 324,675 182,790 $ 8,295,652
Entities affiliated with
Oak Investment
Partners(3)............ -- 1,833,333 888,889 324,675 182,790 $ 8,295,651
Entities affiliated with
The Sevin Rosen
Funds(4)............... -- 1,833,333 888,889 324,675 182,790 $ 8,295,651
Entities affiliated with
Worldview Technology
Partners............... -- -- -- 811,688 46,825 $ 5,374,598
Entities affiliated with
Bowman Capital
Management............. -- -- -- -- 1,250,000 $10,000,000
Douglas O. Reudink...... 1,650,000 -- -- -- -- $ 16,500
Jennifer Gill
Roberts(4)............. -- 5,000 7,408 -- -- $ 30,002
</TABLE>
- --------
(1) Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."
(2) David R. Hathaway, a director, is a general partner of Venrock.
(3) Bandel L. Carano, a director, is a general partner of Oak.
(4) Jennifer Gill Roberts, a director, is a general partner of the Sevin
Rosen. In addition to the equity investment made by entities affiliated
with Sevin Rosen, (i) Ms. Roberts purchased 5,000 shares of Series A
Preferred Stock and 7,408 shares of Series B Preferred Stock for her own
account and (ii) Steven L. Domenik, a general partner of Sevin Rosen,
purchased 5,926 shares of Series B Preferred Stock for his own account.
Holders of Preferred Stock and certain holders of Common Stock are entitled
to certain registration rights with respect to the Common Stock issued or
issuable upon conversion of the Preferred Stock. See "Description of
Securities--Registration Rights."
On May 2, 1997, Thomas S. Huseby, the former Chief Executive Officer of the
Company, sold a total of 200,000 shares of Common Stock to entities affiliated
with Sevin Rosen, Venrock and Oak at a price per share of $2.00. Sevin Rosen
and Venrock each purchased 66,666 shares of Common Stock and Oak
59
<PAGE>
purchased 66,668 shares of Common Stock. On May 28, 1997, Douglas O. Reudink,
Chairman of the Board and Chief Technical Officer of the Company, sold 55,000
shares of Common Stock to each of Sevin Rosen, Venrock and Oak at a price per
share of $2.00.
On October 22, 1997, the Company made an unsecured loan of $75,000 to Vito
E. Palermo, Senior Vice President and Chief Financial Officer of the Company
pursuant to a Promissory Note bearing interest at a rate of 5.50% per annum.
Fifty thousand dollars of the principal amount of the loan is to be forgiven
over a three-year period provided that Mr. Palermo remains employed with the
Company with the remaining balance of $25,000 due on the earlier of October
22, 2000 or the date his employment terminates. The maximum indebtedness under
the Promissory Note during the six-month period ended June 30, 1998 was
$72,602. On October 28, 1997, the Company made a second loan of $162,500 to
Mr. Palermo pursuant to a Secured Promissory Note bearing interest at a rate
of 5.50% per annum, which is secured by a second deed of trust on his
principal residence and a pledge of up to 50,000 shares of Common Stock held
by Mr. Palermo. The secured loan is payable in full on October 28, 2002 or
earlier based upon certain events specified in the loan agreement. The maximum
indebtedness under the Secured Promissory Note during the six-month period
ended June 30, 1998 was $168,205.
On January 10, 1998, the Company repurchased 137,775 shares of Common Stock
from Mr. Huseby for nominal consideration pursuant to the Company's right of
repurchase set forth in a Stock Repurchase Agreement dated July 7, 1995 by and
between the Company and Mr. Huseby. The Stock Repurchase Agreement specified
that the price per share to be paid by the Company was to be equal to the
price per share paid by Mr. Huseby for the shares. The shares repurchased by
the Company were subsequently canceled. In addition, the Company repurchased
100,000 shares of Common Stock on May 5, 1997 from Mr. Huseby for nominal
consideration.
On April 3, 1998, Dr. Reudink sold 30,770 shares of Common Stock at a price
of $6.50 per share to Cedar Grove Investment L.L.C., a limited liability
corporation which is managed by Mr. Scot Jarvis, a director of the Company. On
April 17, 1998, Dr. Reudink sold 20,000 shares of Common Stock at a price of
$6.50 per share to Spinnaker Offshore Founders Fund, an entity affiliated with
Bowman Capital Management and related entities which are holders of Series D
Preferred Stock.
On April 28, 1998, the Company issued an aggregate principal amount of $29.0
million 13.75% Senior Secured Bridge Notes due April 28, 2000 to certain
institutional investors. On April 28, 1999 and at the end of each 180-day
period thereafter until the 13.75% Senior Secured Bridge Notes are repaid in
full, the interest rate will increase by 200 basis points up to a maximum of
18.0%. In addition, the Company issued Note Warrants to purchase an aggregate
of 537,500 shares of Series D Preferred Stock at a purchase price of $0.01 per
share. The Note Warrants expire on April 28, 2000. Pursuant to the terms of
the 13.75% Senior Secured Bridge Notes, upon the closing of this offering, the
Company is obligated to repay one-half of the aggregate principal amount of
the 13.75% Senior Secured Bridge Notes outstanding, together with accrued but
unpaid interest thereon. The remaining outstanding 13.75% Senior Secured
Bridge Notes are redeemable at the Company's option at any time. On or before
the closing of this offering, the Company has the right to redeem all of the
13.75% Senior Secured Bridge Notes and Note Warrants and to repurchase any
Series D Preferred Stock issued upon exercise of the Note Warrants for an
aggregate redemption and repurchase price of $40,600,000.
Bruce Edwards, a director of the Company, is President, Chief Executive
Officer and a member of the Board of Directors of Powerwave. Powerwave is
currently the Company's sole supplier of linear power amplifiers, a component
in the Company's products. From January 1, 1997 to June 30, 1998, the Company
purchased a total of $8,015,545 of linear power amplifiers and related
components from Powerwave. Powerwave purchased $2,500,000 in aggregate
principal amount of the 13.75% Senior Secured Bridge Notes and has been issued
a Note Warrant to purchase up to an aggregate of 46,336 shares of Series D
Preferred Stock at a purchase price of $0.01 per share.
60
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of June 30, 1998, and as
adjusted to reflect the sale of Common Stock offered hereby, as to (i) each
person (or group of affiliated persons) known by the Company to own
beneficially more than 5% of the outstanding shares of the Company's Common
Stock (a "5% Stockholder"), (ii) each of the Company's directors, (iii) each
of the Named Executive Officers, and (iv) all directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
PERCENT OF SHARES
BENEFICIALLY
OWNED(1)
SHARES -----------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OWNED(1) OFFERING OFFERING
---------------- ------------ -------- --------
<S> <C> <C> <C>
Oak Investment Partners(2).................... 3,351,355 20.7% 15.8%
525 University Avenue, Suite 1300
Palo Alto, CA 94301-1902
Venrock Associates(3)......................... 3,342,352 20.7% 15.8%
30 Rockefeller Plaza
New York, NY 10112-0184
The Sevin Rosen Funds(4)...................... 3,333,020 20.6% 15.7%
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301-1542
Douglas O. Reudink(5)......................... 1,404,230 8.7% 6.6%
Bowman Capital Management(6).................. 1,270,000 7.9% 6.0%
1875 South Grant Street, Suite 600
San Mateo, CA 94402
Robert H. Hunsberger(7)....................... 900,000 5.3% 4.1%
Worldview Technology Partners(8).............. 858,513 5.3% 4.1%
435 Tasso Street, Suite 120
Palo Alto, CA 94301-1546
Thomas Huseby(9).............................. 662,225 4.1% 3.1%
Vito E. Palermo(10)........................... 200,000 1.2% *
Robert N. Shuman(11).......................... 100,000 * *
Ray K. Butler(12)............................. 79,541 * *
James J. Daley................................ 49,327 * *
Harold Carey.................................. 42,694 * *
Bandel L. Carano(2)........................... 3,351,355 20.7% 15.8%
David R. Hathaway(3).......................... 3,342,352 20.7% 15.8%
Jennifer Gill Roberts(13)..................... 3,345,428 20.7% 15.8%
Scot B. Jarvis(14)............................ 55,770 * *
Bruce C. Edwards(15).......................... 25,000 * *
David A. Twyver(16)........................... 25,000 * *
All directors and officers as a group (13
persons)(17)................................. 13,174,135 75.0% 58.6%
</TABLE>
- --------
* Less than 1%.
(1) Applicable beneficial ownership percentage is based on 16,166,277 shares
of Common Stock outstanding prior to this offering and 21,166,277 shares
outstanding after this offering, and assuming no exercise of the
Underwriters' over-allotment option, together with applicable options
and warrants for such stockholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission (the
"SEC Rules"). The number of shares beneficially owned by a person
includes shares of Common Stock subject to options and warrants held by
that person that are currently exercisable or exercisable within 60 days
of June 30, 1998. Such shares issuable pursuant to such options and
warrants are deemed outstanding for computing the percentage ownership
of the person holding such options but are not deemed outstanding for
the purposes of computing the percentage ownership of each other person.
A portion of the shares issued or issuable upon exercise of such stock
options is subject to repurchase by the Company at the original exercise
price in the event of termination of employment, which repurchase right
lapses over time. To the Company's knowledge, the persons named in this
table have sole voting and investment power with respect to all shares
of Common Stock shown as owned by them,
61
<PAGE>
subject to community property laws where applicable and except as
indicated in the other footnotes to this table. Unless otherwise
indicated, the address of each 5% Stockholder is: c/o Metawave
Communications Corporation, 10735 Willows Road NE, P.O. Box 97069,
Redmond, WA 98073-9769.
(2) Includes 3,274,943 shares held by Oak Investment Partners VI, L.P. and
76,412 shares held by Oak VI Affiliates Fund, L.P. Bandel L. Carano, a
director, is a Managing Member of Oak Associates VI, L.L.C., a general
partner of Oak Investment Partners VI, L.P., a General Partner of Oak VI
Affiliates and a general partner of Oak VI Affiliates Fund, and as such
may be deemed to share voting and investment power with respect to such
shares. Mr. Carano disclaims beneficial ownership of such shares, except
to the extent of his pecuniary interest in such shares.
(3) Includes 2,123,970 shares held by Venrock Associates and 1,218,382 shares
held by Venrock Associates II, L.P. David R. Hathaway, a director, is a
general partner of Venrock Associates and Venrock Associates II, L.P.,
and as such, may be deemed to share voting and investment power with
respect to such shares. Mr. Hathaway disclaims beneficial ownership of
such shares, except to the extent of his pecuniary interest in such
shares.
(4) Includes 15,220 shares held by Sevin Rosen Bayless Management Co.,
2,573,428 shares held by Sevin Rosen Fund IV L.P., 713,853 shares held by
Sevin Rosen Fund V L.P. and 30,519 shares held by Sevin Rosen V
Affiliates Fund L.P. Jennifer Gill Roberts, a director, is a general
partner of Sevin Rosen Fund IV L.P., Sevin Rosen Fund V L.P. and Sevin
Rosen V Affiliates Fund L.P., and as such, may be deemed to share voting
and investment power with respect to such shares. Ms. Roberts disclaims
beneficial ownership of such shares, except to the extent of her
pecuniary interest in such shares.
(5) Includes 15,000 shares held in trust for Matthew Reudink, Dr. Reudink's
son.
(6) Includes 43,750 shares held by Spinnaker Clipper Fund, L.P., 400,000
shares held by Spinnaker Founders Fund, L.P., 431,250 shares held by
Spinnaker Technology Fund, L.P., 375,000 shares held by Spinnaker
Technology Offshore Fund Limited and 20,000 shares held by Spinnaker
Offshore Founders Fund Ltd.
(7) Includes 900,000 shares issuable upon the exercise of immediately
exercisable options held by Mr. Hunsberger, of which 243,750 shares of
which are fully vested within 60 days of June 30, 1998 and 656,250 shares
of which remain subject to the Company Repurchase Right.
(8) Includes 50,104 shares held by Worldview Strategic Partners I, L.P.,
226,718 shares held by Worldview Technology International I, L.P. and
581,691 shares held by Worldview Technology Partners I, L.P.
(9) Includes 7,900 shares held by Margaret D. Huseby, spouse of Mr. Huseby,
and 31,600 shares held in trust for Katheryn Huseby, Max Huseby, Conor
Huseby and Devin Huseby, Mr. Huseby's children.
(10) Includes 200,000 shares issuable upon the exercise of outstanding options
held by Mr. Palermo, of which 73,749 are exercisable and vested within 60
days of June 30, 1998. In accordance with the SEC Rules, Mr. Palermo is
the beneficial owner of 73,749 shares.
(11) Includes 3,750 shares owned by Mr. Shuman, and 96,250 shares issuable
upon the exercise of outstanding options held by Mr. Shuman, 85,000 of
which are immediately exercisable and subject to the Company Repurchase
Right, and an additional 1,250 shares of which are vested and exercisable
within 60 days of June 30, 1998. In accordance with the SEC Rules,
Mr. Shuman is the beneficial owner of 90,000 shares.
(12) Includes 100,000 shares issuable upon the exercise of outstanding options
held by Mr. Butler, 68,000 shares of which are immediately exercisable
and subject to the Company Repurchase Right and an additional 11,541
shares of which are vested and exercisable within 60 days of June 30,
1998. In accordance with the SEC Rules, Mr. Butler is the beneficial
owner of 79,541 shares.
(13) Includes the shares referenced in footnote (4) and 12,408 shares held by
Ms. Roberts. Ms. Roberts disclaims beneficial ownership of the shares
referenced in footnote (4), except to the extent of her pecuniary interest
in such shares.
(14) Includes 30,770 shares owned by Cedar Grove Investments, LLC ("Cedar
Grove") and 25,000 shares issuable upon the exercise of immediately
exercisable options held by Mr. Jarvis within 60 days of June 30, 1998,
all of which are subject to the Company Repurchase Right. Mr. Jarvis, a
managing member of Cedar Grove, disclaims beneficial ownership of such
shares, except to the extent of his pecuniary interest in such shares.
(15) Includes 25,000 shares issuable upon the exercise of immediately
exercisable options held by Mr. Edwards within 60 days of June 30, 1998,
all of which are subject to the Company Repurchase Right.
(16) Includes 25,000 shares issuable upon the exercise of immediately
exercisable options held by Mr. Twyver within 60 days of June 30, 1998,
all of which are subject to the Company Repurchase Right.
(17) Includes (i) shares referred to in footnotes (2)-(5), (7) and (10)-(16)
and (ii) 306,665 shares beneficially owned by two other executive
officers.
62
<PAGE>
DESCRIPTION OF SECURITIES
Following the closing of the sale of the shares of Common Stock offered
hereby, the authorized capital stock of the Company will consist of
150,000,000 shares of Common Stock, $0.001 par value, and 15,000,000 shares of
Preferred Stock, $0.001 par value.
COMMON STOCK
As of June 30, 1998, there were 16,166,277 shares of Common Stock
outstanding that were held of record by approximately 41 stockholders. There
will be 21,166,277 shares of Common Stock outstanding (assuming no exercise of
outstanding options after June 30, 1998) after giving effect to the sale of
the shares of Common Stock offered hereby.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding Preferred Stock, the holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions available to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors is authorized to issue up to 15,000,000 shares of
Preferred Stock in one or more series and to determine the powers, preferences
and rights and the qualifications, limitations or restrictions granted to or
imposed upon any wholly unissued series of undesignated Preferred Stock,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
any further vote or action by the stockholders.
The issuance of Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the
holders of Common Stock. In certain circumstances, such issuance could have
the effect of decreasing the market price of the Common Stock. As of the
closing of this offering, no shares of Preferred Stock will be outstanding and
the Company currently has no plans to issue any shares of Preferred Stock.
WARRANTS
As of June 30, 1998, the Company has warrants outstanding to purchase an
aggregate of 65,416 shares of Series A Preferred Stock, 19,999 shares of
Series B Preferred Stock, 34,090 shares of Series C Preferred Stock and
541,875 shares of Series D Preferred Stock.
In connection with an equipment lease line entered into in December 1995,
the Company issued a warrant to purchase up to an aggregate of 48,750 shares
of Series A Preferred Stock to Comdisco, Inc. ("Comdisco") at an exercise
price of $2.1875 per share. The warrant expires on the later of December 13,
2002 or three years following the effective date of this offering. In
connection with a second equipment lease line entered into in April 1996, the
Company issued a warrant to purchase up to an aggregate of 16,666 shares of
Series A Preferred Stock to Comdisco at an exercise price of $2.1875 per
share. The warrant expires on the later of April 9, 2003 or three years
following the effective date of this offering. In connection with a third
equipment lease line entered into in August 1996, the Company
63
<PAGE>
issued a warrant to purchase up to an aggregate of 19,999 shares of Series B
Preferred Stock to Comdisco at an exercise price of $4.72 per share. The
warrant expires on the later of August 20, 2003 or three years following the
effective date of this offering. In connection with a fourth equipment lease
line entered into in June 1997, the Company issued a warrant to purchase up to
an aggregate of 34,090 shares of Series C Preferred Stock to Comdisco at an
exercise price of $6.16 per share. The warrant expires on the later of June 9,
2004 or 18 months following the effective date of this offering.
In connection with the issuance of the 13.75% Senior Secured Bridge Notes in
April 1998, the Company issued the holders of the 13.75% Senior Secured Bridge
Notes warrants to purchase an aggregate of 537,500 shares of Series D
Preferred Stock at a purchase price of $0.01 per share (the "Note Warrants").
The Note Warrants expire on April 28, 2000.
In connection with an equipment lease line entered into with Insight
Investments Corporation in April 1998, the Company issued a warrant to
purchase up to an aggregate of 4,375 shares of Series D Preferred Stock at an
exercise price of $8.00 per share. The warrant expires on the closing of this
offering and is expected to be net exercised simultaneously therewith.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 15,338,305 shares of Common Stock (the "Registrable
Securities") or their transferees are entitled to certain rights with respect
to the registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement between the Company and the holders
of Registrable Securities. Subject to certain limitations in the agreement,
certain holders of the Registrable Securities may require, on two occasions at
any time after six months from the effective date of this offering, that the
Company use its best efforts to register the Registrable Securities for public
resale, provided that the proposed aggregate offering price is at least
$7,500,000. If the Company registers any of its Common Stock either for its
own account or for the account of other security holders, the holders of
Registrable Securities are entitled to include their shares of Common Stock in
the registration. The holders of the Note Warrants are also entitled to
include shares issuable upon exercise of the Note Warrants in the
registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in the initial public offering. Subject to certain
conditions, all fees, costs and expenses of such registrations must be borne
by the Company and all selling expenses (including underwriting discounts,
selling commissions and stock transfer taxes) relating to Registrable
Securities must be borne by the holders of the securities being registered.
ANTI-TAKEOVER PROVISIONS OF DELAWARE AND WASHINGTON LAW AND CHARTER DOCUMENTS
The Company is subject to the provisions of Section 203 of the DGCL. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved
in a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to
the stockholder, and an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior, did own)
15% or more of the corporation's outstanding voting stock. This provision may
have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the stockholders.
The laws of the State of Washington, where the Company's principal executive
offices are located, impose restrictions on certain transactions between
certain foreign corporations and significant stockholders. Chapter 23B.19 of
the Washington Business Corporation Act (the "WBCA") prohibits a "target
corporation," with certain exceptions, from engaging in certain "significant
business transactions"
64
<PAGE>
with a person or group of persons who beneficially own 10% or more of the
voting securities of the target corporation (an "acquiring person") for a
period of five years after such acquisition, unless the transaction or
acquisition of such shares is approved by a majority of the members of the
target corporation's board of directors prior to the time of acquisition. Such
prohibited transactions include, among other things, a merger or consolidation
with, disposition of assets to, or issuance or redemption of stock to or from,
the acquiring person, termination of 5% or more of the employees of the target
corporation as a result of the acquiring person's acquisition of 10% or more
of the shares or allowing the acquiring person to receive disproportionate
benefit as a stockholder. After the five-year period, a significant business
transaction may take place as long as it complies with certain fair price
provisions of the statute. A target corporation includes a foreign corporation
if (i) the corporation has a class of voting stock registered pursuant to
Section 12 or 15 of the Exchange Act, (ii) the corporation's principal
executive office is located in Washington, and (iii) any of (a) more than 10%
of the corporation's stockholders of record are Washington residents, (b) more
than 10% of its shares are owned of record by Washington residents, (c) 1,000
or more of its stockholders of record are Washington residents, (d) a majority
of the corporation's employees are Washington residents or more than 1,000
Washington residents are employees of the corporation, or (e) a majority of
the corporation's tangible assets are located in Washington or the corporation
has more than $50.0 million of tangible assets located in Washington. A
corporation may not "opt out" of this statute and, therefore, the Company
anticipates this statute will apply to it. Depending upon whether the Company
meets the definition of a target corporation, Chapter 23B.19 of the WBCA may
have the effect of delaying, deferring or preventing a change in control of
the Company.
In addition, upon completion of this offering, certain provisions of the
Company's charter documents, including a provision eliminating the ability of
stockholders to take actions by written consent, may have the effect of
delaying or preventing changes in control or management of the Company, which
could have an adverse effect on the market price of the Company's Common
Stock. The Company's stock option and purchase plans generally provide that
upon a change in control or similar event optionees are entitled to
accelerated vesting credit equal to either twelve months or twenty-four months
of additional vesting beyond that otherwise scheduled, based on whether he or
she has been employed by the Company less than two years, or two years or
more, respectively, as of the date of such event unless in connection with the
change in control or similar event, outstanding options are assumed or
substituted for equivalent options of a successor corporation. The Board of
Directors has authority to issue up to 15,000,000 shares of Preferred Stock
and to fix the rights, preferences, privileges and restrictions, including
voting rights, of these shares without any further vote or action by the
stockholders. The rights of the holders of the Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company, thereby delaying, deferring or preventing a
change in control of the Company. Furthermore, such Preferred Stock may have
other rights, including economic rights senior to the Common Stock, and, as a
result, the issuance of such Preferred Stock could have a material adverse
effect on the market value of the Common Stock. The Company has no present
plan to issue shares of Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is
ChaseMellon Shareholder Services L.L.C.
LISTING
The Company has applied to list its Common Stock on the Nasdaq National
Market under the trading symbol "MTWV."
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
21,166,277 shares of Common Stock, assuming no exercise of options after June
30, 1998. Of these shares, the 5,000,000 shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 of the Securities Act.
The remaining 16,166,277 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144 (the
"Restricted Shares") and may not be sold publicly unless they are registered
under the Securities Act or are sold pursuant to Rule 144 or another exemption
from registration. All directors and executive officers and certain other
stockholders of the Company, holding in the aggregate 15,838,492 of the shares
of Common Stock outstanding prior to this offering, are contractually
obligated not to sell or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus (the "Lockup Period")
without the prior written consent of BT Alex. Brown Incorporated or the
Company (the "Lockup"). See "Underwriting." The number of shares of Common
Stock available for sale in the public market is further limited by
restrictions under the Securities Act.
Because of the restrictions noted above, on the date of this Prospectus and
until 180 days after the date of this Prospectus (assuming no release of the
Lockup Period by the Company or by BT Alex. Brown Incorporated), no shares
other than the 5,000,000 shares offered hereby will be eligible for sale in
the public market and beginning 90 days after the effective date of this
offering, approximately 298,155 Restricted Shares will be eligible for sale in
the public market. Beginning 180 days after the effective date of this
Prospectus, approximately 15,892,122 Restricted Shares (as well as an
additional 123,880 shares of Common Stock issuable upon exercise of currently
outstanding warrants) will be eligible for sale in the public market, subject
in some cases to certain volume limitations.
<TABLE>
<CAPTION>
SHARES
DAYS AFTER DATE ELIGIBLE
OF THIS PROSPECTUS FOR SALE COMMENT
------------------ ---------- -------
<C> <C> <S>
Upon Effectiveness............... 5,000,000 Shares sold in offering
Upon Effectiveness............... none Freely tradable shares salable under
Rule 144(k) that are not subject to
the Lockup
91 days.......................... 298,155 Shares salable under Rules 701 and 144
and not subject to the Lockup
181 days......................... 15,857,122 Lockup released; shares salable under
Rules 144 and 701
</TABLE>
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year, including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the number of shares of
Common Stock then outstanding or the average weekly trading volume of the
Common Stock as reported through the Nasdaq National Market during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information
about the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned for at least two years the shares proposed to be
sold, would be entitled to sell such shares under Rule 144(k) without regard
to the requirements described above.
66
<PAGE>
In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Exchange Act in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirements, contained in Rule 144. During the Lockup Period,
the Company intends to register on a registration statement on Form S-8, (i) a
total of 3,638,399 shares of Common Stock reserved for issuance under the 1995
Stock Option Plan (assuming no exercise of options after June 30, 1998), (ii)
a total of 850,000 shares of Common Stock reserved for issuance under the 1998
Stock Option Plan, (iii) a total of 300,000 shares of Common Stock reserved
for issuance under the Directors' Plan and (iv) a total of 500,000 shares of
Common Stock reserved for issuance under the Purchase Plan. Such registration
will permit the resale of shares so registered by non-affiliates in the public
market without restriction under the Securities Act.
Prior to this offering, there has been no public market for securities of
the Company. No prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of Common Stock of the Company in the public market after the lapse of the
restrictions described below could adversely affect the prevailing market
price and the ability of the Company to raise equity capital in the future at
a time and price which it deems appropriate. In addition, after this offering,
the holders of 15,338,305 shares of Common Stock (the "Registrable
Securities") will be entitled to certain demand and piggyback rights with
respect to registration of such shares under the Securities Act. Registration
of such shares under the Securities Act would result in such shares becoming
freely tradable without restriction under the Securities Act (except for
shares purchased by affiliates of the Company) immediately upon the
effectiveness of such registration. See "Description of Securities--
Registration Rights of Certain Holders." If such holders, by exercising their
demand registration rights, cause a larger number of securities to be
registered and sold in the public market, such sales could have an adverse
effect on the market price for the Company's Common Stock. If the Company were
to include in a Company initiated registration any Registrable Securities
pursuant to the exercise of piggyback registration rights, such sales may have
an adverse effect on the Company's ability to raise needed capital.
67
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their representatives, BT Alex. Brown
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
NationsBanc Montgomery Securities LLC (the "Representatives"), have severally
agreed to purchase from the Company the following respective numbers of shares
of Common Stock at the initial public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BT Alex. Brown Incorporated........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................
NationsBanc Montgomery Securities LLC..............................
---------
Total.............................................................. 5,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any such shares are
purchased.
The Company has been advised by Representatives of the Underwriters that
they propose to offer the shares of Common Stock directly to the public at the
initial public offering price set forth on the cover page of this Prospectus
and to certain dealers at such price less a concession not in excess of $
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of 750,000 additional shares of Common Stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage of such additional shares as the number set forth next to such
Underwriters name in the above table bears to the total number of shares of
Common Stock offered hereby, and the Company will be obligated, pursuant to
the option, to sell shares to the Underwriters to the extent the option is
exercised. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of shares of Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on
the same terms as those on which the 5,000,000 shares are being offered.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
All officers and directors of the Company and certain stockholders have
agreed with the Underwriters that, until 180 days after the effective date of
this Prospectus, they will not directly or indirectly offer, sell, pledge,
contract to sell (including any short sale), grant any option to purchase or
otherwise dispose of any shares of Common Stock (including, without
limitation, shares of Common Stock of the Company which may be deemed to be
beneficially owned by the undersigned on the date hereof in accordance with
the rules and regulations of the Commission and shares of Common Stock which
may be issued upon exercise of a stock option or warrant) or enter into any
hedging transaction relating to the Common Stock.
68
<PAGE>
The Company has also agreed not to sell, offer to sell, contract to sell,
grant any option to purchase or otherwise dispose of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or any rights to acquire Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of BT
Alex. Brown Incorporated, except that the Company may issue shares upon the
exercise of options granted prior to the date hereof, and may grant additional
options under its Plans, provided that, without the prior written consent of
BT Alex. Brown Incorporated, such additional options shall be exercisable, but
not transferable, during such period. The lockup agreements may be released at
any time as to all or any portion of the shares subject to such agreements at
the sole discretion of BT Alex. Brown Incorporated.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiation between the Company and the
Representatives of the Underwriters. Among the factors to be considered in
such negotiations will be prevailing market conditions, the results of
operations of the Company in recent periods, the market capitalizations and
stages of development of other companies that the Company and the
Representatives of the Underwriters believe to be comparable to the Company,
estimates of the business potential of the Company and its industry in general
and the present state of the Company's development and other factors deemed
relevant.
BT Alex. Brown Incorporated acted as the placement agent in the private
placement of the Company's 13.75% Senior Secured Bridge Notes and Note
Warrants issued on April 28, 1998, and in connection with that placement
received cash compensation. BT Holdings (NY), Inc., an affiliate of BT Alex.
Brown Incorporated, purchased a 13.75% Senior Secured Bridge Note in the
principal amount of $4,500,000 and a Note Warrant to purchase 83,405 shares of
Series D Preferred Stock. See "Certain Relationships and Related Transactions"
for a description of the terms of the 13.75% Senior Secured Bridge Notes and
the Note Warrants.
In view of this relationship, the offering is being made in accordance with
Section 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc., which provides, among other things, that the price of the
Common Stock can be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Merrill Lynch, Pierce, Fenner & Smith Incorporated is serving in
such role and will recommend the maximum public offering price of the Common
Stock, Merrill Lynch, Pierce, Fenner & Smith Incorporated has also
participated in the preparation of this Prospectus and has performed due
diligence with respect thereto.
The Company has been advised by the Representatives that during and after
this offering, the Underwriters may purchase and sell Common Stock in the open
market. These transactions may include over-allotment and stabilizing
transactions and purchases to cover syndicate short positions created in
connection with this offering. Stabilizing transactions consist of certain
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the Common Stock; and syndicate short positions involve the
sale by the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Company in this offering. The
Underwriters also may impose penalty bids, whereby selling concessions allowed
to the syndicate members or other broker-dealers in respect of the Common
Stock sold in this offering for their account may be reclaimed by the
syndicate if such securities are repurchased by the syndicate in stabilizing
or short-covering transactions. These activities may stabilize, maintain or
otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market. These
transactions may be effected on the Nasdaq National Market or otherwise and
these activities, if commenced, may be discontinued at any time.
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm orders to any account over which they
exercise discretionary authority.
69
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by its counsel, Venture Law Group, A Professional Corporation,
Kirkland, Washington. Certain legal matters will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California.
EXPERTS
The financial statements and schedule of Metawave Communications Corporation
as of December 31, 1996 and 1997 and the related statements of operations,
shareholders' equity (deficit), and cash flows for the years then ended and
the period from January 19, 1995 (inception) to December 31, 1995 appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance upon such reports, given on the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement, of which this Prospectus constitutes a
part, under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement
and the exhibits and schedules thereto for further information with respect to
the Company and the Common Stock offered hereby. Statements contained herein
concerning the provisions of any documents are not necessarily complete, and
in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference. Copies of the Registration Statement, including
exhibits and schedules filed therewith, may be inspected without charge at the
Commission's principal office in Washington, D.C. or obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a World Wide Web site
on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding companies that file
electronically with the Commission. The Company has filed the Registration
Statement, including the exhibits and schedules thereto, electronically with
the Commission via the Commission's EDGAR system. The Company intends to
distribute to its stockholders annual reports containing audited financial
statements and will make available copies of quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.
70
<PAGE>
GLOSSARY OF TECHNICAL TERMS
<TABLE>
<S> <C>
AMPLIFIER................... A device used to increase the signal strength of analog or
digital radio frequency (RF) signals.
AMPS (ADVANCED MOBILE PHONE
SERVICE)................... An analog wireless protocol adopted in North and South
America.
ANALOG...................... The traditional method of modulating radio signals to carry
information. The analog method employs a continuous signal
that varies the amplitude, frequency or phase of the radio
transmission.
ANTENNA..................... A device for transmitting and/or receiving radiowave
signals. Antennas can be designed to offer various radiation
patterns. Omni-directional antennas typically radiate
equally in all directions. Other antennas are more
directional, radiating largely in one area and not in
others.
ATTENUATION................. The weakening of a signal along some path, often due to
partial blocking or absorption.
BANDWIDTH................... The total frequency range of spectrum available.
BASE STATION................ A transmit and receive station that controls and relays
signals between a switch and the remote handset or
subscriber unit (fixed or mobile).
BSC (BASE STATION
CONTROLLER)................ Equipment that manages the radio transmission for a set of
base stations by handling radio channel management, message
transport and hand-offs.
BEAM........................ A directed RF signal radiating from an antenna in a narrow
pattern which carries cellular phone traffic.
CARRIER TO INTERFERENCE
RATIO (C/I)................ The ratio of strength in the carrier signal to the total
strength of interfering signals, expressed in dB.
CAPACITY.................... The maximum amount of call traffic that a cellular network
can handle.
CDMA (CODE DIVISION MULTIPLE
ACCESS).................... A digital wireless protocol adopted in North America and
Asia. In this protocol, each voice call is labeled with a
unique code and transmitted on the same frequency channel
with other calls.
CARRIER..................... A CDMA channel with 1.23 MHz bandwidth.
CELL........................ The term used to define a geographic area that is served by
a cell site.
CELL SITE................... The location of the base station equipment servicing the
cell.
CELL-SPLITTING.............. The splitting of one large cell into smaller ones. With
proper splitting and allocation of frequencies, channels can
be reused more frequently, making it possible to increase
capacity.
</TABLE>
71
<PAGE>
GLOSSARY OF TECHNICAL TERMS--(CONTINUED)
<TABLE>
<S> <C>
CELLULAR NETWORK............ A network of interconnected low-powered radio transceivers
that provides mobile telephone service.
CHANNEL..................... The communication path which transfers information between
elements in a wireless network. This radio channel requires
a unique RF frequency that is used for communication between
subscriber unit and cell site base station and is assigned
by the FCC.
COVERAGE AREA............... The geographic area in which the signal strength from a
cellular network is sufficient to provide service to users
of the wireless network.
DB.......................... Abbreviation for decibel, a unit for expressing the relative
strength of two signals.
DIGITAL..................... A method of storing, processing, and transmitting voice and
data that uses distinct electronic pulses to represent the
information.
DIGITAL CELLULAR............ A wireless protocol that breaks up cellular voice or data
transmission and sends them in a digital format. Common
digital cellular protocols include CDMA, GSM and TDMA.
DUAL-BAND................... A mobile or portable phone that is capable of operating in
more than one frequency band. An example of a dual-band
phone is a unit that operates on both a 900 MHz and 1.9 GHz
system.
DUAL-MODE................... A mobile or portable phone that is capable of operating
using more than one standard. An example of a dual-mode
phone is a unit that primarily operates on a digital system
and defaults to analog AMPS operation if the digital system
is unavailable.
FCC......................... The Federal Communications Commission; a U.S. government
agency which regulates wireless communications services and
equipment.
FOOTPRINT................... The coverage area of a cell site.
FREQUENCY................... The rate at which the electric and magnetic fields of a
radio wave oscillate, expressed as the number of cycles per
unit of time. Frequency is typically measured in Hertz (Hz),
or cycles per second.
GHZ (GIGAHERTZ)............. One gigahertz is equal to one billion cycles per second.
GSM (GLOBAL SYSTEM FOR
MOBILE COMMUNICATIONS)..... A digital wireless protocol which serves as the European
standard for digital cellular.
HZ (HERTZ).................. A measurement of frequency, equivalent to one "wave" or
cycle per second.
INFRASTRUCTURE.............. All parts of the wireless network, excluding the
subscriber's phone. Includes the Mobile Telephone Switching
Office, Base Stations, and all links between them.
</TABLE>
72
<PAGE>
GLOSSARY OF TECHNICAL TERMS--(CONTINUED)
<TABLE>
<S> <C>
INTERFERENCE................ Reception of unwanted signals which degrades call quality
and limits wireless capacity. Refers to undesired signals
from the standpoint of any particular listener.
KHZ (KILOHERTZ)............. One kilohertz is equal to one thousand cycles per second.
LAN (LOCAL AREA NETWORK).... A private data communications network linking a variety of
data services such as computers and printers within an
office or home environment.
LMDS (LOCAL MULTIPOINT
DISTRIBUTION SERVICE)...... A broadband wireless communications network that uses
millimeter wave frequencies around 28 to 38 GHz to transmit
video and data over a cellular-like network at distances
under a few miles.
LOCAL LOOP.................. A wired communications channel between the subscriber's
location and the subscriber's local central office, also
known as the subscriber loop.
MHZ (MEGAHERTZ)............. One megahertz is equal to one million cycles per second.
MSC (MOBILE SWITCHING
CENTER).................... A high-capacity, traffic handling device that routes
incoming and outgoing wireless calls by determining which
base station will handle each call and also provides inter-
system hand-offs.
MTSO (MOBILE TELEPHONE
SWITCHING OFFICE).......... The hub of a cellular network, which incorporates the mobile
switching center and the network operating software for the
switching, database, and maintenance functions.
NAMPS (NARROW-BAND AMPS)....
An analog wireless protocol which operates in the 800-MHz
band in the United States. Developed by Motorola, NAMPS
divides traditional 30-MHz channels into three 10-MHz
channels to add capacity.
PCS (PERSONAL COMMUNICATIONS
SERVICES).................. A two-way, digital, wireless telecommunications system
operating in the 1.8 GHz to 2.4 GHz range in the United
States.
PHASED-ARRAY................ A type of antenna design in which the relative phases of the
respective signals feeding the group of antennas are varied
to vary the radiation pattern of the antenna.
PSTN (PUBLIC SWITCHED
TELEPHONE NETWORK)......... Refers to the collection of networks providing public
telephone switching service; the wired or landline network.
RECEIVER.................... A device that receives signals.
</TABLE>
73
<PAGE>
GLOSSARY OF TECHNICAL TERMS--(CONTINUED)
<TABLE>
<S> <C>
REUSE/FREQUENCY REUSE....... The utilization of frequency (channels) more than once in a
wireless network. To minimize interference, cells are
assigned only a portion of an operator's available
frequencies; adjacent cells do not use the identical
channels. The reuse pattern determines how many cells the
available frequencies are divided among before being reused
and therefore how much distance separates cells using the
same frequency.
RF (RADIO FREQUENCY)........ The range of electromagnetic frequencies above the audio
range and below visible light. All broadcast transmission,
from AM radio to microwaves, falls into this range, which is
between 30-KHz and 300-GHz.
RF SIGNAL................... Information transmitted over a communications network by a
modulated RF channel.
ROAMING..................... The ability to use a wireless phone to make and receive
calls in places outside a user's home coverage area.
SECTORIZING................. The process of dividing a cell site into sectors by using
directional antennas. Sectorizing is typically used as a
means of reducing interference in order to increase
frequency reuse and therefore network capacity.
SECTOR SYNTHESIS............ A proprietary method incorporated into Metawave's smart
antenna system to better control the transmission and
reception of CDMA radio signals by cell sites, thereby
reducing interference.
SMART ANTENNA............... A system that can respond to changes in the radio frequency
environment through the use of software algorithms that
control an integrated antenna array.
SMR (SPECIALIZED MOBILE A two-way radio telephony service making use of macrocells
RADIO)..................... that cover an area up to 50 miles in diameter. Widely used
in dispatch operations by truck and taxi fleets. SMR systems
have much less radio spectrum than cellular systems, but
have a much greater range.
SPATIAL DIVERSITY........... An antenna configuration of two or more elements that are
physically spaced (spatially diverse) to combat signal
fading and improve signal quality. The desired spacing
depends on the frequency band and the RF environment.
SPECTRUM.................... A continuous range of frequencies, ranging from 30 Hz to
3000 GHz, available for radio transmission and reception.
The FCC has set aside fixed portions of the spectrum for
cellular service, PCS service, television, FM radio, and
satellite transmissions.
SPECTRUM ALLOCATION......... Federal government designation of a range of frequencies for
a category of use or uses.
SPECTRUM MANAGEMENT......... A way to improve a network's capacity, coverage, and call
quality by using hardware and software tools for network
configuration and RF enhancement.
SUBSCRIBER.................. A customer of a wireless service provider or other
communications company.
SWITCH...................... See MTSO.
</TABLE>
74
<PAGE>
GLOSSARY OF TECHNICAL TERMS--(CONTINUED)
<TABLE>
<S> <C>
TDMA (TIME DIVISION MULTIPLE
ACCESS).................... A method of digital wireless communications transmission by
which a large number of users can access, in sequence, a
single radio frequency channel without interference because
each user is allocated a unique time slot within each
frequency channel.
TRANSCEIVER................. Equipment that both receives and transmits radio waves.
TRANSMITTER................. A device that generates signals.
TRUNKING.................... Allowing a subscriber unit to be connected to any unused
channel in a group of channels for an incoming or outgoing
call. Trunking efficiency is increased whenever greater
numbers of channels can be made available to any group of
subscribers at a given location and time.
WIRELESS.................... Describing a type of technology using radio-based systems
that allows transmission of voice and data signals through
radio frequencies without a physical connection.
WLL (WIRELESS LOCAL LOOP)... A type of wireless technology which is used to provide
subscribers with standard telephone service. Eliminates the
need for a wire, or loop, connecting users to the PSTN by
transmitting voice communications over radio waves between
the end user and a base station that is connected to the
network equipment.
</TABLE>
75
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young, LLP, Independent Auditors.......................... F-2
</TABLE>
<TABLE>
<S> <C>
Balance Sheets.............................................................. F-3
</TABLE>
<TABLE>
<S> <C>
Statements of Operations.................................................... F-4
</TABLE>
<TABLE>
<S> <C>
Statements of Stockholders' Equity (Deficit)................................ F-5
</TABLE>
<TABLE>
<S> <C>
Statements of Cash Flows.................................................... F-6
</TABLE>
<TABLE>
<S> <C>
Notes to Financial Statements............................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Metawave Communications Corporation
We have audited the accompanying balance sheets of Metawave Communications
Corporation as of December 31, 1996 and 1997 and the related statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended and the period from January 19, 1995 (inception) to December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Metawave Communications
Corporation at December 31, 1996 and 1997, and the results of its operations
and its cash flows for the years then ended and the period from January 19,
1995 (inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Seattle, Washington
March 13, 1998, except for Note 13,
as to which the date is April 28, 1998.
F-2
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, STOCKHOLDERS'
------------------ JUNE 30, EQUITY AT
1996 1997 1998 JUNE 30, 1998
-------- -------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..... $ 19,092 $ 13,334 $ 20,311
Accounts and notes receivable,
net.......................... 120 1,444 3,792
Inventories................... -- 4,080 12,000
Debt issuance costs, net of
amortization of 1,275........ -- -- 4,545
Prepaid expenses and other
assets....................... 185 142 708
-------- -------- --------
Total current assets............ 19,397 19,000 41,356
Property and equipment--net
(Note 3)....................... 2,258 3,406 5,032
Other noncurrent assets......... 92 169 169
-------- -------- --------
Total assets.................... $ 21,747 $ 22,575 $ 46,557
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable ............. $ 484 $ 729 $ 3,581
Accrued liabilities........... 622 1,304 2,663
Current portion of notes
payable...................... 104 140 29,838
Current portion of capital
lease obligations............ 465 1,035 1,182
Deferred revenue.............. -- 115 305
-------- -------- --------
Total current liabilities....... 1,675 3,323 37,569
Notes payable, less current
portion........................ 321 263 143
Capital lease obligations, less
current portion................ 1,429 2,709 3,937
Other long-term liabilities..... 7 6 --
-------- -------- --------
Total liabilities............... 3,432 6,301 41,649
Commitments and contingencies
Convertible and redeemable
preferred stock, issued and
outstanding 10,732,623 shares
in 1996 and 13,130,350
in 1997 and June 30, 1998;
aggregate preference in
liquidation of $49,282 at
December 31, 1997 and June 30,
1998........................... 30,100 49,282 49,282 $ --
Convertible and redeemable
preferred stock warrants....... -- 128 4,423 --
Stockholders' equity (deficit):
Preferred stock, $.0001 par
value, authorized 20,000,000
shares, of which 13,130,350
have
been designated as
convertible and redeemable
at June 30, 1998 and December
31,1997...................... -- -- -- --
Common stock, $.0001 par
value, authorized 40,000,000
shares; issued and
outstanding
2,650,000 in 1996, 2,932,093
in 1997 and
3,035,927 at June 30, 1998
and 16,166,277
shares pro forma............. 10 1,968 2,162 55,867
Deferred stock compensation... -- (1,205) (877) (877)
Accumulated deficit........... (11,795) (33,899) (50,082) (50,082)
-------- -------- -------- -------
Total stockholders' equity
(deficit)...................... (11,785) (33,136) (48,797) $ 4,908
-------- -------- -------- =======
Total liabilities and
stockholders' equity (deficit). $ 21,747 $ 22,575 $ 46,557
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 19, 1995 YEAR ENDED SIX MONTHS ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------ ----------------------
1995 1996 1997 1997 1998
---------------- -------- -------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue............. $ -- $ 1,291 $ 1,450 $ 392 $ 6,501
Cost of sales........... -- 1,097 1,728 516 6,396
------- -------- -------- ------- --------
Gross profit (loss)..... -- 194 (278) (124) 105
Operating expenses:
Research and
development.......... 883 7,186 13,083 5,365 8,025
Sales and marketing... 84 1,704 5,383 2,244 4,087
General and
administrative....... 168 2,434 3,762 1,367 2,429
------- -------- -------- ------- --------
Total operating
expenses............... 1,135 11,324 22,228 8,976 14,541
------- -------- -------- ------- --------
Operating loss.......... (1,135) (11,130) (22,506) (9,100) (14,436)
Other income, net....... 157 485 851 409 484
Interest expense........ (22) (150) (449) (236) (2,231)
------- -------- -------- ------- --------
135 335 402 173 (1,747)
------- -------- -------- ------- --------
Net loss................ $(1,000) $(10,795) $(22,104) $(8,927) $(16,183)
======= ======== ======== ======= ========
Pro forma net loss per
share.................. $ (1.54) $ (1.01)
======== ========
Shares used in
computation of
pro forma net loss per
share.................. 14,383 16,061
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JANUARY 19, 1995 (INCEPTION) THROUGH JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
--------------
DEFERRED TOTAL
STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT COMPENSATION DEFICIT EQUITY (DEFICIT)
------ ------ ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Sale of common stock at
$.0036 per share for
cash................... 2,750 $ 10 $ -- $ -- $ 10
Net loss for the period
from January 19, 1995
to December 31, 1995... -- -- -- (1,000) (1,000)
----- ------ ------- -------- --------
Balance, December 31,
1995................... 2,750 10 -- (1,000) (990)
Shares surrendered to
Company for no
consideration......... (100) -- -- -- --
Net loss for the year
ended December 31,
1996.................. -- -- -- (10,795) (10,795)
----- ------ ------- -------- --------
Balance, December 31,
1996................... 2,650 10 -- (11,795) (11,785)
Exercise of stock
options............... 282 77 -- -- 77
Deferred stock
compensation.......... -- 1,881 (1,881) -- --
Stock compensation
expense............... -- -- 676 -- 676
Net loss for the year
ended December 31,
1997.................. -- -- -- (22,104) (22,104)
----- ------ ------- -------- --------
Balance, December 31,
1997................... 2,932 1,968 (1,205) (33,899) (33,136)
Repurchased restricted
stock *............... (138) -- -- -- --
Exercise of stock
options *............. 231 84 -- -- 84
Exercise of stock
warrants*............. 11 110 -- -- 110
Stock compensation
expense *............. -- -- 328 -- 328
Net loss for the period
ended June 30, 1998 *. -- -- -- (16,183) (16,183)
----- ------ ------- -------- --------
Balance, June 30, 1998
*...................... 3,036 $2,162 $ (877) $(50,082) $(48,797)
----- ------ ------- -------- --------
</TABLE>
- --------
* Unaudited
See accompanying notes.
F-5
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 19, 1995 YEAR ENDED SIX MONTHS ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------ ----------------------
1995 1996 1997 1997 1998
---------------- -------- -------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................ $(1,000) $(10,795) $(22,104) $ (8,927) $ (16,183)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization expense. 19 520 1,841 756 2,441
Loss on disposal of
assets .............. -- -- -- -- 24
Stock compensation.... -- -- 676 22 438
Reserve for loss on
assets............... -- -- 425 -- --
Changes in operating
assets and
liabilities:
Increase in accounts
receivable.......... (53) (67) (1,323) (267) (2,349)
Increase in
inventories......... -- -- (4,080) (2,209) (8,091)
Increase in other
assets.............. (55) (222) (34) (63) (2,091)
Increase in accounts
payable, accrued
liabilities and
other liabilities... 206 906 926 878 4,864
(Increase) decrease
in projects in
process............. (717) 717 -- --
Increase (decrease)
in deferred revenue. 1,291 (1,291) 114 -- 191
------- -------- -------- -------- ---------
Net cash used in
operating activities... (309) (10,232) (23,559) (9,810) (20,756)
INVESTING ACTIVITIES
Purchases of securities. (3,612) -- -- -- --
Proceeds on sale of
securities............. -- 3,612 -- -- --
Proceeds on sale of
assets................. -- -- -- -- 78
Purchases of equipment.. (151) (549) (621) (870) (582)
------- -------- -------- -------- ---------
Net cash provided by
(used in) investing
activities............. (3,763) 3,063 (621) (870) (504)
FINANCING ACTIVITIES
Proceeds from issuance
of preferred stock..... 5,500 24,600 19,182 -- --
Proceeds from issuance
of common stock........ 10 -- 77 1 84
Proceeds from notes
payable................ -- 500 -- -- 29,000
Payments on notes
payable................ -- (81) (115) (60) (130)
Principal payments on
capital lease
obligations............ (16) (180) (722) (290) (717)
------- -------- -------- -------- ---------
Net cash provided by
(used in) financing
activities............. 5,494 24,839 18,422 (349) 28,237
------- -------- -------- -------- ---------
Net increase (decrease)
in cash................ 1,422 17,670 (5,758) (11,029) 6,977
Cash and cash
equivalents at
beginning of period.... -- 1,422 19,092 19,092 13,334
------- -------- -------- -------- ---------
Cash and cash
equivalents at end of
period................. $ 1,422 $ 19,092 $ 13,334 $ 8,063 $20,311
======= ======== ======== ======== =========
NONCASH TRANSACTIONS AND
SUPPLEMENTAL
DISCLOSURES
Capital lease
obligations incurred to
purchase assets........ $ 144 $ 1,952 $ 2,665 $ 1,458 $ 2,099
Inventories reclassified
to property and
equipment.............. -- -- -- -- 171
Deferred compensation on
stock option grants.... -- -- 1,881 224 --
Interest paid........... 22 150 450 304 214
</TABLE>
See accompanying notes.
F-6
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Metawave designs, develops, manufactures and markets spectrum management
solutions for the wireless communications industry. Metawave's spectrum
management solutions, consisting of smart antenna systems, applications
software and engineering services, enable cellular network operators to
increase overall network capacity, reduce network operation costs, better
manage network infrastructure and stimulate end user demand through improved
system quality. Using its proprietary technologies, the Company has developed
products that address the capacity, coverage, and call quality problems faced
by cellular network operators.
The Company was incorporated in January 1995. Net revenue since inception
has been attributable to an engineering consulting contract in 1996, services
rendered by the Company's Network Services division during 1997 and sales of
the SpotLight 2000 system during the six months ended June 30, 1998. The
Company's Network Services division was discontinued during the first quarter
of 1998. Since inception, the Company has incurred significant losses and as
of June 30, 1998, had an accumulated deficit of $50.1 million.
Unaudited Interim Financial Information
The financial information as of June 30, 1998 and for the periods ended June
30, 1997 and 1998 is unaudited, but includes all adjustments (consisting only
of normal recurring adjustments) that the Company considers necessary for a
fair presentation of the financial position at such dates and the operations
and cash flows for the periods then ended. Operating results for the period
ended June 30, 1998 are not necessarily indicative of results that may be
expected for the entire year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
Significant estimates made in preparing the financial statements include the
allowance for doubtful accounts, inventory reserves and warranty accruals.
Revenue Recognition
Product revenues are recognized when the product has been shipped and all
customer acceptance conditions have been satisfied. Service revenues,
generally installation and consulting, are recognized when the services have
been performed. Revenue from maintenance contracts is deferred and recognized
ratably over the term of the agreement (which is typically one year). Any
billings in excess of revenue are classified as deferred revenue and projects
in process are recorded as inventory.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment and leasehold improvements are recorded at cost.
Depreciation is provided on the straight-line method for financial statement
purposes and on accelerated methods for federal income tax purposes over
estimated useful lives of two to seven years. Leasehold improvements are
amortized over the lesser of the lease term or estimated useful life.
Pro Forma Net Loss per Share
Pro forma net loss per share is computed using the weighted average number
of shares of common stock outstanding and the weighted average convertible and
redeemable preferred stock outstanding as if such shares were converted to
common stock at the time of issuance. Common stock equivalents,
F-7
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
including stock options and warrants, are excluded from the computation as t
heir effect is antidilutive. For the periods presented, there is no difference
between the basic and diluted earnings per share. Historical basic and diluted
earnings per share are not presented because they are considered meaningless
due to the significant change in capital structure upon the mandatory
conversion of convertible redeemable preferred stock upon completion of the
initial public offering.
Warranty
The Company provides a 12 to 18 month warranty which may vary depending upon
specific contractual terms, on all products and records a related provision
for estimated warranty costs at the date of sale.
Advertising Costs
Advertising costs are charged to expense as incurred. The Company had no
material advertising expense for the periods ended December 31, 1995 and 1996,
while $535,000 and $342,000 were recorded for the year ended December 31, 1997
and the six months ended June 30, 1998, respectively
Cash Equivalents, Fair Values of Financial Instruments, and Concentration of
Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash equivalents, and trade receivables.
The carrying value of financial instruments approximates market value.
Cash equivalents consist of investments with maturities of three months or
less when purchased. The Company invests with various high-quality
institutions and, by policy, limits the amount of credit exposure to any one
institution.
The Company sells its products and provides services to customers in the
wireless communications industry. The Company performs on-going credit
evaluations of its customers' financial condition and generally does not
require collateral. The Company maintains reserves for potential credit
losses, and such losses have been within management's expectations and have
not been material in any year.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Financial
Accounting Standards Board Statement No. 123 and applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its stock
option plans. Accordingly, the Company's stock-based compensation expense is
recognized based on the intrinsic value of the option on the date of grant.
Recognition of stock-based compensation expense under Statement 123 requires
the use of a fair value method to value stock options using option valuation
models that were developed for purposes other than valuing employee stock
options. Pro forma disclosure of net loss under Statement 123 is provided in
Note 6.
Reclassifications
The Company adopted a manufacturing fiscal year in 1998. The fiscal year
1998 is the 52 week period that ends the Sunday following the calendar year
end. For convenience of presentation, all fiscal periods in these financial
statements are treated as ending on a calendar month end.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
F-8
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Standards
In 1997, the following accounting standards were issued: SFAS No. 129,
"Disclosure of Information About Capital Structure" requiring supplemental
disclosure of capital structure, SFAS No. 130, "Reporting Comprehensive
Income," (This statement establishes standards for reporting and disclosure of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements), SFAS No. 131,
"Disclosures About Segments of an Enterprise and Required Information," and
SOP 97-2, "Software Revenue Recognition." Each of these standards became
effective for the Company on January 1, 1998. The adoption of these standards
did not impact the Company's financial statements or disclosures.
In March 1998, the AICPA issued SOP 98-1, Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use. The SOP is
effective for the Company beginning on January 1, 1999 but earlier adoption is
encouraged. The SOP requires the capitalization of certain costs incurred
after the date of adoption in connection with developing or obtaining software
for internal-use. The Company elected to adopt the SOP in 1998. The SOP did
not have a material impact on the Company's operations or financial position.
2. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
(IN THOUSANDS)
<S> <C> <C>
Purchased parts........................................ $1,331 $ 6,766
Subassemblies.......................................... 274 472
Finished goods......................................... 2,475 4,762
------ -------
$4,080 $12,000
====== =======
</TABLE>
Purchased parts include purchased components and partially assembled units.
Subassemblies primarily represent components that are assembled and ready for
final configuration pending the detailed requirements for the specific
customer. Finished goods are units representing projects-in-process at
customer locations.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1996 1997 1998
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Equipment........................................ $ 2,131 $ 4,738 $ 6,932
Furniture and fixtures........................... 394 605 796
Leasehold improvements........................... 272 315 693
------- ------- -------
2,797 5,658 8,421
Accumulated depreciation and amortization........ (539) (2,252) (3,389)
------- ------- -------
$ 2,258 $ 3,406 $ 5,032
======= ======= =======
</TABLE>
F-9
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
4. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER
31,
------------ JUNE 30,
1996 1997 1998
---- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Senior Secured Bridge Notes maturing in April 2000,
bearing interest at 13.75% accrued semi-annually..... $ -- $ -- $ 29,708
Note payable to U.S. Bank with monthly payments of
$217 maturing in July 2000, bearing interest at 11%.. 7 6 4
Note payable to Comdisco with monthly payments of
$12,126, maturing in February 2000, bearing interest
at 8%, with a residual payment of $50,000 due
February 28, 2000, secured by the underlying
equipment............................................ 418 308 252
Notes payable to GMAC with monthly payments
aggregating $2,190, maturing between December 2001
and April 2002, bearing interest at rates between
3.9% and 8.75%....................................... -- 89 17
----- ----- --------
425 403 29,981
Current portion....................................... (104) (140) (29,838)
----- ----- --------
$ 321 $ 263 $ 143
===== ===== ========
</TABLE>
Notes payable are secured by equipment and vehicles.
Future principal payments on notes payable at December 31, 1997 are as
follows: 1998--$139,439; 1999--$159,926; 2000--$84,929; 2001--$16,202; and
2002--$2,071.
The Company has a credit facility with a commercial bank, which provides for
a revolving credit line of $7.5 million to support working capital with a $3.0
million sublimit for issuance of trade-related commercial and standby letters
of credit, which matures on October 14, 1999. Outstanding balances on the
credit line bear interest at the bank's prime rate (8.5%) as of December 31,
1997 and June 30, 1998, respectively, and are secured by the Company's
accounts receivable and inventory. At December 31, 1997 and June 30, 1998, no
amounts were outstanding under this revolving credit line secured by accounts
receivable and $2.5 million was outstanding related to issuance of a standby
letter of credit.
On April 28, 1998, the Company issued $29 million of Senior Secured Bridge
Notes (Notes), which mature on April 28, 2000. The Notes accrue interest at
13.75%, payable semi-annually at the option of the Company in either
additional Notes or cash. Until the Notes are repaid in full, the interest
rate will increase by 200 basis points up to a maximum of 18.0%. On April 28,
1999 and at the end of each subsequent six-month period; to a maximum rate of
18.00%. One-half of the outstanding Notes and any accrued and unpaid interest
is due upon the occurrence of an Initial Public Offering (IPO). The other one-
half of the Notes may be redeemed at any time, prior to the maturity date, by
the Company by payment in cash of the principal and accrued interest.
The Notes are secured by personal property and intellectual property of the
Company. The Company is required to comply with certain covenants and certain
reporting requirements determined by the noteholders.
In connection with the Senior Secured Bridge financing, the noteholders
received warrants to purchase 537,500 shares of series D Preferred Stock at
$.01 per share. The Company recorded debt
F-10
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
issuance fees of approximately $5,820,000 related to the issuance of these
warrants. The fees are amortized over the two-year contractual life of the
Notes. The warrants have a two-year term. On April 28, 1999 and at the end of
each subsequent three-month period, the Company will issue the noteholders
200,000 additional warrants. This provision will terminate upon an IPO by the
Company and redemption of at least one-half of the issued and outstanding
Notes.
The Company may redeem the balance of the Notes and warrants on or before
the completion of an IPO or on April 28, 1999 for and aggregate redemption and
repurchase price of $40.6 million.
5. CONVERTIBLE AND REDEEMABLE PREFERRED STOCK
In July 1995, the Company issued 5,500,000 shares of Series A Preferred
Stock (Series A) through a private offering. Proceeds from the financing
amounted to $5,500,000.
In May 1996, the Company issued 2,711,113 shares of Series B Preferred Stock
(Series B) through a private offering. Proceeds from the financing amounted to
$9,150,006. An additional 29,630 shares of Series B were issued in November
1996 with proceeds of $100,002.
In October and November 1996, the Company issued 2,491,880 shares of Series
C Preferred Stock (Series C) through a private offering. Proceeds from the
financing amounted to $15,349,980.
In August 1997, the Company issued 2,397,727 shares of Series D Preferred
Stock (Series D) through a private offering. Proceeds from the financing
amounted to $19,181,816.
Holders of Series A, B, C, and D have preferential rights to dividends
($.08, $.27, $.49, and $.64 per share per annum, respectively) when and if
declared by the Board of Directors. Dividends are not cumulative until July
1999. The holders are entitled to the number of votes equal to the number of
shares of common stock into which the preferred stock could be converted. Each
share of preferred stock is convertible into one share of common stock at the
option of the holder, or automatically upon the vote or written consent of the
holders of the majority of the shares of Series A, B, C, and D originally
issued or upon the closing of an initial public offering of the Company's
common stock from which the aggregate proceeds are not less than $15 million.
The conversion rate is subject to adjustment, as provided by the Company's
Amended and Restated Articles of Incorporation. In the event of liquidation,
the holders of Series A, B, C, and D have preferential rights to liquidation
payments of $1.00, $3.375, $6.16, and $8.00 per share, respectively, plus any
declared but unpaid dividends. The preferred stock has redemption rights for a
six-month period beginning on December 31, 2000 upon the election of at least
50% of the holders. The redemption price is equal to the original purchase
price plus any declared but unpaid dividends.
Convertible and Redeemable Preferred Stock Warrants
In connection with a Master Lease Agreement dated December 13, 1995, the
Company has issued two warrants providing for the purchase of 48,750 shares
and 16,666 shares of Series A Preferred Stock at an exercise price of $2.1875
per share, subject to adjustment as provided in the Warrant Agreements. The
Warrant Agreements expire after seven years or eighteen months to three years
from the effective date of an initial public offering, whichever comes later.
F-11
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
5. CONVERTIBLE AND REDEEMABLE PREFERRED STOCK (CONTINUED)
During 1996, the Company entered into an additional lease line to the
aforementioned Master Lease Agreement. The new lease included the issuance of
a warrant to purchase 19,999 shares of Series B Preferred Stock with an
exercise price of $4.72.
During 1997, the Company entered into an additional lease line to the
aforementioned Master Lease Agreement. The new lease included the issuance of
a warrant to purchase 34,090 shares of Series C Preferred Stock with an
exercise price of $6.16.
6. STOCKHOLDERS' EQUITY
Authorized Shares
In anticipation of the IPO of the Company's Common Stock, in May 1998, the
Board of Directors approved the amendment and restatement of the Certificate
of Incorporation to change the authorized number of shares of preferred stock
to 15,000,000 shares and increase the number of authorized shares of Common
Stock of the Company to 150,000,000 shares. These changes are to take effect
upon completion of the IPO.
Stock Repurchase Agreement
Prior to June 30, 1998, the Company had common stock repurchase agreements
with two founders, whereby if the shareholder ceases to be an employee of the
Company, the Company has the right to repurchase shares of common stock at the
original issuance price paid by the founder. The stock held by the founders,
and subject to the terms of these agreements, vested during each full fiscal
quarter commencing after June 30, 1995 at a rate of 33% per year and became
fully vested on June 30, 1998. As of December 31, 1997, there were 344,437
shares subject to repurchase with an aggregate purchase price of $1,240.
During 1996, one of the founders surrendered 100,000 shares to the Company for
no consideration. On January 10, 1998, the Company repurchased 137,775 shares
of common stock from one of the founders for $501.
Proforma Stockholders' Equity (Unaudited)
The proforma stockholders' equity in the accompanying balance sheet reflects
the conversion of convertible and redeemable Preferred Stock and the
conversion of Preferred Stock warrants to Common Stock warrants coincident
with the IPO.
Stock Option Plan
The Company's 1995 Stock Option Plan (the Plan) provides for the granting of
incentive stock options and nonqualified stock options to employees, officers,
directors, and consultants. Options under the Plan have been granted at fair
market value on the date of grant and expire between five and ten years.
Options granted under this Plan generally become exercisable at the rate of
25% of the total number of shares subject to the option after the first
anniversary following the date of grant, with 2.083% vesting monthly
thereafter, with all shares becoming fully vested on the fourth anniversary
date of the date of grant. The Company has reserved 4,150,000 shares of common
stock for issuance under the Plan.
In anticipation of an IPO of the Company's common stock, in May 1998, the
Board of Directors approved the 1998 Stock Option Plan and the 1998 Employees
Stock Purchase Plan, subject to stockholder approval. Shares reserved for
issuance under these plans were 850,000 shares and 500,000 shares,
respectively.
The 1998 Directors' Stock Option Plan was adopted by the Board of Directors
in February 1998 and approved by the stockholders on April 20, 1998. A total
of 300,000 shares of Common Stock has been
F-12
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
reserved for issuance under the Directors' Plan. The Directors' Plan provides
for the automatic grant of nonstatutory stock options to nonemployee directors
of the Company upon joining the Board or upon the effectiveness of the
Company's initial public offering. Provided an individual remains a director,
the Directors' Plan provides that each option granted under the Plan shall
become exercisable in installments cumulatively as to 25% of the total number
of shares subject to the option on the first anniversary of the date of grant
of the option and 2.083% of the total number of shares subject to the option
each month thereafter. The exercise price of all stock options granted under
the Directors' Plan shall be equal to the fair market value of a share of the
Company's Common Stock on the date of grant of the option. The fair market
value of any option granted concurrently with the initial effectiveness of the
Purchase Plan shall be the Price to Public set forth in the final prospectus
relating to this Offering. Options granted under the Directors' Plan have a
term of ten years.
In 1997, deferred compensation of $1,881,382 was recorded for options
granted under the 1995 Plan. The deferred compensation was calculated as the
difference between the exercise price and the deemed value of the Company's
stock options granted under the 1995 Plan. The deferred compensation is
amortized over the vesting period of the related options. Amortized stock
compensation of $676,491 and $328,000 was recorded in the year ended December
31,1997 and the six months ended June 30, 1998, respectively.
Had the stock compensation expense for the Company's stock option plan been
determined based on the estimated fair value using the minimum value option
pricing model at the date of grant, the Company's net loss would have been
increased to these pro forma amounts (in thousands, except per share data):
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported................................. $(1,000) $(10,795) $(22,104)
Pro forma................................... (1,002) (10,816) (22,109)
Pro forma net loss per share:
As reported................................. -- -- (1.54)
Pro forma................................... -- -- (1.54)
</TABLE>
The fair value for these options was estimated at the date of grant using
minimum value option pricing models that take into account: (1) the stock
price at the grant date, (2) the exercise prices, (3) a one-year expected life
beyond the vest date, (4) no dividends, and (5) a risk-free interest rate of
between 5.42% and 6.43% during 1995 through 1997 over the expected life of the
options. Compensation expense recognized in providing pro forma disclosures
may not be representative of the effects on pro forma net income for future
years because the amounts above include only the amortization for the fair
value of 1997, 1996, and 1995 grants.
F-13
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of the Company's stock option activity and related information
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $.10 995,500 $.10 1,942,854 $ .24 3,148,794 $ .79
Granted at deemed
value................. 1,012,000 .10 1,189,454 .34 671,983 1.95 530,445 8.20
Granted at below deemed
value................. -- -- -- 1,359,285 .68 -- --
Canceled............... (16,500) .10 (242,100) .27 (543,236) .29 (171,970) 1.82
Exercised.............. -- -- -- (282,092) .27 (229,509) .36
--------- --------- --------- ---------
Outstanding at end of
period................. 995,500 .10 1,942,854 .24 3,148,794 .79 3,277,760 1.97
========= ========= ========= =========
Exercisable at end of
period................. -- -- 321,859 .10 2,140,002 .97 2,634,213 2.35
========= ========= ========= =========
Weighted average fair
value of options
granted during the
period.................
Granted at value....... $.10 $.34 $1.95 $8.20
Granted at below value. -- -- $1.89 --
</TABLE>
The following information is provided for options outstanding and exercisable
at December 31, 1997:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------ ------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
EXERCISE NUMBER OF EXERCISE CONTRACTUAL NUMBER OF EXERCISE
RANGE OPTIONS PRICE LIFE (YEARS) OPTIONS PRICE
-------- --------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
$ .10- .35................ 913,180 $ .14 7.98 500,104 $ .13
.62-1.20................ 1,800,314 .65 9.36 1,204,598 .67
2.00-3.36................ 435,300 2.73 9.91 435,300 2.73
--------- ---------
.10-3.36................ 3,148,794 .79 9.03 2,140,002 .96
========= =========
</TABLE>
In connection with the Plans, 660,639 shares of common stock are available
for future issuance at June 30, 1998.
F-14
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
Common Shares Reserved for Future Issuance. The Company has reserved shares
of common stock as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Series A Preferred Stock............................. 5,500,000 5,500,000
Series B Preferred Stock............................. 2,740,743 2,740,743
Series C Preferred Stock............................. 2,491,880 2,491,880
Series D Preferred Stock............................. 2,397,727 2,397,727
Convertible redeemable preferred stock warrants...... 119,505 925,755
Stock options........................................ 3,667,908 5,288,399
---------- ----------
16,917,763 19,344,504
========== ==========
</TABLE>
Weighted Average Shares and Pro Forma Net Loss Per share (unaudited). Pro
forma net loss per share is calculated as follows (in thousands, except share
and per share data):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Net loss........................................... $ (22,104) $ (16,183)
========== ==========
Weighted average outstanding:
Common stock..................................... 2,723,106 2,930,465
Convertible preferred stock...................... 11,660,178 13,130,350
---------- ----------
Total weighted average outstanding................. 14,383,284 16,060,815
========== ==========
Pro forma net loss per share....................... $ (1.54) $ (1.01)
========== ==========
</TABLE>
7. INCOME TAXES
As of December 31, 1997, the Company had federal net operating loss
carryforwards (NOL) of approximately $28.5 million and research and
development tax credit carryforwards of approximately $677,500. The federal
net operating loss carryforwards will begin to expire in the year 2009 if not
utilized. As a result of changes in ownership coincident with the recent
financings, the utilization of a portion of the net operating loss
carryforward will be limited, pursuant to Section 382 of the Internal Revenue
Code of 1986, as amended. Approximately $9,200,000 of the NOL is limited to
$920,000 per year. The remaining NOL is not subject to limitation as of
December 31, 1997, but is estimated to be subject to annual limitation of
$8,000,000 upon completion of the IPO.
F-15
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
7. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company has
recognized a valuation allowance equal to the deferred tax assets due to the
uncertainty of realizing the benefits of the assets. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Deferred tax liabilities:
Prepaid assets.......................................... $ 18 $ 11
Deferred tax assets:
Net operating loss carryforwards........................ 3,865 9,674
Research and development tax credit carryforwards....... 210 678
Accrued compensation.................................... 82 167
Fixed assets............................................ 70 86
Accrued expenses and reserves........................... 1 431
Deferred revenue........................................ -- 906
Stock compensation...................................... -- 80
------- --------
Total deferred tax assets................................ 4,228 12,022
------- --------
4,210 12,011
Less valuation reserve................................... (4,210) (12,011)
------- --------
Net deferred taxes....................................... $ -- $ --
======= ========
</TABLE>
8. COMMITMENTS
The Company has entered into capital lease agreements to acquire certain
furniture and equipment, with lease terms ranging from 36 to 48 months. The
furniture and equipment, which serves as collateral for the leases, was
recorded at $4,635,553 and had accumulated amortization of $1,639,816 at
December 31, 1997. Amortization of the assets was included in depreciation
expense.
Operating leases are for office and manufacturing facilities.
In September 1997, the Company entered into a build-to-suit lease
arrangement for 95,838 square feet that will replace the current facilities.
The Company occupied the new building in June 1998, at which time the lease
commenced, and expires May 31, 2005. The Company, at its option, may extend
the term of this lease for two successive periods of five years each. The
option must be elected twelve months prior to the expiration of the initial
lease term. In connection with this arrangement, the Company has issued
letters of credit to the landlord aggregating $2.5 million.
F-16
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
8. COMMITMENTS (CONTINUED)
Following is a summary of future minimum payments under capital leases and
operating leases, including the new facility, that have initial or remaining
noncancelable lease terms in excess of one year at December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998................................................. $ 1,302 $1,256
1999................................................. 1,333 1,461
2000................................................. 1,162 1,390
2001................................................. 475 1,557
2002................................................. -- 1,557
------- ------
4,272 $7,221
======
Less interest........................................ (528)
-------
3,744
Current portion...................................... (1,035)
-------
$ 2,709
=======
</TABLE>
Rental expense for operating leases was $667,939, $304,619, and $21,167 for
the years ended December 31, 1997, 1996, and 1995, respectively.
The Company entered into agreements with certain leasing companies to
provide up to $2 million in 1996, $3 million in 1997 and $3.5 million at June
30, 1998 of financing to allow the Company to lease additional equipment.
Pursuant to these agreements, equipment leases would generally have a term of
three years and an implicit interest rate of 8.756% for 1996, 7.25% in 1997
and 14.5% at June 30, 1998 all are secured by the underlying equipment. The
Company issued warrants to purchase 4,375 shares of series D Preferred Stock
with an exercise price of $8 per share in conjunction with one of the lease
agreements.
9. RETIREMENT PLANS
The Company has a salary deferral 401(k) plan for its employees. The plan
allows employees to contribute a percentage of their pretax earnings annually,
subject to limitations imposed by the Internal Revenue Service. The plan also
allows the Company to make a matching contribution, subject to certain
limitations. To date, the Company has made no contributions.
10. RELATED-PARTY TRANSACTIONS
In October 1997, the Board authorized a secured loan of $162,500 and an
unsecured loan of $75,000 to the Company's Chief Financial Officer. Both loans
bear interest at 5.5%. The secured loan is payable in full on October 28, 2002
or earlier based upon certain events specified in the agreement. The unsecured
loan is forgiven over three years, with the remaining balance of $25,000 due
on October 22, 2000 or earlier based upon termination of employment.
F-17
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED)
11. REVENUES AND OPERATIONS
The Company's customers are primarily cellular network operators in the
United States and certain international markets. As such, the Company's
primary market is made up of a limited number of customers operating within
the same industry, thereby subjecting the Company to business risks associated
with potential downturns of the industry. During 1997, two customers of the
Network Services division represented 63% and 27% of total revenue.
In addition, the Company's current product design includes two key
components that are each currently supplied by a single supplier. Purchases
from these key suppliers aggregated $2,046,975 and $1,565,086 during 1997.
In December 1997, the Company determined that it would discontinue the
Network Services division. Accordingly, the carrying value of these fixed
assets has been adjusted to estimated recoverable value, thereby resulting in
an impairment loss of $200,000, which is included in other expenses in the
accompanying 1997 Statement of Operations.
In June 1998, in connection with certain patent licenses, the Company issued
warrants and recorded fees for an aggregate amount of $360,000. This amount
was appropriately recorded as an operating expense for the period ended June
30, 1998.
F-18
<PAGE>
[INSIDE BACK COVER ARTWORK:
MAP OF THE WORLD INDICATING THE LOCATION OF THE COMPANY'S
CUSTOMERS AND COMMERCIAL DEPLOYMENT AND A LIST OF CUSTOMER NAMES.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 20
Dividend Policy........................................................... 20
Capitalization............................................................ 21
Dilution.................................................................. 22
Selected Financial Data................................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 24
Business.................................................................. 32
Management................................................................ 48
Certain Relationships and Related Transactions............................ 59
Principal Stockholders.................................................... 61
Description of Securities................................................. 63
Shares Eligible for Future Sale........................................... 66
Underwriting.............................................................. 68
Legal Matters............................................................. 70
Experts................................................................... 70
Additional Information.................................................... 70
Glossary of Technical Terms............................................... 71
Index to Financial Statements F-1
</TABLE>
------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,000,000 SHARES
[LOGO OF METAWAVE COMMUNICATIONS CORPORATION]
COMMON STOCK
-----------------
PROSPECTUS
-----------------
BT ALEX. BROWN
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market Listing Fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC Registration Fee.............................................. $15,000
NASD Filing Fee................................................... 7,113
Nasdaq National Market Listing Fee................................ 30,000
Printing Fees and Expenses........................................ 150,000
Legal Fees and Expenses........................................... 300,000
Accounting Fees and Expenses...................................... 200,000
Blue Sky Fees and Expenses........................................ 5,000
Transfer Agent and Registrar Fees................................. 10,000
Miscellaneous..................................................... 107,887
-------
Total........................................................... 825,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL authorizes a court to award, or a corporation's
Board of Directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit such indemnification under certain circumstances
for liabilities (including reimbursement for expenses incurred) arising under
the Securities Act of 1933, as amended (the "Securities Act"). Article IX of
the Registrant's Amended and Restated Certificate of Incorporation (Exhibit
3.1 hereto) provides for indemnification of its directors and officers to the
maximum extent permitted by the DGCL and Article IX of the Registrant's Bylaws
(Exhibit 3.2 hereto) provides for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the DGCL. In
addition, the Registrant has entered into Indemnification Agreements (Exhibit
10.1 hereto) with its directors and officers containing provisions which are
in some respects broader than the specific indemnification provisions
contained in the DGCL. The indemnification agreements may require the Company,
among other things, to indemnify its directors against certain liabilities
that may arise by reason of their status or service as directors (other than
liabilities arising from willful misconduct of culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' insurance if available on
reasonable terms. Reference is also made to Section 8 of the Underwriting
Agreement contained in Exhibit 1.1 hereto, indemnifying officers and directors
of the Company against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since January 1, 1995, the Registrant has issued and sold (without
payment of any selling commission to any person) the following unregistered
securities (as adjusted to reflect the automatic conversion of its outstanding
Preferred Stock into Common Stock upon completion of this Offering):
(1) In July and November 1995, the Registrant issued and sold shares of
Series A Preferred Stock convertible into an aggregate of 5,500,000 shares
of Common Stock to 6 investors for an aggregate purchase price of
$5,500,000.
(2) From May to September 1996, the Registrant issued and sold shares of
Series B Preferred Stock convertible into an aggregate of 2,740,743 shares
of Common Stock to 13 investors for an aggregate purchase price of
$9,250,008.
II-1
<PAGE>
(3) In October and November 1996, the Registrant issued and sold shares
of Series C Preferred Stock convertible into an aggregate of 2,491,880
shares of Common Stock to 19 investors for an aggregate purchase price of
$15,349,981.
(4) In August 1997, the Registrant issued and sold shares of Series D
Preferred Stock convertible into an aggregate of 2,397,727 shares of Common
Stock to 17 investors for an aggregate purchase price of $19,181,816.
(5) The Registrant has issued to an equipment lease provider the
following warrants: (A) in December 1995, a warrant to purchase shares of
Series A Preferred Stock convertible into 48,750 shares of Common Stock for
an aggregate purchase price of $106,641; (B) in April 1996, a warrant to
purchase shares of Series A Preferred Stock convertible into 16,666 shares
of Common Stock for an aggregate purchase price of $36,457; (C) in August
1996, a warrant to purchase shares of Series B Preferred Stock convertible
into 19,999 shares of Common Stock for an aggregate purchase price of
$95,295; and (D) in June 1997, a warrant to purchase shares of Series C
Preferred Stock convertible into 34,091 shares of Common Stock for an
aggregate purchase price of $210,001.
(6) In April 1998, the Registrant issued an aggregate principal amount of
$29.0 million 13.75% Senior Secured Bridge Notes due April 28, 2000 to
certain institutional investors. In connection with the issuance of such
notes, the Registrant issued warrants to purchase shares of Series D
Preferred Stock convertible into 537,500 shares of Common Stock for an
aggregate purchase price of $5,375.
(7) In April 1998, the Registrant issued to an equipment lease provider a
warrant to purchase shares of Series D Preferred Stock convertible into
3,182 shares of Common Stock for an aggregate purchase price of $35,000.
(8) In June 1998, in connection with certain patent licenses, the
Registrant issued the licensor a warrant to purchase 11,000 shares of
Common Stock for an aggregate purchase price of $110. Such licensor
subsequently exercised the warrant and purchased 11,000 shares of Common
Stock for an aggregate purchase price of $110.
(9) As of June 30, 1998, an aggregate of 511,601 shares of Common Stock
had been issued upon exercise of options under the Registrant's 1995 Stock
Option Plan.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuances described in Items 15(a)(1) through 15(a)(8) were deemed to be
exempt from registration under the Securities Act in reliance upon Section
4(2) thereof as transactions by an issuer not involving any public offering.
The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof and appropriate
legends where affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationships with the Company,
to information about the Registrant. The issuances described in Items 15(a)(9)
were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder in that they were offered and
sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701. In
addition, such issuances were deemed to be exempt from registration under
Section 4(2) of the Securities Act as transactions by an issuer not involving
any public offering.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
3.3* Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
Offering.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1 Form of Indemnification Agreement.
10.2 1995 Stock Option Plan, as amended, and form of stock option agreement.
10.3 1998 Stock Option Plan, as amended, and form of stock option agreement.
10.4 1998 Employee Stock Purchase Plan and form of subscription agreement.
10.5 1998 Directors' Stock Option Plan and form of stock option agreement.
10.6 Third Amended and Restated Registration Rights Agreement dated August
6, 1997 by and among the Registrant and certain holders of the
Registrant's capital stock.
10.7* Metawave Communications Corporation 401(k) Savings and Retirement Plan.
10.8+ Lease for Willow Creek Corporate Center dated September 29, 1997 by and
between the Registrant and Carr America Realty Corporation.
10.9+ Purchase Agreement dated October 21, 1997 by and between the Registrant
and 360 Degree Communications Company.
10.10+ Purchase Agreement dated December 12, 1997 by and between the
Registrant and Telefonica Celular de Paraguay S.A.
10.11+ Purchase Agreement dated March 4, 1998 by and between the Registrant
and ALLTEL Supply Inc.
10.12+ Purchase Agreement dated March 5, 1998 by and between the Registrant
and OJSC St. Petersburg Telecom.
10.13 Loan Agreement dated October 14, 1997 by and between Registrant and
Imperial Bank.
10.14 Amendment No. 1 to the Loan Agreement dated October 14, 1997 by and
between Registrant and Imperial Bank.
10.15 Metawave Communications Corporation Note Agreement dated as of April
27, 1998 Regarding $29,000,000 13.75% Senior Secured Bridge Notes due
April 28, 2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
99.1 Report of Ernst & Young LLP, Independent Auditors on Financial
Statement Schedule.
99.2 Financial Statement Schedule.
</TABLE>
- --------
* To be supplied by amendment.
+ Certain information in these exhibits has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.406
II-3
<PAGE>
(b) Financial Statement Schedules
The following financial statement schedule is filed herewith:
Schedule II--Valuation and Qualifying Accounts (see Exhibit 99.2).
Other financial statement sshedules are omitted because the information
called for is not required or is shown either in the financial statements or
the notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Redmond, State of Washington, on July 22, 1998.
METAWAVE COMMUNICATIONS CORPORATION
/s/ Robert H. Hunsberger
By: _________________________________
Robert H. Hunsberger
President and Chief Executive
Officer
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert H. Hunsberger and Vito E. Palermo, and
each of them, as his or her attorneys-in-fact, each with full power of
substitution, for him or her in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective
amendments), and any and all Registration Statements filed pursuant to Rule
462 under the Securities Act of 1933, in connection with or related to this
Offering contemplated by this Registration Statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof. This
Power of Attorney may be signed in several counterparts.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Robert H. Hunsberger President, Chief Executive July 22, 1998
____________________________________ Officer and Director
Robert H. Hunsberger (Principal Executive Officer)
/s/ Vito E. Palermo Senior Vice President, Chief July 22, 1998
____________________________________ Financial Officer and
Vito E. Palermo Secretary (Principal Financial
and Accounting Officer)
/s/ Douglas O. Reudink Chief Technical Officer and July 22, 1998
____________________________________ Chairman of the Board of
Douglas O. Reudink Directors
/s/ Bandel L. Carano Director July 22, 1998
____________________________________
Bandel L. Carano
/s/ Bruce C. Edwards Director July 22, 1998
____________________________________
Bruce C. Edwards
/s/ David R. Hathaway Director July 22, 1998
____________________________________
David R. Hathaway
/s/ Scot B. Jarvis Director July 22, 1998
____________________________________
Scot B. Jarvis
/s/ Jennifer Gill Roberts Director July 22, 1998
____________________________________
Jennifer Gill Roberts
/s/ David A. Twyver Director July 22, 1998
____________________________________
David A. Twyver
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
3.3* Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
Offering.
10.1 Form of Indemnification Agreement.
10.2 1995 Stock Option Plan, as amended, and form of stock option
agreement.
10.3 1998 Stock Option Plan, as amended, and form of stock option
agreement.
10.4 1998 Employee Stock Purchase Plan and form of subscription agreement.
10.5 1998 Directors' Stock Option Plan and form of stock option agreement.
10.6 Third Amended and Restated Registration Rights Agreement dated August
6, 1997 by and among the Registrant and certain holders of the
Registrant's capital stock.
10.7* Metawave Communications Corporation 401(k) Savings and Retirement
Plan.
10.8+ Lease for Willow Creek Corporate Center dated September 29, 1997 by
and between the Registrant and Carr America Realty Corporation.
10.9+ Purchase Agreement dated October 21, 1997 by and between the
Registrant and 360 Degree Communications Company.
10.10+ Purchase Agreement dated December 12, 1997 by and between the
Registrant and Telefonica Celular de Paraguay S.A.
10.11+ Purchase Agreement dated March 4, 1998 by and between the Registrant
and ALLTEL Supply Inc.
10.12+ Purchase Agreement dated March 5, 1998 by and between the Registrant
and OJSC St. Petersburg Telecom.
10.13 Loan Agreement dated October 14, 1997 by and between Registrant and
Imperial Bank.
10.14 Amendment No. 1 to the Loan Agreement dated October 14, 1997 by and
between Registrant and Imperial Bank.
10.15 Metawave Communications Corporation Note Agreement dated as of April
27, 1998 Regarding $29,000,000 13.75% Senior Secured Bridge Notes due
April 28, 2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
99.1 Report of Ernst & Young LLP, Independent Auditors on Financial
Statement Schedule.
99.2 Financial Statement Schedule.
</TABLE>
- --------
*To be supplied by amendment.
+ Certain information in these exhibits has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.406
<PAGE>
EXHIBIT 1.1
[WSGR DRAFT 7/22/98]
5,000,000 SHARES
METAWAVE COMMUNICATIONS CORPORATION
COMMON STOCK
($0.0001 PAR VALUE)
UNDERWRITING AGREEMENT
_______________, 1998
BT Alex. Brown Incorporated
Merrill Lynch, Pierce, Fenner & Smith Incorporated
NationsBanc Montgomery Securities LLC
As Representatives of the Several Underwriters
c/o BT Alex. Brown Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Metawave Communications Corporation, a Delaware corporation (the
"Company"), proposes to sell to the several underwriters named in Schedule I
hereto (the "Underwriters") for whom you are acting as representatives (the
"Representatives") an aggregate of 5,000,000 shares of the Company's Common
Stock, $0.0001 par value (the "Firm Shares"). The respective amounts of the
Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto. The Company also proposes to sell at
the Underwriters' option an aggregate of up to 750,000 additional shares of
the Company's Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters
and to act on their behalf in the manner herein provided and (b) that the
several Underwriters are willing, acting severally and not jointly, to purchase
the numbers of Firm Shares set forth opposite their respective names in Schedule
I, plus their pro rata portion of the Option Shares if you elect to exercise the
over-allotment option in whole
<PAGE>
or in part for the accounts of the several Underwriters. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to each of the Underwriters as
follows:
(a) A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been prepared by the Company in conformity in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting the
requirements of the Rules and Regulations) contained therein and the exhibits,
financial statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to you. Such registration statement,
together with any registration statement filed by the Company pursuant to Rule
462 (b) of the Act, herein referred to as the "Registration Statement," which
shall be deemed to include all information omitted therefrom in reliance upon
Rule 430A and contained in the Prospectus referred to below, has become
effective under the Act and no post-effective amendment to the Registration
Statement has been filed as of the date of this Agreement. "Prospectus" means
(a) the form of prospectus first filed with the Commission pursuant to Rule
424(b) or (b) the last preliminary prospectus included in the Registration
Statement filed prior to the time it becomes effective or filed pursuant to Rule
424(a) under the Act that is delivered by the Company to the Underwriters for
delivery to purchasers of the Shares, together with the term sheet or
abbreviated term sheet filed with the Commission pursuant to Rule 424(b)(7)
under the Act. Each preliminary prospectus included in the Registration
Statement prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus." Any reference herein to the Registration Statement,
any Preliminary Prospectus or to the Prospectus shall be deemed to refer to and
include any supplements or amendments to any Prospectus, filed with the
Commission after the date of filing of the Prospectus under Rules 424(b) or
430A, and prior to the termination of the offering of the Shares by the
Underwriters.
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The Company is duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification except where the failure to so
qualify would not have a material adverse effect on the business, properties,
assets, rights, operations, financial condition or results of operation of the
Company. The Company has no subsidiaries and owns no
3
<PAGE>
shares of stock or any other equity securities of any corporation or have any
equity interest in any firm, partnership, association or entity.
(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; the
Shares to be issued and sold by the Company have been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully paid
and non-assessable; and no preemptive rights of stockholders exist with respect
to any of the Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated by
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of Common Stock.
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description set forth in "Description of Securities" in the Prospectus, insofar
as it purports to constitute a summary of the Shares. The form of certificates
for the Shares conforms to the corporate law of the jurisdiction of the
Company's incorporation.
(e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform in all
material respects, to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and will
not contain, any untrue statement of a material fact and do not omit, and will
not omit, to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives, specifically for use in the
preparation thereof.
(f) The financial statements of the Company, together with related
notes and schedules as set forth in the Registration Statement, present fairly
the financial position and the results of operations and cash flows of the
Company and the consolidated Subsidiaries, at the indicated dates and for the
indicated periods. Such financial statements and related schedules have been
prepared in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as disclosed
herein, and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary financial and statistical data
4
<PAGE>
included in the Registration Statement presents fairly the information shown
therein and such data has been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company. [The pro
forma financial information included in the Registration Statement and the
Prospectus present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma bases
described therein, and, in the opinion of the Company, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.]
(g) Ernst & Young LLP, who have expressed their opinion with respect
to the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company before any court or
administrative agency or otherwise which if determined adversely to the Company
might result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, financial condition or
prospects of the Company or to prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement.
(i) The Company has good and marketable title to all of the properties
and assets reflected in the financial statements (or as described in the
Registration Statement) hereinabove described, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except those reflected in such
financial statements (or as described in the Registration Statement) or which
are not material in amount. The Company occupies its leased properties under
valid and binding leases conforming in all material respects to the description
thereof set forth in the Registration Statement.
(j) The Company has filed all Federal, State, local and foreign income
tax returns which have been required to be filed and has paid all taxes
indicated by said returns and all assessments received by them or any of them to
the extent that such taxes have become due. All tax liabilities have been
adequately provided for in the financial statements of the Company.
(k) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not been
any material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties,
assets, rights, operations, financial condition or prospects of the Company,
whether or not occurring in the ordinary course of business, and there has not
been any material transaction entered into or any material transaction that is
probable of being entered into by the Company, other than transactions in the
ordinary course of business and changes and transactions described in the
Registration Statement, as it may be amended
5
<PAGE>
or supplemented. The Company has no material contingent obligations which are
not disclosed in the Company's financial statements which are included in the
Registration Statement.
(l) The Company is not nor with the giving of notice or lapse of time
or both, will be, in violation of or in default under its Certificate of
Incorporation or Bylaws or under any agreement, lease, contract, indenture or
other instrument or obligation to which it is a party or by which it, or any of
its properties, is bound and which default is of material significance in
respect of the financial condition of the Company or the business, management,
properties, assets, rights, operations, financial condition or prospects of the
Company. The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated and the fulfillment of the terms hereof
will not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company, or of the Certificate of
Incorporation or Bylaws of the Company or any order, rule or regulation
applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body; except where such conflict,
breach, violation or default would not have a material adverse effect on the
Company's business, management, properties, assets, rights, operations,
financial condition or prospects of the Company.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(n) The Company owns or possesses sufficient licenses or other rights
to use all patents, copyrights, trade secrets, trademarks, service marks, trade
names, technology, know-how or other proprietary information or materials
necessary to the conduct of the business now being conducted by the Company as
described in the Prospectus. The Company holds all material licenses,
certificates and permits from governmental authorities which are necessary to
the conduct of its business. The Company knows of no material infringement by
others of patents, patent rights, trade names, trademarks or copyrights owned by
or licensed to the Company. Except as specifically disclosed in the Prospectus,
the Company has sufficient, or can acquire on commercially reasonable terms,
trademarks, trade names, patent rights, mask works, copyrights, licenses,
approvals and governmental authorizations to conduct its business as now
conducted and as proposed to be conducted; and the Company has no knowledge of
any infringement by it of any trademark, trade name, patent right, mask work,
copyright, license, trade secret or other similar right of others, and, to the
Company's knowledge, except as disclosed in the Prospectus, no claim has been
made against the Company regarding trademark, trade name, patent, mask work,
copyright, license, trade secret or other infringement which could have a
material
6
<PAGE>
adverse effect on the financial condition, business or results of operations of
the Company.
(o) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares.
(p) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the rules and regulations
of the Commission thereunder.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) The Company carries, or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of its respective
business and the value of their respective properties.
(s) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(t) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section
7
<PAGE>
517.075 of Laws of the State of Florida.
(u) The Company is conducting its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation all applicable rules and
regulations of the Federal Communications Commission and all applicable local,
state and federal environmental laws and regulations; except where failure to be
so in compliance could not materially adversely affect the financial condition,
business or results of operations of the Company.
2. Purchase, Sale and Delivery of the Firm Shares.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 10 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House funds by certified or bank cashier's checks drawn to the
order of the Company against delivery of certificates therefor to the
Representatives for the several accounts of the Underwriters. Such payment and
delivery are to be made at the offices of BT Alex. Brown Incorporated, 1 South
Street, Baltimore, Maryland, at 10:00 a.m., Baltimore time, on the third
business day after the date of this Agreement or at such other time and date not
later than five business days thereafter as you and the Company shall agree
upon, such time and date being herein referred to as the "Closing Date." (As
used herein, "business day" means a day on which the New York Stock Exchange is
open for trading and on which banks in New York are open for business and are
not permitted by law or executive order to be closed.) The certificates for the
Firm Shares will be delivered in such denominations and in such registrations as
the Representatives request in writing not later than the second full business
day prior to the Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to
8
<PAGE>
the Company setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in which the
Option Shares are to be registered and the time and date at which such
certificates are to be delivered. The time and date at which certificates for
Option Shares are to be delivered shall be determined by the Representatives but
shall not be earlier than three nor later than 10 full business days after the
exercise of such option, nor in any event prior to the Closing Date (such time
and date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the notice
of exercise shall set the Closing Date as the Option Closing Date. The number of
Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the number of
Firm Shares being purchased by such Underwriter bears to 5,000,000, adjusted by
you in such manner as to avoid fractional shares. The option with respect to the
Option Shares granted hereunder may be exercised only to cover over-allotments
in the sale of the Firm Shares by the Underwriters. You, as Representatives of
the several Underwriters, may cancel such option at any time prior to its
expiration by giving written notice of such cancellation to the Company. To the
extent, if any, that the option is exercised, payment for the Option Shares
shall be made on the Option Closing Date in New York Clearing House funds by
certified or bank cashier's check drawn to the order of the Company against
delivery of certificates therefor at the offices of BT Alex. Brown Incorporated,
1 South Street, Baltimore, Maryland.
(d) The Company hereby confirms its engagement of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") as, and Merrill Lynch
hereby confirms its Agreement with the Company to render services as, a
"Qualified Independent Underwriter," within the meaning of Section (b)(15) of
Rule 2720 of the National Association of Securities Dealers, Inc. with respect
to the offering and sale of the Shares. Merrill Lynch, solely in its capacity
has the Qualified Independent Underwriter and not otherwise, is referred to
herein as the "QIU." The price at which the Shares will be sold to the public
shall not be greater than the maximum price recommended by the QIU.
3. Offering by the Underwriters.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
9
<PAGE>
4. Covenants of the Company.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations and (iii) file on a timely basis all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission subsequent to the date of the Prospectus and
prior to the termination of the offering of the Shares by the Underwriters.
(b) The Company will advise the Representatives promptly (i) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (ii) of receipt of any comments from the Commission, (iii) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representatives in endeavoring
to qualify the Shares for sale under the securities laws of such jurisdictions
as the Representatives may reasonably have designated in writing and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, four signed copies of the
10
<PAGE>
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"), and
the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended. The Company will deliver to the
Representatives similar reports with respect to significant subsidiaries, as
that term is defined in the Rules and Regulations, which are not consolidated in
the Company's financial statements.
(h) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made during the period commencing on the
date of this Agreement and ending on the one hundred eightieth (180th) day after
the date of the Prospectus, directly or indirectly, by the Company otherwise
than (i) hereunder, (ii) with the prior written consent of BT Alex. Brown
Incorporated, or (iii) pursuant to the exercise of options or warrants to
purchase Common Stock granted pursuant to the stock option or stock purchase
plans of the Company
11
<PAGE>
or outstanding warrants of the Company which are described in the Registration
Statement and the Prospectus.
(i) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the Nasdaq National Market.
(j) The Company has caused each officer and director and certain
security holders of the Company who beneficially own in the aggregate more than
98% of the outstanding shares of Common Stock of the Company to furnish to you,
on or prior to the date of this Agreement, a letter or letters, in form and
substance satisfactory to the Underwriters, pursuant to which each such person
shall agree not to offer, sell, sell short or otherwise dispose of any shares of
Common Stock of the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for Common Shares or
derivative of Common Shares owned by such person or request the registration for
the offer or sale of any of the foregoing (or as to which such person has the
right to direct the disposition of) for a period of 180 days after the date of
the Prospectus, directly or indirectly, except with the prior written consent of
BT Alex. Brown Incorporated ("Lockup Agreements"). In addition, in connection
with any exercise of options to purchase Common Stock granted pursuant to the
stock option or stock purchase plans of the Company during such 180 day period,
the Company shall cause each optionee to enter into a Lockup Agreement.
(k) The Company shall apply the net proceeds of its sale of the Shares
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(o) The Company will not take, directly or indirectly, any action
designed to cause or result in the filing of a registration statement on Form S-
8 under the Act covering shares of Common Stock reserved for issuance under the
Company's stock option, stock purchase or other employee benefit plans for a
period of 180 days after the date of this Prospectus.
12
<PAGE>
5. Costs and Expenses.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation
Letter, the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Shares; the Listing Fee of the Nasdaq
National Market; the reasonable fees and expenses of the QIU (including the fees
and disbursements of counsel to the QIU); and the expenses, including the fees
and disbursements of counsel for the Underwriters, incurred in connection with
the qualification of the Shares under State securities or Blue Sky laws. The
Company agrees to pay all costs and expenses of the Underwriters, including the
reasonable fees and disbursements of counsel for the Underwriters, incident to
the offer and sale of directed shares of the Common Stock by the Underwriters to
employees and persons having business relationships with the Company and its
Subsidiaries. The Company shall not, however, be required to pay for any of the
Underwriters expenses (other than those related to qualification under NASD
regulation and State securities or Blue Sky laws) except that, if this Agreement
shall not be consummated because the conditions in Section 6 hereof are not
satisfied, or because this Agreement is terminated by the Representatives
pursuant to Section 11 hereof, or by reason of any failure, refusal or inability
on the part of the Company to perform any undertaking or satisfy any condition
of this Agreement or to comply with any of the terms hereof on its part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including reasonable fees and disbursements of counsel, reasonably incurred in
connection with investigating, marketing and proposing to market the Shares or
in contemplation of performing their obligations hereunder; but the Company
shall not in any event be liable to any of the several Underwriters for damages
on account of loss of anticipated profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the Company
contained herein, and to the performance by the Company of its covenants and
obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and
13
<PAGE>
Regulations shall have been made, and any request of the Commission for
additional information (to be included in the Registration Statement or
otherwise) shall have been disclosed to the Representatives and complied with to
their reasonable satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been issued and
no proceedings for that purpose shall have been taken or, to the knowledge of
the Company, shall be contemplated by the Commission and no injunction,
restraining order, or order of any nature by a Federal or state court of
competent jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Venture Law Group, A
Professional Corporation, counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; and the Company is duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification, or in which the failure to qualify
would have a materially adverse effect upon the business of the Company.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Common Stock have been duly authorized; the outstanding
shares of the Company's Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable; all of the Shares conform to the
description thereof contained under the heading "Description of
Securities--Common Stock" in the Prospectus; the certificates for the Shares,
assuming they are in the form filed with the Commission, are in due and proper
form; the shares of Common Stock, including the Option Shares, if any, to be
sold by the Company pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue or sale thereof.
(iii) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit
14
<PAGE>
them to underwrite the sale of, any of the Shares or the right to have any
Common Shares or other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company.
(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein).
(vi) The statements under the captions "Risk Factors--Shares
Eligible for Future Sale After the Offering," "--Control by Existing
Shareholders," "Management--Limitation of Liability and Indemnification
Matters," "--Severance Arrangements," "Certain Transactions," "Description of
Securities" and "Shares Eligible for Future Sale" in the Prospectus, insofar as
such statements constitute a summary of documents referred to therein or matters
of law, fairly summarize in all material respects the information called for
with respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company except as set forth in the
Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of the
Company, or any agreement or instrument known to such counsel to which the
Company or is a party or by which the Company may be bound, except where such
conflicts, breach or default would not have the material adverse effect on the
earnings, business, management, properties, assets, rights, operations or
financial condition of the Company .
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
15
<PAGE>
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.
(xii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and application
of the net proceeds therefrom as described in the Prospectus, required to
register as an investment company under the 1940 Act.
In rendering such opinion Venture Law Group, A Professional
Corporation, may rely as to matters governed by the laws of states other than
Delaware, Washington or Federal laws on local counsel in such jurisdictions,
provided that in each case Venture Law Group, A Professional Corporation, shall
state that they believe that they and the Underwriters are justified in relying
on such other counsel. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that, [ALTHOUGH SUCH COUNSEL DOES
NOT ASSUME ANY RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF THE
STATEMENTS CONTAINED IN THE REGISTRATION STATEMENT OR THE PROSPECTUS,] nothing
has come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, at the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need express
no view as to financial statements, related notes, schedules and other financial
information derived therefrom). With respect to such statement, Venture Law
Group, A Professional Corporation may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(c) The Underwriters shall have received on the Closing Date an
opinion of Fulbright & Jaworski LLP, dated the Closing Date, with respect to
certain intellectual property matters, to the effect that:
(i) The Company owns all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Prospectus as being owned by it or necessary for the conduct of its business,
and such counsel is not aware of any claim to the contrary or any challenge by
any other person to the rights of the Company with respect to the foregoing
other than those identified in the Prospectus.
16
<PAGE>
(ii) Such counsel is not aware of any legal actions, claims or
proceedings pending or threatened against the Company alleging that the Company
is infringing or otherwise violating any patents or trade secrets owned by
others other than those identified in the Prospectus.
(iii) Such counsel has reviewed the descriptions of patents and
patent applications under the captions "Risk Factors--Uncertainty Regarding
Protection of Intellectual Property" and "Business--Intellectual Property" in
the Registration Statement and Prospectus, and, to the extent they constitute
matters of law or legal conclusions, these descriptions are accurate and fairly
and completely present the patent situation of the Company.
(iv) Such counsel is aware of nothing that causes such counsel to
believe that, as of the date that the Registration Statement became effective
and as of the date of such opinion, the description of patents and patent
applications under the captions "Risk Factors--Uncertainty Regarding Protection
of Intellectual Property" and "Business--Intellectual Property" in the
Registration Statement and Prospectus contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading, including without limitation, any undisclosed
material issue with respect to the subsequent validity or enforceability of such
patent or patent issuing from any such pending patent application.
(d) The Representatives shall have received from Wilson Sonsini
Goodrich & Rosati, P.C., counsel for the Underwriters, an opinion dated the
Closing Date or the Option Closing Date, as the case may be, substantially to
the effect specified in subparagraphs [(iv) and (v)] of Paragraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion
Wilson Sonsini Goodrich & Rosati, P.C. may rely as to all matters governed other
than by the laws of the State of California, the State of Delaware or Federal
laws on the opinion of counsel referred to in Paragraph (b) of this Section 6.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact,
necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need express
no view as to financial statements, related notes, schedules and other financial
information therein). With respect to such statement, Wilson Sonsini Goodrich &
Rosati, P.C. may state that their belief is based upon the procedures set forth
therein, but is without independent check and verification.
17
<PAGE>
(e) The Representatives shall have received at or prior to the Closing
Date from Wilson Sonsini Goodrich & Rosati, P.C., a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
State securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(f) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registrations
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and
18
<PAGE>
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company or the earnings, business, management, properties, assets, rights,
operations, financial condition or prospects of the Company, whether or not
arising in the ordinary course of business.
(h) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq National Market.
(j) The Lockup Agreements described in Section 4 (j) are in full force
and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Wilson Sonsini
Goodrich & Rosati, P.C., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company.
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
19
<PAGE>
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that (i) the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof and (ii) the indemnity agreement
contained in this paragraph (a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such loss, claim, damage, liability or expense purchased the Shares which is the
subject thereof (or to the benefit of any person controlling such Underwriter)
if at or prior to the written confirmation of the sale of such Shares a copy of
the Prospectus (or the Prospectus as amended or supplemented) was not sent or
delivered to such person and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented). This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the
20
<PAGE>
Representatives specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party and shall pay as incurred the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel at its own expense. Notwithstanding
the foregoing, the indemnifying party shall pay as incurred (or within 30 days
of presentation) the fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them or (iii) the indemnifying party shall have
failed to assume the defense and employ counsel acceptable to the indemnified
party within a reasonable period of time after notice of commencement of the
action. It is understood that the indemnifying party shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by you in the
case of parties indemnified pursuant to Section 8(a) and by the Company in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
of which indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action
or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any
21
<PAGE>
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other from the offering
of the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company and the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus, bear to
the aggregate public offering price of the Shares. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter, and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
22
<PAGE>
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Indemnification of QIU.
(a) The Company agrees to indemnify and hold harmless the QIU, its
directors, its officers and each person, if any, who controls the QIU within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) related to, based upon or arising out of (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) the QIU's
activities as QIU under its engagement pursuant to Section 2 hereof.
(b) In case any action shall be commenced in any person in respect of
which indemnity may be sought pursuant to Section 9(a) (the "QIU Indemnified
Party"), the QIU Indemnified Party shall promptly notify the Company in writing
and the Company shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to the QIU Indemnified Party and
the payment of all fees and expenses of such counsel, as incurred. Any QIU
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the QIU Indemnified Party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the Company, (ii) the Company shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the QIU Indemnified Party or
(iii) the named parties to any such action (including any impleaded parties)
include both the QIU Indemnified Party and the Company, and the QIU Indemnified
Party shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Company (in which case the Company shall not have the right to
assume the defense of such
23
<PAGE>
action on behalf of the QIU Indemnified Party). In any such case, the Company
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all QIU Indemnified Parties, which firm shall be designated by the QIU, and all
such fees and expenses shall be reimbursed as they are incurred. The Company
shall indemnify and hold harmless the QUI Indemnified Party from and against any
and all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the Company shall have received a request from the QIU
Indemnified Party for reimbursement for the fees and expenses of counsel (in any
case where such fees and expenses are at the expense of the Company) and, prior
to the date of such settlement, the Company shall have failed to comply with
such reimbursement request. The Company shall not, without the prior written
consent of the QIU Indemnified Party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the QIU Indemnified Party is or could have been a
party and indemnity or contribution may be or could have been sought hereunder
by the QIU Indemnified Party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the QIU Indemnified Party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the QIU Indemnified Party.
(c) To the extent that the indemnification provided for in this
Section 9 is unavailable to a QIU Indemnified Party or insufficient in respect
of any losses, claims, damages, liabilities or judgments referred to therein,
then the Company, in lieu of indemnifying such QIU Indemnified Party, shall
contribute to the amount paid or payable by such QIU Indemnified Party as a
result of such losses, claims, damages, liabilities and judgments in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the QIU on the other hand from the offering of the
Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only the relative benefits referred
to but also the relative fault of the Company on the one hand and the QIU on the
other hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the QIU on the other hand shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company as set forth in the table on the cover page of
the Prospectus, and the fee received by the QIU pursuant to Section 2(d) hereof,
bear to the sum of such total net proceeds and such fee. The relative fault of
the Company on the one hand and the QIU on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the QIU and the parties
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
24
<PAGE>
The Company and the QIU agree that is would not be just and equitable
if contribution pursuant to this Section 9(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable to a QIU Indemnified Party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such QIU Indemnified Party
in connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(d) The remedies provided for in this Section 9 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
QIU Indemnified Party at law or in equity.
10. Default by Underwriters.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or Option Shares, as the case may
be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 36 hours you, as such Representatives, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or you
as the Representatives of the Underwriters will have the right, by written
notice given within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or of the Company except to the extent provided in Section 8
hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 10, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be
25
<PAGE>
effected. The term "Underwriter" includes any person substituted for a
defaulting Underwriter. Any action taken under this Section 10 shall not relieve
any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
11. Notices.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to BT Alex. Brown
Incorporated, 1 South Street, Baltimore, Maryland 21202, Attention:
________________; with a copy to BT Alex. Brown Incorporated, 1 South Street,
Baltimore, Maryland 21202. Attention: General Counsel; if to the Company, to
Robert H. Hunsberger
President and Chief Executive Officer
and
Kathy Surace-Smith,
General Counsel
Metawave Communications Corporation
8700-148th Avenue N.E.
Redmond, Washington 98052-3482
12. Termination.
This Agreement may be terminated by you by notice to the Company as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business, management, properties, assets, rights,
operations, financial condition or prospects of the Company, whether or not
arising in the ordinary course of business, (ii) any outbreak or escalation of
hostilities or declaration of war or national emergency or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, escalation, declaration, emergency, calamity,
crisis or change on the financial markets of the United States would, in your
reasonable judgment, make it impracticable to market the Shares or to enforce
contracts for the sale of the Shares, or (iii) suspension of trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such Exchange, (iv) the enactment,
publication, decree or
26
<PAGE>
other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and adversely
affects or may materially and adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by United States or New York
State authorities, (vi) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Exchange Act); (vii) the
suspension of trading of the Company's Common Stock by the Commission on the
Nasdaq National Market or (viii) the taking of any action by any governmental
body or agency in respect of its monetary or fiscal affairs which in your
reasonable opinion has a material adverse effect on the securities markets in
the United States; or
(c) as provided in Sections 6 and 10 of this Agreement.
13. Successors.
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, the officers, directors and controlling
persons referred to herein, and the QIU Indemnified Parties and no other person
will have any right or obligation hereunder. No purchaser of any of the Shares
from any Underwriter shall be deemed a successor or assign merely because of
such purchase.
14. Information Provided by Underwriters.
The Company, and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
15. Miscellaneous.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, any QIU Indemnified Party or by or on
behalf of the Company or its directors or officers and (c) delivery of and
payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
27
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
METAWAVE COMMUNICATIONS CORPORATION
By
----------------------------------
Robert H. Hunsberger
President and Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. BROWN INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Brown Incorporated
By:
----------------------------
Authorized Officer
28
<PAGE>
SCHEDULE 1
SCHEDULE OF UNDERWRITERS
NUMBER OF FIRM
SHARES TO BE
UNDERWRITER PURCHASED
- -------------------------------------------------------------------------------
BT Alex. Brown Incorporated...................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated............
NationsBanc Montgomery Securities LLC.........................
---------------
Total.......................................................
===============
- -------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
METAWAVE COMMUNICATIONS CORPORATION,
A DELAWARE CORPORATION
The undersigned, Vito Palermo, hereby certifies that:
1. He is the duly elected Chief Financial Officer and Secretary,
respectively, of Metawave Communications Corporation, a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on July 11, 1995.
3. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
The name of this Corporation is Metawave Communications Corporation.
ARTICLE II
The address of the registered office of this Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. CLASSES OF STOCK. This Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares that this Corporation is authorized to issue is sixty
million (60,000,000) shares. Forty million (40,000,000) shares shall be Common
Stock, par value $.0001 per share, and twenty million (20,000,000) shares shall
be Preferred Stock, par value $.0001 per share.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Third Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. The
rights, preferences, privileges, and restrictions granted to
<PAGE>
and imposed on the Series A Preferred Stock, which series shall consist of
5,565,416 shares, and the Series B Preferred Stock, which series shall consist
of 2,760,742 shares, and the Series C Preferred Stock, which series shall
consist of 2,700,000 shares and the Series D Preferred Stock, which series shall
consist of 2,500,000 shares, are as set forth below in this Article IV(B). The
Board of Directors is hereby authorized to fix or alter the rights, preferences,
privileges and restrictions granted to or imposed upon additional series of
Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or of any of them. Subject to compliance with applicable
protective voting rights that have been or may be granted to the Preferred Stock
or series thereof in Certificates of Determination or this Corporation's Third
Amended and Restated Certificate of Incorporation ("Protective Provisions"), but
notwithstanding any other rights of the Preferred Stock or any series thereof,
the rights, privileges, preferences and restrictions of any such additional
series may be subordinated to, pari passu with (including, without limitation,
inclusion in provisions with respect to dividends, liquidation and acquisition
preferences, redemption and/or approval of matters by vote or written consent),
or senior to any of those of any present or future class or series of Preferred
or Common Stock. Subject to compliance with applicable Protective Provisions and
unless otherwise specifically provided in the resolution establishing any
series, the Board of Directors shall further have the authority, after the
issuance of shares of a series whose number it has designated, to amend the
resolution establishing such series to decrease the number of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
1. DIVIDEND PROVISIONS. Subject to the rights of other series of
Preferred Stock that may from time to time come into existence, the holders of
shares of Series A, Series B, Series C and Series D Preferred Stock shall be
entitled to receive dividends, when, as and if declared by the Board of
Directors, out of any assets legally available therefor, prior and in preference
to any declaration or payment of any dividend (payable other than in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock of
this Corporation) on the Common Stock of this Corporation, (a) at the rate of
$.08 per share of Series A Preferred Stock, $.27 per share of Series B Preferred
Stock, $.49 per share of Series C Preferred Stock, and $.64 per share of Series
D Preferred Stock, per annum (each of such amounts being subject to equitable
adjustment to reflect the effects of any stock dividends, stock splits,
combinations, reverse splits, reclassifications or recapitalizations (herein
referred to as "Adjustment Events")), or (b) if a dividend is paid on the Common
Stock in an amount per share (the "Alternate Rate") which, when multiplied by
the respective numbers of shares of Common Stock into which shares of the Series
A, Series B, Series C or Series D Preferred Stock are then convertible, exceeds
the preferential dividend per share which holders of shares of such series would
otherwise be entitled to receive under clause (a) of this Section 1, then
holders of shares of such series shall be entitled to receive the Alternate Rate
per share of such series in lieu of the preferential dividend set forth in
clause (a) of this Section 1. Such dividends shall not be cumulative until the
calendar quarter beginning July 1, 2000. Such dividends shall accrue on each
share from July 1, 2000, if declared
-2-
<PAGE>
by the Board of Directors. Such dividends shall be cumulative so that, if such
dividends in respect of any previous or current annual dividend period, at the
annual rate specified above, shall have been declared but not paid, the
deficiency shall first be fully paid before any dividend or other distribution
shall be paid on or declared and set apart for the Common Stock. Any
accumulation of dividends on the Series A, Series B, Series C and Series D
Preferred Stock shall not bear interest. Cumulative dividends with respect to a
share of Series A, Series B, Series C or Series D Preferred Stock that are
accrued, payable and/or in arrears shall, upon conversion of such share to
Common Stock, subject to the rights of other series of Preferred Stock that may
from time to time come into existence, be paid to the extent assets are legally
available therefor either in cash or in Common Stock (valued at the fair market
value on the date of payment as determined by the Board of Directors of this
Corporation). Any amounts for which assets are not legally available shall be
paid promptly as assets become legally available therefor. Any partial payment
will be made pro rata among the holders of such shares.
2. LIQUIDATION PREFERENCE
(a) In the event of any liquidation, dissolution or winding up
of this Corporation, either voluntary or involuntary, subject to the rights of
other series of Preferred Stock that may from time to time come into existence,
the holders of Series A, Series B, Series C and Series D Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets of this Corporation to the holders of Common Stock by reason of their
ownership thereof, an amount per share equal to the sum of (i) $1.00 for each
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price"), $3.375 for each outstanding share of Series B Preferred Stock (the
"Original Series B Issue Price"), $6.16 for each outstanding share of Series C
Preferred Stock (the "Original Series C Issue Price") and $8.00 for each
outstanding share of Series D Preferred Stock (the "Original Series D Issue
Price") (each such amount being subject to adjustment for Adjustment Events),
and (ii) an amount equal to declared but unpaid dividends and accrued cumulative
dividends on each such share of Series A, Series B, Series C and Series D
Preferred Stock. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A, Series B, Series C and Series D
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of other
series of Preferred Stock that may from time to time come into existence, the
entire assets and funds of this Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A, Series B, Series
C and Series D Preferred Stock in proportion to the preferential amount each
such holder is otherwise entitled to receive.
(b) For purposes of subsections (b), (c), (d) and (e) of this
Section 2, the following definitions shall apply:
"Series A Investment Amount" shall mean the Original Series
A Issue Price multiplied by the number of shares of Series A Preferred Stock
outstanding.
-3-
<PAGE>
"Series B Investment Amount" shall mean the Original Series
B Issue Price multiplied by the number of shares of Series B Preferred Stock
outstanding.
"Series C Investment Amount" shall mean the Original Series
C Issue Price multiplied by the number of shares of Series C Preferred Stock
outstanding.
"Series D Investment Amount" shall mean the Original Series
D Issue Price multiplied by the number of shares of Series D Preferred Stock
outstanding.
"Total Preferred Stock Investment Amount" shall mean the sum
of the Series A Investment Amount, Series B Investment Amount, Series C
Investment Amount and Series D Investment Amount.
"Series A Percentage" shall mean the Series A Investment
Amount divided by the Total Preferred Stock Investment Amount.
"Series B Percentage" shall mean the Series B Investment
Amount divided by the Total Preferred Stock Investment Amount.
"Series C Percentage" shall mean the Series C Investment
Amount divided by the Total Preferred Stock Investment Amount.
"Series D Percentage" shall mean the Series D Investment
Amount divided by the Total Preferred Stock Investment Amount.
(c) Upon the completion of the distributions required by
subsection (a) of this Section 2 and any other distribution that may be required
with respect to other series of Preferred Stock that may from time to time come
into existence, the remaining assets of this Corporation available for
distribution to stockholders shall be distributed as follows: (i) an aggregate
amount (the "First Distribution Amount") equal to the product of $1.50
multiplied by the number of shares of Series A, Series B, Series C and Series D
Preferred Stock then outstanding (as adjusted for Adjustment Events) shall be
distributed, on a pari passu basis, in an amount equal to the Series A
Percentage multiplied by the First Distribution Amount, ratably among the
holders of Series A Preferred Stock, the Series B Percentage multiplied by the
First Distribution Amount, ratably among the holders of Series B Preferred
Stock, the Series C Percentage multiplied by the First Distribution Amount,
ratably among the holders of Series C Preferred Stock, and the Series D
Percentage multiplied by the First Distribution Amount, ratably among the
holders of Series D Preferred Stock, and (ii) an amount per share equal to $1.50
for each outstanding share of Common Stock (as adjusted for Adjustment Events),
in addition to the amounts paid pursuant to subsection (a) of this Section 2,
shall be distributed ratably among the holders of Common Stock. If the assets
and funds thus distributed among the holders of the Series A, Series B, Series C
and Series D Preferred Stock and the holders of the Common Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of other series of Preferred
Stock that may from time to time come into existence, the entire assets and
funds of this Corporation legally available for
-4-
<PAGE>
distribution shall be distributed ratably among the holders of the Series A,
Series B, Series C and Series D Preferred Stock and the holders of the Common
Stock in proportion to the preferential amount each such holder is otherwise
entitled to receive under this subsection (c).
(d) Upon the completion of the distributions required by
subsections (a) and (c) of this Section 2 and any other distribution that may be
required with respect to other series of Preferred Stock that may from time to
time come into existence, the remaining assets of this Corporation available for
distribution to stockholders shall be distributed as follows: (i) an aggregate
amount (the "Second Distribution Amount") equal to the product of $3.5625
multiplied by the number of shares of Series B, Series C and Series D Preferred
Stock then outstanding (as adjusted for Adjustment Events) shall be distributed,
on a pari passu basis, in an amount equal to the Series A Percentage multiplied
by the Second Distribution Amount, ratably among the holders of Series A
Preferred Stock, the Series B Percentage multiplied by the Second Distribution
Amount, ratably among the holders of Series B Preferred Stock, the Series C
Percentage multiplied by the Second Distribution Amount, ratably among the
holders of Series C Preferred Stock, and the Series D Percentage multiplied by
the Second Distribution Amount, ratably among the holders of Series D Preferred
Stock, and (ii) an amount per share equal to $3.5625 for each outstanding share
of Common Stock (as adjusted for Adjustment Events), in addition to the amounts
paid pursuant to subsections (a) and (c) of this Section 2, shall be distributed
ratably among the holders of Common Stock. If the assets and funds thus
distributed among the holders of the Series A, Series B, Series C and Series D
Preferred Stock and the holders of the Common Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, subject to the rights of other series of Preferred Stock that may from
time to time come into existence, the entire assets and funds of this
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A, Series B, Series C and Series D Preferred
Stock and the holders of the Common Stock in proportion to the preferential
amount each such holder is otherwise entitled to receive under this subsection
(d).
(e) Upon the completion of the distributions required by
subsections (a), (c) and (d) of this Section 2 and any other distribution that
may be required with respect to other series of Preferred Stock that may from
time to time come into existence, the remaining assets of this Corporation
available for distribution to stockholders shall be distributed as follows: (i)
an aggregate amount (the "Third Distribution Amount") equal to the product of
$4.1775 multiplied by the number of shares of Series C and Series D Preferred
Stock then outstanding (as adjusted for Adjustment Events) shall be distributed,
on a pari passu basis, in an amount equal to the Series A Percentage multiplied
by the Third Distribution Amount, ratably among the holders of Series A
Preferred Stock, the Series B Percentage multiplied by the Third Distribution
Amount, ratably among the holders of Series B Preferred Stock, the Series C
Percentage multiplied by the Third Distribution Amount, ratably among the
holders of Series C Preferred Stock, and the Series D Percentage multiplied by
the Third Distribution Amount, ratably among the holders of Series D Preferred
Stock, and (ii) an amount per share equal to $4.1775 for each outstanding share
of Common Stock (as adjusted for Adjustment Events), in addition to the amounts
paid pursuant to subsections (a), (c) and (d) of this Section 2, shall be
-5-
<PAGE>
distributed ratably among the holders of Common Stock. If the assets and funds
thus distributed among the holders of the Series A, Series B, Series C and
Series D Preferred Stock and the holders of the Common Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of other series of Preferred
Stock that may from time to time come into existence, the entire assets and
funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A, Series B, Series C and
Series D Preferred Stock and the holders of the Common Stock in proportion to
the preferential amount each such holder is otherwise entitled to receive under
this subsection (e).
(f) Upon the completion of the distributions required by
subsections (a), (c), (d) and (e) of this Section 2 and any other distribution
that may be required with respect to other series of Preferred Stock that may
from time to time come into existence, the remaining assets of this Corporation
available for distribution to stockholders shall be distributed as follows: (i)
an aggregate amount (the "Fourth Distribution Amount") equal to the product of
$2.76 multiplied by the number of shares of Series D Preferred Stock then
outstanding (as adjusted for Adjustment Events) shall be distributed, on a pari
passu basis, in an amount equal to the Series A Percentage multiplied by the
Fourth Distribution Amount, ratably among the holders of Series A Preferred
Stock, the Series B Percentage multiplied by the Fourth Distribution Amount,
ratably among the holders of Series B Preferred Stock, the Series C Percentage
multiplied by the Fourth Distribution Amount, ratably among the holders of
Series C Preferred Stock, and the Series D Percentage multiplied by the Fourth
Distribution Amount, ratably among the holders of Series D Preferred Stock, and
(ii) an amount per share equal to $2.76 for each outstanding share of Common
Stock (as adjusted for Adjustment Events), in addition to the amounts paid
pursuant to subsections (a), (c), (d) and (e) of this Section 2, shall be
distributed ratably among the holders of Common Stock. If the assets and funds
thus distributed among the holders of the Series A, Series B, Series C and
Series D Preferred Stock and the holders of the Common Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of other series of Preferred
Stock that may from time to time come into existence, the entire assets and
funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A, Series B, Series C and
Series D Preferred Stock and the holders of the Common Stock in proportion to
the preferential amount each such holder is otherwise entitled to receive under
this subsection (f).
(g) Upon the completion of the distributions required by
subsections (a), (c), (d)(e), and (f) of this Section 2 and any other
distribution that may be required with respect to other series of Preferred
Stock that may from time to time come into existence, if assets remain in this
Corporation, the holders of Series A, Series B, Series C and Series D Preferred
Stock shall receive no further distributions and the holders of the Common Stock
of this Corporation shall receive all of the remaining assets of this
Corporation pro rata based on the number of shares of Common Stock held by each.
-6-
<PAGE>
(h) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of this Corporation shall be deemed to be occasioned
by, or to include, (A) the acquisition of this Corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) that results in the
transfer of fifty percent (50%) or more of the outstanding voting power of this
Corporation; or (B) a sale of all or substantially all of the assets of this
Corporation.
(ii) In any of such events, if the consideration received by
this Corporation is other than cash, the value of such consideration will be
deemed its fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through
the NASDAQ National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3) days
prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by this
Corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Series A, Series B, Series C and Series D Preferred
Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A)(1), (2) or (3) to reflect the approximate fair
market value thereof as mutually determined by this Corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Series A, Series B, Series C and Series D Preferred Stock.
(iii) In the event the requirements of this subsection 2(f)
are not complied with, this Corporation shall forthwith either:
(A) cause such closing to be postponed until such time
as the requirements of this Section 2(f) have been complied with; or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Series A, Series B,
Series C and Series D
-7-
<PAGE>
Preferred Stock shall revert to and be the same as such rights, preferences and
privileges existing immediately prior to the date of the first notice referred
to in subsection 2(f)(iv) hereof.
(iv) This Corporation shall give each holder of record of
Series A, Series B, Series C and Series D Preferred Stock written notice of such
impending transaction not later than twenty (20) days prior to the stockholders'
meeting called to approve such transaction, if any, or twenty (20) days prior to
the closing of such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and this Corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after this
Corporation has given the first notice provided for herein or sooner than ten
(10) days after this Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least a majority of
the voting power of all then outstanding shares of Series A, Series B, Series C
and Series D Preferred Stock.
3. REDEMPTION
(a) Subject to the rights of other series of Preferred Stock
that may from time to time come into existence, upon receipt by this
Corporation, within the six (6) month period commencing December 31, 2000, of a
written request (the "Redemption Request") from the holders of not less than
fifty percent (50%) of the then outstanding shares of Series A, Series B, Series
C and Series D Preferred Stock (voting together as a single class and not as a
separate series, and on an as converted basis) that all or, if less than all, a
specified percentage of such holders' shares of such series (which percentage
shall be the same for the Series A, Series B, Series C and Series D Preferred
Stock) be redeemed, and concurrently with surrender by such holders of the
certificates representing such shares, this Corporation shall, to the extent it
may lawfully do so, redeem (i) in four (4) equal annual installments commencing
no later than the first anniversary of the receipt of the Redemption Request
(each such payment date being referred to herein as a "Redemption Date"), or
(ii) at the Corporation's election, in fewer annual installments, including
without limitation, a single lump sum payment, the shares specified in such
request by paying in cash therefor a sum per share equal to $1.00 per share of
Series A Preferred Stock (as adjusted for Adjustment Events) to be redeemed plus
all declared but unpaid dividends and accrued cumulative dividends on such share
(the "Series A Redemption Price"), a sum per share equal to $3.375 per share of
Series B Preferred Stock (as adjusted for Adjustment Events) to be redeemed plus
all declared but unpaid dividends and accrued cumulative dividends on such share
(the "Series B Redemption Price"), a sum per share equal to $6.16 per share of
Series C Preferred Stock (as adjusted for Adjustment Events) to be redeemed plus
all declared but unpaid dividends and accrued cumulative dividends on such share
(the "Series C Redemption Price") and a sum per share equal to $8.00 per share
of Series D Preferred Stock (as adjusted for Adjustment Events) to be redeemed
plus all declared but unpaid dividends and accrued cumulative dividends on such
share (the "Series D Redemption Price"). The holders of the
-8-
<PAGE>
Series A, Series B, Series C and Series D Preferred Stock may exercise their
redemption rights pursuant to this subsection 3(a) only during the six (6) month
period commencing December 31, 2000, and any redemption payments shall be made
on a pro rata basis among the holders of all shares of Series A, Series B,
Series C and Series D Preferred Stock to be redeemed in proportion to the
aggregate redemption payments due to each such holder.
(b) Subject to the rights of other series of Preferred Stock
that may from time to time come into existence, at least fifteen (15) but no
more than thirty (30) days prior to each Redemption Date, written notice shall
be mailed, first class postage prepaid, to each holder of record (at the close
of business on the business day next preceding the day on which notice is given)
of the Series A, Series B, Series C and Series D Preferred Stock to be redeemed
on the Redemption Date, at the address last shown on the records of this
Corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
Redemption Date or Dates, the Redemption Price (as applicable), the place at
which payment may be obtained and calling upon such holder to surrender to this
Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice") on such Redemption Date or Dates. Except as provided in
subsection 3(c), on or after each Redemption Date, each holder of Series A,
Series B, Series C and Series D Preferred Stock to be redeemed shall surrender
to this Corporation the certificate or certificates representing such shares, in
the manner and at the place designated in the Redemption Notice, and thereupon
the applicable Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. In the event less
than all the shares represented by any such certificate are redeemed on a
Redemption Date, a new certificate shall be issued representing the unredeemed
shares. Any certificate issued after the date of the Redemption Request shall
bear a legend indicating that such shares are subject to redemption by the
Company pursuant to the Redemption Request. Shares subject to redemption by the
Company pursuant to the Redemption Request shall be transferable (subject to
redemption by the Company) but shall not be convertible into Common Stock except
as provided in subsection 4(a) of Division B of this Article IV.
(c) From and after each Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series A, Series B, Series C or Series D Preferred Stock designated
for redemption on such Redemption Date, as holders of Series A, Series B, Series
C or Series D Preferred Stock (except the right to receive the applicable
Redemption Price without interest upon surrender of their certificate or
certificates), shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of this Corporation or be deemed to
be outstanding for any purpose whatsoever. Subject to the rights of other series
of Preferred Stock that may from time to time come into existence, if the funds
of this Corporation legally available for redemption of shares of Series A,
Series B, Series C and Series D Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Series A, Series B, Series
C and Series D Preferred Stock to be redeemed on such date, those funds that are
legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such
-9-
<PAGE>
shares to be redeemed such that each holder of a share of Series A, Series B,
Series C and Series D Preferred Stock receives the same percentage of the
applicable Series A Redemption Price, Series B Redemption Price, Series C
Redemption Price or Series D Redemption Price. The shares of Series A, Series B,
Series C and Series D Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. Subject to the
rights of other series of Preferred Stock that may from time to time come into
existence, at any time thereafter when additional funds of this Corporation are
legally available for the redemption of such shares of Series A, Series B,
Series C and Series D Preferred Stock, such funds will immediately be used to
redeem the balance of the shares that this Corporation has become obligated but
has failed to redeem on any Redemption Date.
(d) On or prior to each Redemption Date, this Corporation shall
deposit the Redemption Price of all shares of Series A, Series B, Series C and
Series D Preferred Stock designated for redemption in the Redemption Notice and
not yet redeemed or converted with a bank or trust corporation having aggregate
capital and surplus in excess of $100,000,000 as a trust fund for the benefit of
the respective holders of the shares designated for redemption and not yet
redeemed, with irrevocable instructions and authority to the bank or trust
corporation to publish the notice of redemption thereof and pay the Redemption
Price for such shares to their respective holders on or after the Redemption
Date, upon receipt of notification from this Corporation that such holder has
surrendered his, her or its share certificate to this Corporation pursuant to
subsection 3(b) above. As of the date of such deposit (even if prior to the
Redemption Date), the deposit shall constitute full payment of the shares to
their holders, and from and after the date of the deposit the shares so called
for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect thereto except the rights
to receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor, and
the right to convert such shares as provided in Article IV(B)(4) hereof. Such
instructions shall also provide that any moneys deposited by this Corporation
pursuant to this subsection 3(d) for the redemption of shares thereafter
converted into shares of this Corporation's Common Stock pursuant to Article
IV(B)(4) hereof prior to the Redemption Date shall be returned to this
Corporation forthwith upon such conversion. The balance of any moneys deposited
by this Corporation pursuant to this subsection 3(d) remaining unclaimed at the
expiration of two (2) years following each Redemption Date shall thereafter be
returned to this Corporation upon its request expressed in a resolution of its
Board of Directors.
4. CONVERSION. The shares of Series A, Series B, Series C and
Series D Preferred Stock shall be subject to conversion as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A, Series B, Series
C and Series D Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share and on or prior to
the fifth day prior to the first Redemption Date, if any, as may have been fixed
in any Redemption Notice with respect to such share, at the office of this
Corporation or any transfer agent for such stock, into such number of fully paid
and
-10-
<PAGE>
nonassessable shares of Common Stock as is determined by dividing the
Original Series A Issue Price, Original Series B Issue Price, Original Series C
Issue Price or Original Series D Issue Price, as the case may be, by the
respective Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion.
The initial Conversion Price per share for shares of Series A Preferred Stock
shall be the Original Series A Issue Price, the initial Conversion Price per
share for shares of Series B Preferred Stock shall be the Original Series B
Issue Price, the initial Conversion Price per share for shares of Series C
Preferred Stock shall be the Original Series C Issue Price and the initial
Conversion Price per share for shares of Series D Preferred Stock shall be the
Original Series D Issue Price; provided, however, that the Conversion Price for
the Series A, Series B, Series C and Series D Preferred Stock shall be subject
to adjustment as set forth in subsection 4(d).
(b) AUTOMATIC CONVERSION. Each share of the Series A, Series B,
Series C and Series D Preferred Stock shall automatically be converted into
shares of Common Stock at the respective Conversion Price at the time in effect
for such Series A, Series B, Series C or Series D Preferred Stock immediately
upon the earlier of (i) the closing of a sale of the Corporation's Common Stock
in a firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act of 1933, as amended, the public offering
price of which was not less than $9.25 per share (adjusted to reflect Adjustment
Events) and $15,000,000 in the aggregate, or (ii) the date specified by written
consent or agreement of the holders of two-thirds (2/3) of the aggregate number
of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock then outstanding (voting together
as a single class and not as a separate series, and on an as converted basis).
(c) MECHANICS OF CONVERSION. Before any holder of Series A,
Series B, Series C or Series D Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he or she shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this Corporation or of
any transfer agent for the Series A, Series B, Series C or Series D Preferred
Stock, and shall give written notice to this Corporation at its principal
corporate office of the election to convert the same and shall state therein the
name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A, Series
B, Series C or Series D Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A, Series B, Series C or Series D
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series A, Series B, Series
C or Series D Preferred Stock for conversion, be conditioned upon the closing
with the underwriters of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common Stock upon conversion
of the Series A, Series B,
-11-
<PAGE>
Series C or Series D Preferred Stock shall not be deemed to have converted such
Series A, Series B, Series C or Series D Preferred Stock until immediately prior
to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
A, Series B, Series C and Series D Preferred Stock shall be subject to
adjustment from time to time as follows:
(i) (A) If this Corporation shall issue, after the date
upon which any shares of Series D Preferred Stock were first issued (the
"Purchase Date"), any Additional Stock (as defined below) without consideration
or for a consideration per share less than the respective Conversion Price for
the Series A, Series B, Series C or Series D Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for such series in effect immediately prior to the issuance shall forthwith
(except as otherwise provided in this clause (i)) be adjusted to a price
determined by multiplying the Conversion Price of such series in effect
immediately prior to such issuance by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance (including shares of Common Stock deemed to be issued pursuant to
subsection 4(d)(i)(E)) plus the number of shares of Common Stock that the
aggregate consideration received by this Corporation for such issuance would
purchase at such Conversion Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
(including shares of Common Stock deemed to be issued pursuant to subsection
4(d)(i)(E)) plus the number of shares of such Additional Stock. Notwithstanding
the foregoing, no such Conversion Price adjustment shall occur pursuant to this
subsection 4(d)(i) if prior to the issuance of the Additional Stock this
Corporation shall have obtained a written waiver of the adjustment provided for
in this subsection, which waiver shall have been approved by the holders of not
less than sixty-five percent (65%) of each series of Preferred Stock that would
otherwise be entitled to adjustment of its Conversion Price hereunder.
(B) No adjustment of the Conversion Price for the
Series A, Series B, Series C or Series D Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments that are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three (3) years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of the three (3) years from the
date of the event giving rise to the adjustment being carried forward. Except to
the limited extent provided for in subsections 4(d)(i)(E)(3), (E)(4) and (E)(5),
no adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall
have the effect of increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting
-12-
<PAGE>
any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections 4(d)(i)(C) and 4(d)(i)(D)), if any, received by this Corporation
upon the issuance of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account potential
antidilution adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by this Corporation for any such
securities and related options or rights, plus the minimum additional
consideration, if any, to be received by this Corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 4(d)(i)(C) and 4(d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to this
Corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities (excluding a change
pursuant to subsection 4(d)(i) in the number of shares of Common Stock issuable
upon conversion of shares of Preferred Stock), the Conversion
-13-
<PAGE>
Price of the Series A, Series B, Series C or Series D Preferred Stock, to the
extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange, or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series A, Series B, Series C or Series D
Preferred Stock, to the extent in any way affected by or computed using such
options, rights or securities or options or rights related to such securities
shall be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities that remain in effect)
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities, or upon the exercise of the options or rights
related to such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections
4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E))
by this Corporation after the Purchase Date other than:
(A) shares of Common Stock issued pursuant to a
transaction described in subsection 4(d)(iii) hereof;
(B) shares of Common Stock issuable or issued to
employees, consultants or directors of this Corporation, or affiliates of any
such persons, pursuant to a stock option plan, restricted stock plan or grant
approved by the Board of Directors of this Corporation;
(C) shares of Common Stock issuable or issued to
vendors, suppliers, equipment lessors or bank lenders to this Corporation, or
affiliates of any such persons, where such issuance is not principally for the
purpose of raising additional equity capital for this Corporation;
(D) shares of Common Stock issued or issuable upon
conversion of shares of Series A, Series B, Series C and Series D Preferred
Stock of this Corporation (including additional shares of Common Stock issuable
upon conversion thereof as a result of the operation of subsection 4(d)(i));
-14-
<PAGE>
(E) shares of Common Stock issuable or issued upon
conversion or exercise of convertible or exercisable securities of this
Corporation outstanding as of the date of this Third Amended and Restated
Certificate of Incorporation;
(F) shares of Common Stock issued pursuant to the
acquisition of another corporation or entity, or any product line, intellectual
property or technology, by this Corporation or any subsidiary of this
Corporation by means of merger, consolidation, purchase of assets or other
transaction of series of related transactions approved by the Board of Directors
of this Corporation and, in the case of an acquisition of another corporation or
entity, whereby this Corporation or its shareholders own a majority of the
voting power of such other corporation or entity following such acquisition; and
(G) shares of Common Stock issued to corporate
partners or in connection with other strategic alliances approved by the Board
of Directors of this Corporation.
(iii) In the event this Corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the respective
Conversion Prices of the Series A, Series B, Series C and Series D Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of each such series shall be
increased in proportion to such increase of the aggregate of shares of Common
Stock outstanding and those issuable with respect to such Common Stock
Equivalents with the number of shares issuable with respect to Common Stock
Equivalents determined from time to time in the manner provided for deemed
issuances in subsection 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the respective Conversion Prices for the Series A, Series B, Series
C and Series D Preferred Stock shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of each
such series shall be decreased in proportion to such decrease in outstanding
shares.
(e) OTHER DISTRIBUTIONS. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred
-15-
<PAGE>
to in subsection 4(d)(iii), then, in each such case for the purpose of this
subsection 4(e), the holders of the Series A, Series B, Series C and Series D
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of this Corporation into which their shares of Series A, Series B, Series
C and Series D Preferred Stock are convertible as of the record date fixed for
the determination of the holders of Common Stock of this Corporation entitled to
receive such distribution.
(f) RECAPITALIZATION. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2) provision shall be made so that the holders of
the Series A, Series B, Series C and Series D Preferred Stock shall thereafter
be entitled to receive upon conversion of the Series A, Series B, Series C and
Series D Preferred Stock the number of shares of stock or other securities or
property of this Corporation or otherwise to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A, Series B, Series C and Series D Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A, Series B, Series C and Series D
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.
(g) NO IMPAIRMENT. This Corporation will not, by amendment of
its Third Amended and Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by this Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Series A, Series B, Series C and
Series D Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A, Series B, Series C or Series
D Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A, Series B, Series C or Series D Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A, Series B, Series C or Series D Preferred
Stock pursuant to this
-16-
<PAGE>
Section 4, this Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A, Series B, Series C and Series D Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. This
Corporation shall, upon the written request at any time of any holder of Series
A, Series B, Series C or Series D Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price for such series of Preferred Stock at
the time in effect, and (C) the number of shares of Common Stock and the amount,
if any, of other property that at the time would be received upon the conversion
of a share of such series of Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
Corporation shall mail to each holder of Series A, Series B, Series C and Series
D Preferred Stock, at least 20 days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSIION. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A, Series B, Series C and Series D
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Series A, Series B, Series C and Series D Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
A, Series B, Series C and Series D Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Preferred Stock, this
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Third Amended and
Restated Certificate of Incorporation.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A, Series B, Series C
and Series D Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of this Corporation.
-17-
<PAGE>
5. VOTING RIGHTS
(a) GENERAL VOTING RIGHTS. The holder of each share of Series
A, Series B, Series C and Series D Preferred Stock shall have the right to one
vote for each share of Common Stock into which such Series A, Series B, Series C
and Series D Preferred Stock could then be converted, and with respect to such
vote, such holder shall have full voting rights and powers equal to the voting
rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of this Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an as
converted basis (after aggregating all shares into which shares of Series A,
Series B, Series C and Series D Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
(b) VOTING FOR THE ELECTION OF DIRECTORS. As long as an
aggregate of at least 9,589,584 of the shares of Series A, Series B, Series C
and Series D Preferred Stock (which number shall be equitably adjusted to
reflect Adjustment Events) remain outstanding, the holders of shares of Series
A, Series B, Series C and Series D Preferred Stock, voting together as a single
voting group, shall be entitled to elect three (3) directors of this Corporation
at each annual election of directors. If the aggregate number of shares of
Series A, Series B, Series C and Series D Preferred Stock that remain
outstanding shall be between 6,393,056 and 9,589,583 inclusive (which numbers
shall be equitably adjusted to reflect Adjustment Events), the holders of shares
of Series A, Series B, Series C and Series D Preferred Stock, voting together as
a single voting group, shall be entitled to elect two (2) directors of this
Corporation at each annual election of directors. If the aggregate number of
shares of Series A, Series B, Series C and Series D Preferred Stock that remain
outstanding shall be between 3,196,528 and 6,393,055 inclusive (which numbers
shall be equitably adjusted to reflect Adjustment Events), the holders of shares
of Series A, Series B, Series C and Series D Preferred Stock, voting together as
a single voting group, shall be entitled to elect one (1) director of this
Corporation at each annual election of directors. The holders of outstanding
Common Stock shall be entitled to elect two (2) directors of this Corporation at
each annual election of directors. The holders of Series A, Series B, Series C
and Series D Preferred Stock and Common Stock (voting together as a single
voting group, and on an as-converted basis) shall be entitled to elect any
remaining directors of this Corporation.
In the case of any vacancy (other than a vacancy caused by
removal) in the office of a director occurring among the directors elected by
the holders of a class or series of stock pursuant to this Section 5(b), the
remaining directors so elected by that class or series may by affirmative vote
of a majority thereof (or the remaining director so elected if there be but one,
or if there are no such directors remaining, by the affirmative vote of the
holders of a majority of the shares of that class or series), elect a successor
or successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so
-18-
<PAGE>
elected as provided in the immediately preceding sentence hereof may be removed
during the aforesaid term of office, either with or without cause, by, and only
by, the affirmative vote of the holders of the shares of the class or series of
stock entitled to elect such director or directors, given either at a special
meeting of such stockholders duly called for that purpose or pursuant to a
written consent of stockholders, and any vacancy thereby created may be filled
by the holders of that class or series of stock represented at the meeting or
pursuant to unanimous written consent.
6. PROTECTIVE PROVISIONS. Subject to the rights of other series of
Preferred Stock that may from time to time come into existence, this Corporation
shall not take any of the following actions without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the shares of Series A, Series B, Series C and Series D Preferred
Stock then outstanding, voting together as a single class and not as separate
series on an as converted basis, provided, however, that in the event that the
aggregate number of shares of Series A, Series B, Series C and Series D
Preferred Stock then outstanding represent less than twenty percent (20%) of the
sum of the aggregate number of all shares of Preferred Stock then outstanding on
an as-converted basis (i.e., after aggregating all shares into which shares of
Preferred Stock could be converted) plus Common Stock then outstanding, then the
protective provisions of this Section 6 shall cease to be of any force or effect
and shall not bind this Corporation:
(a) sell, convey, or otherwise dispose of all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation) or effect any
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of this Corporation is disposed of;
(b) dissolve, wind-up or liquidate this Corporation;
(c) alter, change or reclassify the rights, preferences or
privileges of the shares of Series A, Series B, Series C or Series D Preferred
Stock so as to affect adversely the shares;
(d) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A, Series B, Series
C or Series D Preferred Stock provided, however, that the Board of Directors may
amend the terms of any series to decrease the number of shares of that series
(but not below the number of shares of such series then outstanding), and the
number of shares constituting the decrease shall thereafter constitute
authorized but undesignated shares;
(e) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security having a preference over the Series A, Series B, Series
C or Series D Preferred Stock with respect to voting, or having a preference
over or being on a parity with the Series A, Series B, Series C or Series D
Preferred Stock with respect to dividends or upon liquidation;
-19-
<PAGE>
(f) enter into any transaction or series of related transactions
in which this Corporation borrows more than $5,000,000;
(g) amend this Corporation's Third Amended and Restated
Certificate of Incorporation or Bylaws (excluding an amendment to this
Corporation's Third Amended and Restated Certificate of Incorporation, which
amendment does no more than authorize for issuance an equity security not
covered by subsection 6(e) above);
(h) change the authorized number of directors of this
Corporation;
(i) pay any dividends on its Common Stock; or
(j) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided, however, that this restriction shall
not apply to the repurchase of shares of Common Stock (up to a maximum of
$500,000) from employees, officers, directors, consultants or other persons
performing services for the Company or any subsidiary.
7. Additional Series C Preferred Stock Protective Provisions.
Subject to the rights of other series of Preferred Stock that may from time to
time come into existence, this Corporation shall not take any of the following
actions without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the voting power of
all then outstanding shares of Series C Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
shares of Series C Preferred Stock so as to affect adversely the shares; or
(b) amend the automatic conversion provisions applicable to the
Preferred Stock as set forth in subsection (4)(b) of Division B of this Article
IV.
8. Additional Series D Preferred Stock Protective Provisions.
Subject to the rights of other series of Preferred Stock that may from time to
time come into existence, this Corporation shall not take any action, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least a majority of the voting power of all then outstanding
shares of Series D Preferred Stock, that would alter, change or reclassify the
rights, preferences or privileges of the shares of Series D Preferred Stock so
as to affect adversely the shares in a manner different from the Series A,
Series B and Series C Preferred Stock.
9. Status of Converted or Redeemed Stock. In the event any shares
of Series A, Series B, Series C or Series D Preferred Stock shall be redeemed or
converted pursuant to Section 3 or Section 4 hereof, the shares so converted or
redeemed shall be canceled and shall not be issuable by this Corporation. The
Third Amended and Restated Certificate of Incorporation of this Corporation
shall be appropriately amended to effect the corresponding reduction in this
Corporation's authorized capital stock.
-20-
<PAGE>
C. Common Stock
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of this Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
up of this Corporation, the assets of this Corporation shall be distributed as
provided in Section 2 of Division B of this Article IV.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of this Corporation, and shall be entitled
to vote upon such matters in such manner as may be provided by law.
ARTICLE V
Except as otherwise provided in this Third Amended and Restated Certificate
of Incorporation, in furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this Corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of
this Corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this Corporation.
-21-
<PAGE>
ARTICLE IX
A director of this Corporation shall, to the full extent permitted by the
Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be liable to this Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment or
repeal of this Article IX, nor the adoption of any provision of this Third
Amended and Restated Certificate of Incorporation inconsistent with this Article
IX, shall eliminate or reduce the effect of this Article IX in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article IX, would accrue or arise, prior to such amendment, repeal or adoption
of any inconsistent provision.
ARTICLE X
This Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Third Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE XI
This Corporation shall not take any of the following actions without first
obtaining the approval (by vote or written consent, as provided by law) of at
least sixty-six and two-thirds percent (662/3%) of the directors of this
Corporation;
(a) sell, convey, or otherwise dispose of all or substantially all of its
property or business or merge into or consolidate with any other corporation
(other than a wholly-owned subsidiary corporation) or effect any transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of this Corporation is disposed of;
(b) change the authorized number of directors of this Corporation; or
(c) consummate any financing pursuant to which the holders of Series A,
Series B, Series C and Series D Preferred Stock are entitled to exercise the
right of first offer set forth in Section 2.4 of the Third Amended and Restated
Investors' Rights Agreement, dated on or about August 5, 1997, by and among this
Corporation and certain investors and founders, as amended from time to time,
unless the existing stockholders of this Corporation purchase less than sixty-
six and two-thirds percent (66 2/3%) of the shares sold in such financing.
***
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
-22-
<PAGE>
[SIGNATURE PAGES FOLLOW]
-23-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this certificate on August
4, 1997.
/s/ Vito Palermo
-------------------------------------
Vito Palermo
Chief Financial Officer and Secretary
SIGNATURE PAGE TO THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
-24-
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
METAWAVE COMMUNICATIONS CORPORATION
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - CORPORATE OFFICES....................................... 1
1.1 Registered Office.......................................... 1
1.2 Other Offices.............................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS............................... 1
2.1 Place Of Meetings.......................................... 1
2.2 Annual Meeting............................................. 1
2.3 Special Meeting............................................ 1
2.4 Manner Of Giving Notice; Affidavit Of Notice............... 2
2.5 Advance Notice Of Stockholder Nominees..................... 2
2.6 Quorum..................................................... 4
2.7 Adjourned Meeting; Notice.................................. 4
2.8 Conduct Of Business........................................ 4
2.9 Voting..................................................... 4
2.10 Waiver Of Notice.......................................... 4
2.11 Record Date For Stockholder Notice;
Voting; Giving Consents................................... 5
2.12 Proxies................................................... 5
ARTICLE III - DIRECTOR.............................................. 6
3.1 Powers..................................................... 6
3.2 Number Of Directors........................................ 6
3.3 Election, Qualification And Term Of
Office Of Directors........................................ 6
3.4 Resignation And Vacancies.................................. 6
3.5 Place Of Meetings; Meetings By Telephone................... 7
3.6 Regular Meetings........................................... 8
3.7 Special Meetings; Notice................................... 8
3.8 Quorum..................................................... 8
3.9 Waiver Of Notice........................................... 8
3.10 Board Action By Written Consent Without A Meeting......... 9
3.11 Fees And Compensation Of Directors........................ 9
3.12 Approval Of Loans To Officers............................. 9
3.13 Removal Of Directors...................................... 9
3.14 Chairman Of The Board Of Directors........................ 10
ARTICLE IV - COMMITTEES............................................. 10
4.1 Committees Of Directors.................................... 10
4.2 Committee Minutes.......................................... 11
4.3 Meetings And Action Of Committees.......................... 11
ARTICLE V - OFFICERS................................................ 11
5.1 Officers................................................... 11
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.2 Appointment Of Officers.................................... 11
5.3 Subordinate Officers....................................... 11
5.4 Removal And Resignation Of Officers........................ 12
5.5 Vacancies In Offices....................................... 12
5.6 Chief Executive Officer.................................... 12
5.7 President.................................................. 12
5.8 Vice Presidents............................................ 13
5.9 Secretary.................................................. 13
5.10 Chief Financial Officer................................... 13
5.11 Chief Technical Officer................................... 14
5.12 Representation Of Shares Of Other Corporations............ 14
5.13 Authority And Duties Of Officers.......................... 14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS............................ 14
6.1 Indemnification Of Directors And Officers.................. 14
6.2 Indemnification Of Others.................................. 15
6.3 Payment Of Expenses In Advance............................. 15
6.4 Indemnity Not Exclusive.................................... 15
6.5 Insurance.................................................. 15
6.6 Conflicts.................................................. 16
ARTICLE VII - RECORDS AND REPORTS................................... 16
7.1 Maintenance And Inspection Of Records...................... 16
7.2 Inspection By Directors.................................... 16
7.3 Annual Statement To Stockholders........................... 17
ARTICLE VIII - GENERAL MATTERS...................................... 17
8.1 Checks..................................................... 17
8.2 Execution Of Corporate Contracts And Instruments........... 17
8.3 Stock Certificates; Partly Paid Shares..................... 17
8.4 Special Designation On Certificates........................ 18
8.5 Lost Certificates.......................................... 18
8.6 Construction; Definitions.................................. 18
8.7 Dividends.................................................. 19
8.8 Fiscal Year................................................ 19
8.9 Seal....................................................... 19
8.10 Transfer Of Stock......................................... 19
8.11 Stock Transfer Agreements................................. 19
8.12 Registered Stockholders................................... 19
ARTICLE IX - AMENDMENTS............................................. 20
-ii-
<PAGE>
BYLAWS
OF
METAWAVE COMMUNICATIONS CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
1.2 OTHER OFFICES.
The Board of Directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the Board of Directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING.
The annual meeting of stockholders shall be held on such date, time and
place, either within or without the State of Delaware, as may be designated by
resolution of the Board of Directors each year. At the meeting, directors shall
be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING.
(a) A special meeting of the stockholders may be called at any time
by the Board of Directors, the chairman of the board , the president or by one
or more stockholders holding shares in the aggregate entitled to cast not less
than sixty six and two-thirds percent (66 2/3%) of the votes at that meeting.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the chairman of the board or the president, the
request shall be in writing,
<PAGE>
specifying the time of such meeting and the general nature of the business
proposed to be transacted, and shall be delivered personally or sent by
registered mail or by telegraphic or other facsimile transmission to the
chairman of the board, the president, any vice president, or the secretary of
the corporation. No business may be transacted at such special meeting otherwise
than as specified in such notice. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting
will be held at the time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within twenty (20) days after the
receipt of the request, the person or persons requesting the meeting may give
the notice. Nothing contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
notice of meeting given in accordance with Section 2.2(b). Nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders at which directors are to be selected pursuant to such notice of
meeting (i) by or at the direction of the board of directors or (ii) by any
stockholder of the corporation who is a stockholder of record at the time of
giving of notice provided for in this paragraph, who shall be entitled to vote
at the meeting and who complies with the notice procedures set forth in Section
2.5.
2.4 NOTICE OF STOCKHOLDER'S MEETINGS; AFFIDAVIT OF NOTICE.
All notices of meetings of stockholders shall be in writing and shall be
sent or otherwise given in accordance with this Section 2.4 of these Bylaws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting (or such longer or shorter
time as is required by Section 2.5 of these Bylaws, if applicable). The notice
shall specify the place, date, and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES.
Only persons who are nominated in accordance with the procedures set forth
in this Section 2.5 shall be eligible for election as directors. Nominations of
persons for election to the board of directors of the corporation may be made at
a meeting of stockholders by or at the direction of the board of directors or by
any stockholder of the corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 2.5. Such nominations, other than those made by or at the direction
of the board of directors, shall be made pursuant to timely notice in writing to
the secretary of the corporation.
-2-
<PAGE>
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation not less than
sixty (60) days nor more than ninety (90) days prior to the meeting; provided,
however, that in the event that less than sixty (60) days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a Director, (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including, without limitation, such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the corporation's books, of such stockholder and (ii)
the class and number of shares of the corporation which are beneficially owned
by such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director shall furnish to
the secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this Section 2.5. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if he or she should so determine, he or she shall so declare to
the meeting and the defective nomination shall be disregarded.
2.6 QUORUM.
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (a) the chairman of the meeting or (b) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless these Bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the
-3-
<PAGE>
corporation may transact any business that might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
2.9 VOTING.
(a) The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.11 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
(b) Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. If the Board
of Directors does not so fix a record date:
-4-
<PAGE>
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.
3.2 NUMBER OF DIRECTORS.
Upon the adoption of these Bylaws, the number of directors constituting the
entire Board of Directors shall be nine (9). Thereafter, this number may be
changed by a resolution of the Board of Directors or of the stockholders,
subject to Section 3.4 of these Bylaws. No reduction of the authorized number of
directors shall have the effect of removing any director before such director's
term of office expires.
-5-
<PAGE>
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES.
Any director may resign at any time upon written notice to the attention of
the Secretary of the corporation. When one or more directors so resigns and the
resignation is effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies. A vacancy
created by the removal of a director by the vote of the stockholders or by court
order may be filled only by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute a majority of the quorum.
Each director so elected shall hold office until the next annual meeting of the
stockholders and until a successor has been elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
-6-
<PAGE>
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
-7-
<PAGE>
3.8 QUORUM.
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee. Written consents representing actions taken by the board
or committee may be executed by telex, telecopy or other facsimile transmission,
and such facsimile shall be valid and binding to the same extent as if it were
an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, the Board of Directors shall have the authority to fix the compensation
of directors. No such compensation shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
-8-
<PAGE>
3.12 APPROVAL OF LOANS TO OFFICERS.
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
Unless otherwise restricted by statute, by the certificate of incorporation
or by these Bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors; provided, however, that if the
stockholders of the corporation are entitled to cumulative voting, if less than
the entire Board of Directors is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to elect
him if then cumulatively voted at an election of the entire Board of Directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
The corporation may also have, at the discretion of the Board of Directors,
a chairman of the Board of Directors who shall not be considered an officer of
the corporation.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the Bylaws of the corporation, shall
have and may exercise all the powers and authority of the Board
-9-
<PAGE>
of Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers that
may require it; but no such committee shall have the power or authority to (a)
amend the certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board of Directors as provided in Section 151(a)
of the General Corporation Law of Delaware, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), (b) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (c) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (d) recommend
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (e) amend the Bylaws of the corporation; and, unless the board
resolution establishing the committee, the Bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
-10-
<PAGE>
ARTICLE V
OFFICERS
5.1 OFFICERS.
The officers of the corporation shall be a chief executive officer, a
president, a secretary, a chief financial officer and a chief technical officer.
The corporation may also have, at the discretion of the Board of Directors, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these Bylaws. Any number of
offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS.
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these Bylaws, shall
be appointed by the Board of Directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the chief executive officer
or the president to appoint, such other officers and agents as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take effect
at the date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation is
without prejudice to the rights, if any, of the corporation under any contract
to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the corporation shall be filled by
the Board of Directors.
-11-
<PAGE>
5.6 CHIEF EXECUTIVE OFFICER.
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the chairman of the board, if any, the chief executive officer of
the corporation shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers of
the corporation. He or she shall preside at all meetings of the stockholders
and, in the absence or nonexistence of a chairman of the board, at all meetings
of the Board of Directors and shall have the general powers and duties of
management usually vested in the office of chief executive officer of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
5.7 PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the chairman of the board (if any) or the chief executive officer,
the president shall have general supervision, direction, and control of the
business and other officers of the corporation. He or she shall have the general
powers and duties of management usually vested in the office of president of a
corporation and such other powers and duties as may be prescribed by the Board
of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
In the absence or disability of the chief executive officer and president,
the vice presidents, if any, in order of their rank as fixed by the Board of
Directors or, if not ranked, a vice president designated by the Board of
Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 SECRETARY.
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
-12-
<PAGE>
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required to be given by law or by
these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the Board of Directors. He or she shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
president, the chief executive officer, or the directors, upon request, an
account of all his or her transactions as chief financial officer and of the
financial condition of the corporation, and shall have other powers and perform
such other duties as may be prescribed by the Board of Directors or the Bylaws.
5.11 CHIEF TECHNICAL OFFICER.
Subject to such supervisory powers of the chief executive officer and the
president, the chief technical officer shall have general supervision,
direction, and control of the research and development activities of the
corporation and shall have other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
5.12 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the chief executive officer, the president, any
vice president, the chief financial officer, chief technical officer, the
secretary or assistant secretary of this corporation, or any other person
authorized by the Board of Directors or the chief executive officer or the
president or a vice president, is authorized to vote, represent, and exercise on
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this corporation. The
authority granted herein may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by the person having such authority.
-13-
<PAGE>
5.13 AUTHORITY AND DUTIES OF OFFICERS.
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (a) who is or was a director or
officer of the corporation, (b) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS.
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (a) who is or was an employee or
agent of the corporation, (b) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately
-14-
<PAGE>
be determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation.
6.5 INSURANCE.
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 CONFLICTS.
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
The corporation shall, either at its principal executive offices or at such
place or places as designated by the Board of Directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
-15-
<PAGE>
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
The Board of Directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
-16-
<PAGE>
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of a corporation shall be represented by certificates, provided
that the Board of Directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the chief executive officer or the president or vice-
president, and by the chief financial officer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the number
of shares registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
has ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
-17-
<PAGE>
8.5 LOST CERTIFICATES.
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS.
The directors of the corporation, subject to any restrictions contained in
(a) the General Corporation Law of Delaware or (b) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR.
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 SEAL.
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession,
-18-
<PAGE>
assignation or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors; provided, further, any amendment to the Bylaws that
increases or reduces the authorized number of directors shall require the
affirmative approval of at least two-thirds of the directors. The fact that
such power has been so conferred upon the directors shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal
Bylaws. Notwithstanding the foregoing, any amendments to this Article IX shall
require approval of holders of two-thirds of the outstanding Common Stock.
-19-
<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
METAWAVE COMMUNICATIONS CORPORATION
The undersigned hereby certifies that the undersigned is the duly elected,
qualified, and acting Secretary of Metawave Communications Corporation, and that
the foregoing Bylaws were adopted as the Bylaws of the corporation on May 19,
1998, by the Board of Directors of the corporation.
Executed this 14th day of July, 1998.
/s/ Vito Palermo
-----------------------
Vito Palermo, Secretary
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of
_______________, by and between Metawave Communications Corporation, a Delaware
corporation (the "Company"), and [IndemniteeName] (the "Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in obtaining
liability insurance for directors, officers and key employees, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance. The Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting directors,
officers and key employees to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
Indemnitee does not regard the current protection available as adequate under
the present circumstances, and Indemnitee and agents of the Company may not be
willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE>
reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section l(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby undertakes
to repay such amounts advanced only if, and to the extent that, it shall
ultimately be determined that Indemnitee is not entitled to be indemnified by
the Company as authorized hereby.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in
-2-
<PAGE>
writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company and
shall be given in accordance with the provisions of Section 12(d) below. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the Company
contests Indemnitee's right to indemnification, the question of Indemnitee's
right to indemnification shall be for the court to decide, and neither the
failure of the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination that indemnification of Indemnitee is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct required by applicable law, nor an actual determination by the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice
of a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel
-3-
<PAGE>
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ counsel in any such proceeding at Indemnitee's expense; and (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he or she may have ceased
to serve in any such capacity at the time of any action, suit or other covered
proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise.
-4-
<PAGE>
For example, the Company and Indemnitee acknowledge that the Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
-5-
<PAGE>
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for expenses
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Agreement.
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee
-6-
<PAGE>
with respect to such action, unless as a part of such action, the court of
competent jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
12. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) NOTICES. Any notice, demand or request required or permitted to
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of
-7-
<PAGE>
Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company to effectively
bring suit to enforce such rights.
[Signature Page Follows]
-8-
<PAGE>
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
METAWAVE COMMUNICATIONS CORPORATION
By: __________________________________________
Title: __________________________________________
Address: 8700 148th Avenue N.E.
Redmond, Washington 98052
AGREED TO AND ACCEPTED:
[IndemniteeName]
______________________________
(Signature)
Address: [IndemniteeAddress1]
[IndemniteeAddress2]
-9-
<PAGE>
EXHIBIT 10.2
METAWAVE COMMUNICATIONS CORPORATION
THIRD AMENDED AND RESTATED 1995 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. This Third Amended and Restated 1995 Stock
Option Plan amends and restates the Second Amended and Restated Amended and
Restated 1995 Stock Option Plan. The purposes of this Third Amended and Restated
1995 Stock Option Plan are to attract and retain the best available personnel
for positions of substantial responsibility, to provide additional incentive to
Employees and Consultants of the Company and its Subsidiaries and to promote the
success of the Company's business. Options granted under the Plan may be
incentive stock options (as defined under Section 422 of the Code) or
nonstatutory stock options, as determined by the Administrator at the time of
grant of an option and subject to the applicable provisions of Section 422 of
the Code, as amended, and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as defined
below) in which the Company owns an equity interest.
(c) "Applicable Laws" shall have the meaning set forth in Section
4(b)(iii) below.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
(g) "Common Stock" means the Common Stock of the Company.
(h) "Company" means Metawave Communications Corporation, a Delaware
corporation.
(i) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(j) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
<PAGE>
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(k) "Control Transaction" means:
(i) any merger, consolidation, or statutory or contractual
share exchange in which there is no group of persons who held a majority of the
outstanding Common Stock immediately prior to the transaction who continue to
hold, immediately following the transaction, at least a majority of the combined
voting power of the outstanding shares of that class of capital stock (herein,
"Voting Stock") which ordinarily (and apart from rights accruing under special
circumstances) has the right to vote in the election of directors of the Company
(or of any other corporation or entity whose securities are issued in such
transaction wholly or partially in exchange for Common Stock);
(ii) any liquidation or dissolution of the Company;
(iii) any transaction (or series of related transactions)
involving the sale, lease, exchange or other transfer not in the ordinary course
of business of all, or substantially all, of the assets of the Company; or
(iv) any transaction (or series of related transactions) in
which any person (including, without limitation, any natural person, any
corporation or other legal entity, and any person as defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act, other than the Company or any
employee benefit plan sponsored by the Company):
(A) purchases any Common Stock (or securities convertible
into Common Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer subject to the requirements of the Exchange Act,
or
(B) directly or indirectly becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of securities of the Company
which, when aggregated with such person's beneficial ownership prior to such
transaction, either (x) represent 30% or more (50% or more if the Company is not
then subject to the requirements of the Exchange Act) (the "Control Percentage")
of the combined voting power of the then outstanding Voting Stock of the
Company, or (y) if such person's beneficial ownership prior to such transaction
already exceeded the applicable Control Percentage, result in an increase in
such holder's beneficial ownership percentage (all such percentages being
calculated as provided in Rule 13d-3(d) under the Exchange Act with respect to
rights to acquire the Company's securities).
-2-
<PAGE>
All references in this definition to specific sections of or
rules promulgated under the Exchange Act shall apply whether or not the Company
is then subject to the requirements of the Exchange Act.
(l) "Director" means a member of the Board.
(m) "Employee" means any person, including Officers, Named Executives
and Directors, employed by the Company or any Parent or Subsidiary of the
Company, with the status of employment determined based upon such minimum number
of hours or periods worked as shall be determined by the Administrator in its
discretion, subject to any requirements of the Code. The payment of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Fair Market Value" means, as of any date, the fair market value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(p) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(q) "Named Executive" means any individual who, on the last day of
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four highest compensated officers of the
Company (other than the chief executive officer). Such officer status shall be
determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
-3-
<PAGE>
(r) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Optioned Stock" means the Common Stock subject to an Option.
(u) "Optionee" means an Employee or Consultant who receives an
Option.
(v) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(w) "Plan" means this Third Amended and Restated 1995 Stock Option
Plan.
(x) "Reporting Person" means an officer, director, or greater than
ten percent stockholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.
(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
as the same may be amended from time to time, or any successor provision.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(aa) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(bb) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 4,150,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan. Shares
repurchased by the Company pursuant to any repurchase right which the Company
may have shall not be available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
-4-
<PAGE>
(b) Plan Procedure After the Date, if any, Upon Which the Company
Becomes Subject to the Exchange Act.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-
3, grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3 and Section 162(m) of the Code as
it applies so as to qualify grants of options to Named Executive Officers as
performance-based compensation, or (B) a committee designated by the Board to
make grants to Reporting Persons under the Plan, which committee shall be
constituted in such a manner as to permit grants under the Plan to comply with
Rule 16b-3 and to qualify grants of Options to Named Executives as performance-
based compensation under Section 162(m) of the Code and otherwise so as to
satisfy the Applicable Laws. Once appointed, such committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the committee and thereafter directly make grants to Reporting
Persons under the Plan, all to the extent permitted by Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable corporate and securities
laws, of the Code and of any applicable Stock Exchange (the "Applicable Laws").
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(o) of the Plan;
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
-5-
<PAGE>
(iii) to determine whether and to what extent Options or any
combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to construe and interpret the terms of the Plan and Options
granted under the Plan; and
(x) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(d) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
holders of Options.
5. ELIGIBILITY.
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees; provided, however, that Employees of an Affiliate shall not be
eligible to receive Incentive Stock Options. An Employee or Consultant who has
been granted an Option may, if he or she is otherwise eligible, be granted
additional Options.
(b) Type of Option. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
-6-
<PAGE>
(c) Employment Relationship. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided
in this Plan, the maximum number of Shares which may be subject to options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be [250,000]. This Section 8 shall not apply prior to the date upon which
the Company becomes subject to the Exchange Act and following such date, shall
not apply until the (i) earliest of: (A) the first material modification of the
Plan (including any increase to the number of shares reserved for issuance under
the Plan in accordance with Section 3); (B) the issuance of all of the shares of
common stock reserved for issuance under the Plan; (C) the expiration of the
Plan; or (D) the first meeting of shareholders at which directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of any equity security
under Section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
-7-
<PAGE>
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the grant of
such Option, is a Named Executive Officer the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of the grant.
(B) granted to any person other than a Named Executive
Officer, the per Share exercise price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note (subject to the provisions of Section 153 of the
Delaware General Corporation Law), (4) other Shares that (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender or such other period as may be
required to avoid a charge to the Company's earnings [were not acquired,
directly or indirectly from the Company], and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) any combination of the foregoing methods of
payment, or (8) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares
-8-
<PAGE>
with respect to which the Option is exercised. Full payment may, as authorized
by the Administrator, consist of any consideration and method of payment
allowable under Section 9(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, not withstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
Section 10(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 10(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) Disability of Optionee
(i) Notwithstanding Section 10(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
-9-
<PAGE>
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Extension of Exercise Period. The Administrator shall have full
power and authority to extend the period of time for which an option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 10(b), 10(c)
and 10(d) above or in the Option Agreement to such greater time as the Board
shall deem appropriate, provided, that in no event shall such option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(f) Termination for Misconduct. Notwithstanding Sections 10(b), (c),
(d) and (e) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant for Misconduct, all outstanding Options held
by the Optionee shall terminate immediately and cease to be outstanding. For
purposes of this Section 10(f), Misconduct shall mean the commission of any act
of fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Company or any Parent or Subsidiary, or any other intentional misconduct by such
person adversely affecting the business or affairs of the Company or any Parent
or Subsidiary in a material manner.
(g) Rule 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(h) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and
-10-
<PAGE>
conditions as the Administrator shall establish and communicate to the Optionee
at the time that such offer is made.
11. WITHHOLDING TAXES. As a condition to the exercise of Options granted
hereunder, the Optionee shall make such arrangements as the Administrator may
require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with the exercise, receipt or
vesting of such Option. The Company shall not be required to issue any Shares
under the Plan until such obligations are satisfied.
12. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than the applicable taxes on the ordinary income
recognized or (d) by electing to have the Company withhold from the Shares to be
issued upon exercise of the Option, if any, that number of Shares having a fair
market value equal to the amount required to be withheld. For this purpose, the
fair market value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
-11-
<PAGE>
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, the maximum number of shares of Common Stock for which Options may
be granted to any employee under Section 8 of the Plan, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination, recapitalization or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Control Transaction
(i) The Company shall provide each Optionee with notice of the
pendency of any Control Transaction (i) at least thirty (30) days prior to the
expected date of consummation of a Control Transaction that has been approved or
recommended by the Board, or (ii) promptly after the Board becomes aware of the
pendency or occurrence of a proposed or completed Control Transaction that has
not been approved or recommended by the Board.
(ii) Each Optionee shall be entitled to exercise the vested
portion of the Option at any time prior to consummation of a Control
Transaction. If the terms of the Option prescribe a time-based vesting schedule,
the Optionee shall, conditioned upon consummation of the Control Transaction and
upon the Optionee remaining employed by the Company through the date of such
consummation, be entitled to accelerated vesting credit equal to either twelve
months or twenty-four months of additional vesting beyond that otherwise
scheduled, based on whether he or she has been employed by the Company less than
two years, or two years or more, respectively, as of the date of such
consummation; provided, however, that this sentence shall not apply with respect
to any Option as to which the Administrator determines, in its sole discretion,
that the Board or the acquiring person or the surviving corporation, as the case
may be, has made
-12-
<PAGE>
equitable and appropriate provision for the assumption of or the substitution of
a new option for the Option on terms which are, as nearly as practicable, the
financial equivalent of the Option (taking into account the consideration for
which the Common Stock is to be exchanged in the Control Transaction).
(iii) Any exercise may be made contingent upon consummation of a
Control Transaction if so elected by the Optionee in his or her notice of
exercise, and must be made contingent upon such consummation with respect to any
portion of an Option entitled to accelerated vesting under the second sentence
of Section 13(c)(ii) above.
(iv) Upon consummation of a Control Transaction that has been
approved or recommended by the Board, all unexercised Options shall expire,
except to the extent that the Administrator determines otherwise pursuant to the
second sentence of Section 13(c)(ii) above.
(d) Certain Distributions. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
14. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee only by the Optionee. The designation of a
beneficiary by an Optionee will not constitute transfer.
15. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Authority to Amend or Terminate. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Sections 162(m) and 422 of the Code (or any other applicable law or
regulation, including the requirements of any Stock Exchange), the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
-13-
<PAGE>
(b) Effect of Amendment or Termination. No amendment or termination
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange and shall be further
subject to the approval of counsel to the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. AGREEMENTS. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.
20. STOCKHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted. Such stockholder approval shall be obtained in the degree
and manner required under applicable state and federal law and the rules of any
Stock Exchange upon which the Common Stock is listed. All Options issued under
the Plan shall become void in the event such approval is not obtained.
(b) In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the stockholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
(c) If any required approval by the stockholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 20(b) hereof, then the Company shall, at or prior to
the first annual meeting of stockholders held subsequent to the later of (1) the
first registration of any class of equity
-14-
<PAGE>
securities of the Company under Section 12 of the Exchange Act or (2) the
granting of an Option hereunder to an officer or director after such
registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were then
being solicited) by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to stockholders.
-15-
<PAGE>
EXHIBIT 10.3
METAWAVE COMMUNICATIONS CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 Stock Option Plan are
--------------------
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as defined
---------
below) in which the Company owns an equity interest.
(c) "Applicable Laws" shall have the meaning set forth in Section
---------------
4(b)(iii) below.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Code" means the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.
(g) "Common Stock" means the Common Stock of the Company.
------------
(h) "Company" means Metawave Communications Corporation, a Delaware
-------
corporation.
(i) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(j) "Continuous Status as an Employee or Consultant" means the
----------------------------------------------
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise
<PAGE>
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or their respective successors. For purposes of this Plan, a change
in status from an Employee to a Consultant or from a Consultant to an Employee
will not constitute an interruption of Continuous Status as an Employee or
Consultant.
(k) "Control Transaction" means:
-------------------
(i) any merger, consolidation, or statutory or contractual
share exchange in which there is no group of persons who held a majority of the
outstanding Common Stock immediately prior to the transaction who continue to
hold, immediately following the transaction, at least a majority of the combined
voting power of the outstanding shares of that class of capital stock (herein,
"Voting Stock") which ordinarily (and apart from rights accruing under special
------------
circumstances) has the right to vote in the election of directors of the Company
(or of any other corporation or entity whose securities are issued in such
transaction wholly or partially in exchange for Common Stock);
(ii) any liquidation or dissolution of the Company;
(iii) any transaction (or series of related transactions)
involving the sale, lease, exchange or other transfer not in the ordinary course
of business of all, or substantially all, of the assets of the Company; or
(iv) any transaction (or series of related transactions) in
which any person (including, without limitation, any natural person, any
corporation or other legal entity, and any person as defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act, other than the Company or any
employee benefit plan sponsored by the Company):
(A) purchases any Common Stock (or securities convertible
into Common Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer subject to the requirements of the Exchange Act,
or
(B) directly or indirectly becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of securities of the Company
which, when aggregated with such person's beneficial ownership prior to such
transaction, either (x) represent 30% or more (50% or more if the Company is not
then subject to the requirements of the Exchange Act) (the "Control Percentage")
of the combined voting power of the then outstanding Voting Stock of the
Company, or (y) if such person's beneficial ownership prior to such transaction
already exceeded the applicable Control Percentage, result in an increase in
such holder's beneficial ownership percentage (all such percentages being
calculated as provided in Rule 13d-3(d) under the Exchange Act with respect to
rights to acquire the Company's securities).
All references in this definition to specific sections
of or rules promulgated under the Exchange Act shall apply whether or not the
Company is then subject to the requirements of the Exchange Act.
-2-
<PAGE>
(l) "Director" means a member of the Board.
--------
(m) "Employee" means any person, including Officers, Named Executives
--------
and Directors, employed by the Company or any Parent or Subsidiary of the
Company, with the status of employment determined based upon such minimum number
of hours or periods worked as shall be determined by the Administrator in its
discretion, subject to any requirements of the Code. The payment of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(o) "Fair Market Value" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
------
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(p) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(q) "Named Executive" means any individual who, on the last day of
---------------
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four highest compensated officers of the
Company (other than the chief executive officer). Such officer status shall be
determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(r) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(s) "Option" means a stock option granted pursuant to the Plan.
------
-3-
<PAGE>
(t) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(u) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(v) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(w) "Plan" means this 1998 Stock Option Plan.
----
(x) "Reporting Person" means an officer, director, or greater than
----------------
ten percent stockholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.
(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.
(z) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(aa) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(bb) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 850,000 shares of Common Stock (the "Pool"). On the first
trading day of each of the five calendar years beginning in 1999 and ending in
2003, the Pool shall be increased by an amount equal to three percent (3%) of
the outstanding Common Stock up to a maximum of 1,000,000 in any calendar year,
or such lower amount as determined by the Board of Directors.
The shares may be authorized, but unissued, or reacquired Common Stock. If
an Option should expire or become unexercisable for any reason without having
been exercised in full, the unpurchased Shares that were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan. In addition, any shares of Common Stock which are retained by
the Company upon exercise of an Option in order to satisfy the exercise or
purchase price for such Option or any withholding taxes due with respect to such
exercise shall be treated as not issued and shall continue to be available under
the Plan. Shares repurchased by the Company pursuant to any repurchase right
which the Company may have shall not be available for future grant under the
Plan.
-4-
<PAGE>
4. ADMINISTRATION OF THE PLAN.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which
----------------------
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company
-------------------------------------------------------------
Becomes Subject to the Exchange Act.
- -----------------------------------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-
------------------------------
3, grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With
------------------------------------------------
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3 and Section 162(m) of the Code as
it applies so as to qualify grants of options to Named Executive Officers as
performance-based compensation, or (B) a committee designated by the Board to
make grants to Reporting Persons under the Plan, which committee shall be
constituted in such a manner as to permit grants under the Plan to comply with
Rule 16b-3 and to qualify grants of Options to Named Executives as performance-
based compensation under Section 162(m) of the Code and otherwise so as to
satisfy the Applicable Laws. Once appointed, such committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the committee and thereafter directly make grants to Reporting
Persons under the Plan, all to the extent permitted by Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who
- ---------
are not Reporting Persons, the Plan shall be administered by (A) the Board or
(B) a committee designated by the Board, which committee shall be constituted in
such a manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable corporate
and securities laws, of the Code and of any applicable Stock Exchange (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
-5-
<PAGE>
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(o) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or any
combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to construe and interpret the terms of the Plan and
Options granted under the Plan; and
(x) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
holders of Options.
5. ELIGIBILITY.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
--------------------
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees; provided, however, that Employees of an Affiliate shall not be
eligible to receive Incentive Stock Options. An Employee or Consultant who has
been granted an Option may, if he or she is otherwise eligible, be granted
additional Options.
(b) Type of Option. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for
-6-
<PAGE>
the first time by any Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares subject to an Incentive
Stock Option shall be determined as of the date of the grant of such Option.
(c) Employment Relationship. The Plan shall not confer upon any
-----------------------
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided
---------------------------------
in this Plan, the maximum number of Shares which may be subject to options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be [5,000,000 MINUS 1995 PLAN OUTSTANDING OPTIONS AS OF S-1 EFFECTIVE
DATE]. This Section 8 shall not apply prior to the date upon which the Company
becomes subject to the Exchange Act and following such date, shall not apply
until the (i) earliest of: (A) the first material modification of the Plan
(including any increase to the number of shares reserved for issuance under the
Plan in accordance with Section 3); (B) the issuance of all of the shares of
common stock reserved for issuance under the Plan; (C) the expiration of the
Plan; or (D) the first meeting of shareholders at which directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of any equity security
under Section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
-7-
<PAGE>
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the grant of
such Option, is a Named Executive Officer the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of the grant.
(B) granted to any person other than a Named Executive
Officer, the per Share exercise price shall be no less than 85% of the Fair
Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note (subject to the provisions of Section 153 of the
Delaware General Corporation Law), (4) other Shares that (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender or such other period as may be
required to avoid a charge to the Company's earnings [were not acquired,
directly or indirectly from the Company], and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) any combination of the foregoing methods of
payment, or (8) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. EXERCISE OF OPTION.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
-8-
<PAGE>
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
----------------------------------------------------
Section 10(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 10(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) Disability of Optionee
----------------------
(i) Notwithstanding Section 10(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
-9-
<PAGE>
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Extension of Exercise Period. The Administrator shall have full
----------------------------
power and authority to extend the period of time for which an option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 10(b), 10(c)
and 10(d) above or in the Option Agreement to such greater time as the Board
shall deem appropriate, provided, that in no event shall such option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(f) Termination for Misconduct. Notwithstanding Sections 10(b), (c),
--------------------------
(d) and (e) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant for Misconduct, all outstanding Options held
by the Optionee shall terminate immediately and cease to be outstanding. For
purposes of this Section 10(f), Misconduct shall mean the commission of any act
of fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Company or any Parent or Subsidiary, or any other intentional misconduct by such
person adversely affecting the business or affairs of the Company or any Parent
or Subsidiary in a material manner.
-10-
<PAGE>
(g) Rule 16b-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(h) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. WITHHOLDING TAXES. As a condition to the exercise of Options granted
-----------------
hereunder, the Optionee shall make such arrangements as the Administrator may
require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with the exercise, receipt or
vesting of such Option. The Company shall not be required to issue any Shares
under the Plan until such obligations are satisfied.
12. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than the applicable taxes on the ordinary income
recognized or (d) by electing to have the Company withhold from the Shares to be
issued upon exercise of the Option, if any, that number of Shares having a fair
market value equal to the amount required to be withheld. For this purpose, the
fair market value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
--------
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
-11-
<PAGE>
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
-------------------------------------------------------------------
TRANSACTIONS.
- ------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, the maximum number of shares of Common Stock for which Options may
be granted to any employee under Section 8 of the Plan, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination, recapitalization or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Control Transaction
-------------------
(i) The Company shall provide each Optionee with notice of the
pendency of any Control Transaction (i) at least thirty (30) days prior to the
expected date of consummation of a Control Transaction that has been approved or
recommended by the Board, or (ii) promptly after the Board becomes aware of the
pendency or occurrence of a proposed or completed Control Transaction that has
not been approved or recommended by the Board.
(ii) Each Optionee shall be entitled to exercise the vested
portion of the Option at any time prior to consummation of a Control
Transaction. If the terms of the Option prescribe a time-based vesting schedule,
the Optionee shall, conditioned upon consummation of the Control Transaction and
upon the Optionee remaining employed by the Company through the date of such
consummation, be entitled to accelerated vesting credit equal to either twelve
-12-
<PAGE>
months or twenty-four months of additional vesting beyond that otherwise
scheduled, based on whether he or she has been employed by the Company less than
two years, or two years or more, respectively, as of the date of such
consummation; provided, however, that this sentence shall not apply with respect
to any Option as to which the Administrator determines, in its sole discretion,
that the Board or the acquiring person or the surviving corporation, as the case
may be, has made equitable and appropriate provision for the assumption of or
the substitution of a new option for the Option on terms which are, as nearly as
practicable, the financial equivalent of the Option (taking into account the
consideration for which the Common Stock is to be exchanged in the Control
Transaction).
(iii) Any exercise may be made contingent upon consummation of a
Control Transaction if so elected by the Optionee in his or her notice of
exercise, and must be made contingent upon such consummation with respect to any
portion of an Option entitled to accelerated vesting under the second sentence
of Section 13(c)(ii) above.
(iv) Upon consummation of a Control Transaction that has been
approved or recommended by the Board, all unexercised Options shall expire,
except to the extent that the Administrator determines otherwise pursuant to the
second sentence of Section 13(c)(ii) above.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
14. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee only by the Optionee. The designation of a
beneficiary by an Optionee will not constitute transfer.
15. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) Authority to Amend or Terminate. The Board may at any time
-------------------------------
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore
-13-
<PAGE>
made, without his or her consent. In addition, to the extent necessary and
desirable to comply with Rule 16b-3 or with Sections 162(m) and 422 of the Code
(or any other applicable law or regulation, including the requirements of any
Stock Exchange), the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange and shall be further
subject to the approval of counsel to the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. AGREEMENTS. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
20. STOCKHOLDER APPROVAL.
--------------------
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted. Such stockholder approval shall be obtained in the degree
and manner required under applicable state and federal law and the rules of any
Stock Exchange upon which the Common Stock is listed. All Options issued under
the Plan shall become void in the event such approval is not obtained.
(b) In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the stockholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
-14-
<PAGE>
(c) If any required approval by the stockholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 20(b) hereof, then the Company shall, at or prior to
the first annual meeting of stockholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were then
being solicited) by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to stockholders.
-15-
<PAGE>
EXHIBIT 10.4
METAWAVE COMMUNICATIONS CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1998 Employee Stock Purchase
Plan of Metawave Communications Corporation ("the Company").
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Metawave Communications Corporation., a
Delaware corporation.
(e) "Compensation" shall mean total cash compensation received by an
Employee from the Company or a Designated Subsidiary. By way of illustration,
but not limitation, Compensation includes regular compensation such as salary,
wages, overtime, shift differentials, bonuses, commissions and incentive
compensation, but excludes relocation, expense reimbursements, tuition or other
reimbursements and income realized as a result of participation in any stock
option, stock purchase, or similar plan of the Company or any Designated
Subsidiary.
(f) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the account of
a participant pursuant to the Plan.
(h) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
<PAGE>
(i) "Employee" shall mean any person, including an Officer, who is an
Employee of the Company for tax purposes whose customary employment with the
Company is for at least twenty (20) hours per week and more than five (5) months
in a calendar year by the Company or one of its Designated Subsidiaries.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Purchase Date" shall mean the last day of each Purchase Period
of the Plan.
(l) "Offering Date" shall mean the first business day of each
Offering Period of the Plan.
(m) "Offering Period" shall mean a period of approximately twelve
(12) months commencing on the first day of the second payroll period in February
and August of each year (or at such other time or times as may be determined by
the Board of Directors), except for the first Offering Period as set forth in
Section 4(a).
(n) "Officer" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "Plan" shall mean this Employee Stock Purchase Plan.
(p) "Purchase Period" shall mean a period of approximately six (6)
months within an Offering Period, except for the first Purchase Period as set
forth in Section 4(b).
(q) "Purchase Price" shall mean the lower of (i) eighty-five percent
(85%) of the fair market value of a share of the Company's Common Stock on the
Offering Date, or (ii) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Purchase Date; provided however, that
in the event (i) the Company's shareholders approve an increase in the number of
shares available for issuance under the Plan, (ii) all or a portion of such
additional shares are to be issued with respect to one or more Offering Periods
that are underway at the time of shareholder approval ("New Shares") and (iii)
the fair market value of a share of Common Stock on the date of such approval
(the "Authorization Date FMV") is higher than the fair market value on the
Enrollment Date for any such Offering Period, the Purchase Price with respect to
New Shares shall be 85 % of the Authorization Date FMV or the fair market value
of a share of Common Stock on the Exercise Date, whichever is lower.
(r) "Purchase Right" shall mean an option granted to a participant
pursuant to this Plan to purchase such shares of the Company's Common Stock as
provided in section 7, which the participant may or may not exercise during the
Offering Period in which such option is outstanding. Such option arises from
the right of a participant to withdraw any accumulated payroll deductions of the
Employee not previously applied to the purchase of Common Stock under the Plan
and to terminate participation in the Plan at any time during an Offering
Period.
-2-
<PAGE>
(s) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an Purchase Right under the Plan (i) if, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding options to purchase stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of stock
of the Company or of any subsidiary of the Company, or (ii) if such Purchase
Right would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of fair market value of such stock (determined at the time such
Purchase Right is granted) for each calendar year in which such Purchase Right
is outstanding at any time.
4. Offering Periods and Purchase Periods.
(a) Offering Periods. The Plan shall be implemented by a series of
Offering Periods of approximately twelve (12) months duration, with new Offering
Periods commencing on or about the first day of the second payroll period in
February and August of each year (or at such other time or times as may be
determined by the Board of Directors). The first Offering Period shall commence
on the beginning of the effective date of the Registration Statement on Form S-1
for the initial public offering of the Company's Common Stock (the "IPO Date")
and continue until the last day of the first payroll period in July 1999. The
Plan shall continue until terminated in accordance with Section 19 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without shareholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Offering Period to be
affected. Eligible employees may not participate in more than one Offering
Period at a time.
(b) Purchase Periods. Each Offering Period shall consist of two (2)
consecutive purchase periods of approximately six (6) months duration. The last
day of each Purchase Period shall be the "Purchase Date" for such Purchase
Period. A Purchase Period commencing on the beginning of the second payroll
period in February shall end on the last day of the first payroll period in the
next August. A Purchase Period commencing on the first day of the second
payroll period in August shall end on the last day of the first payroll period
in the next February. The first Purchase Period shall commence on the IPO Date
and shall end on the last day of the first payroll period in February, 1999.
The Board of Directors of the Company shall have the power to change the
duration and/or frequency of Purchase Periods with respect to
-3-
<PAGE>
future purchases without shareholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Purchase
Period to be affected.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 15%) to be paid
as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. Method of Payment of Contributions.
(a) At the time a participant files his or her subscription
agreement, the participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than fifteen percent (15%) of such participant's Compensation on
each such payday. All payroll deductions made by a participant shall be credited
to his or her account under the Plan. A participant may not make any additional
payments into such account.
(b) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or, during the Offering Period may increase or
decrease the rate of his or her Contributions during such Offering Period by
completing and filing with the Company a new subscription agreement; provided,
however, that no participant may effect more than one increase or decrease
during a Purchase Period. The change in rate shall be effective as of the
beginning of the next calendar month following the date of filing of the new
subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during an Offering
Period. Payroll deductions shall recommence at the rate provided in such
participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. Grant of Purchase Right.
-4-
<PAGE>
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted a Purchase Right
to purchase on each Purchase Date a number of shares of the Company's Common
Stock determined by dividing such Employee's Contributions accumulated prior to
such Purchase Date and retained in the participant's account as of the Purchase
Date by the Purchase Price, provided, however, that the maximum number of shares
an Employee may purchase during each Purchase Period shall be 2,500 shares of
the Company's Common Stock, and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 13. The fair market
value of a share of the Company's Common Stock shall be determined as provided
in Section 7(b).
(b) The Purchase Right price per share of the shares offered in a
given Offering Period shall be the Purchase Price. The fair market value of the
Company's Common Stock on a given date shall be determined by the Board in its
discretion based on the closing price of the Common Stock for such date (or, in
the event that the Common Stock is not traded on such date, on the immediately
preceding trading date), as reported by the National Association of Securities
Dealers Automated Quotation (Nasdaq) National Market or, if such price is not
reported, the mean of the bid and asked prices per share of the Common Stock as
reported by Nasdaq or, in the event the Common Stock is listed on a stock
exchange, the fair market value per share shall be the closing price on such
exchange on such date (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
Street Journal. For purposes of the Offering Date under the first Offering
Period under the Plan, the fair market value of a share of the Common Stock of
the Company shall be the Price to Public as set forth in the final prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424 under the
Securities Act of 1933, as amended.
8. Exercise of Purchase Right. Unless a participant withdraws from the
Plan as provided in paragraph 10, his or her Purchase Right for the purchase of
shares will be exercised automatically on each Purchase Date of an Offering
Period, and the maximum number of full shares subject to the Purchase Right will
be purchased at the applicable Purchase Right price with the accumulated
Contributions in his or her account. The shares purchased upon exercise of a
Purchase Right hereunder shall be deemed to be transferred to the participant on
the Purchase Date. No fractional shares shall be purchased. Any payroll
deductions accumulated in a participant's account which are not sufficient to
purchase a full share shall be retained in the participant's account for the
subsequent Purchase Period or Offering Period, subject to earlier withdrawal by
the participant as provided in Section 10. Any other monies left over in a
participant's account after a Purchase Date shall be returned to the
Participant. During his or her lifetime, a participant's Purchase Right to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her Purchase Right or the deposit of such number of shares with the
broker selected by the Company for administration of Plan stock purchases, as
determined by the Company.
-5-
<PAGE>
10. Voluntary Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time at least
five (5) business days prior to each Purchase Date by giving written notice to
the Company in the form provided in the Company. All of the participant's
Contributions credited to his or her account will be paid to him or her promptly
after receipt of his or her notice of withdrawal and his or her Purchase Right
for the current period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the Offering
Period.
(b) Upon termination of the participant's Continuous Status as an
Employee (as defined in Section 2(f) hereof) prior to the Purchase Date of an
Offering Period for any reason, including retirement or death, the Contributions
credited to his or her account will be returned to him or her or, in the case of
his or her death, to the person or persons entitled thereto under Section 14,
and his or her Purchase Right will be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her Purchase Right
terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Automatic Withdrawal. If the fair market value of the shares on the
first Purchase Date of an Offering Period is less than the fair market value of
the shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period.
12. Interest. No interest shall accrue on the Contributions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 500,000 shares, plus an
annual increase on the first day of each of the Company's five fiscal years
beginning in 1999 and ending in 2003, equal to the lesser of (i) 375,000 shares;
(ii) two percent (2%) of the shares of Common Stock outstanding on the last day
of the immediately preceding fiscal year; or (iii) a lesser amount determined by
the Board, subject to adjustment upon changes in capitalization of the Company
as provided in Section 19. If the total number of shares which would otherwise
be subject to Purchase Rights granted pursuant to Section 7(a) on the Offering
Date of an Offering Period exceeds the number of shares then available under the
Plan (after deduction of all shares for
-6-
<PAGE>
which Purchase Rights have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for Purchase
Right grant in as uniform a manner as shall be practicable and as it shall
determine to be equitable. In such event, the Company shall give written notice
of such reduction of the number of shares subject to the Purchase Right to each
Employee affected thereby and shall similarly reduce the rate of Contributions,
if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her Purchase Right until such Purchase Right has been
exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
16. Transferability. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an Purchase Right or to
receive shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 10.
-7-
<PAGE>
17. Use of Funds. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following the Purchase Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate Transactions.
(a) Adjustment. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each Purchase
Right under the Plan which has not yet been exercised and the number of shares
of Common Stock which have been authorized for issuance under the Plan but have
not yet been placed under Purchase Right (collectively, the "Reserves"), as well
as the price per share of Common Stock covered by each Purchase Right under the
Plan which has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to a Purchase Right.
(b) Corporate Transactions. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each Purchase Right under the Plan shall be assumed or an
equivalent Purchase Right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Purchase Date (the "New Purchase Date"). If the Board shortens the
Offering Period then in progress in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board shall notify each participant in
writing, at least ten (10) days prior to the New Purchase Date, that the
Purchase Date for his or her Purchase Right has been changed to the New Purchase
Date and that his or her Purchase Right will be exercised automatically on the
New Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. For purposes of this paragraph, a
Purchase Right granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the Purchase Right confers the right to
purchase, for each share of Purchase Right stock subject to the Purchase
-8-
<PAGE>
Right immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the Purchase Right to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding Purchase Right, in the
event that the Company effects one or more reorganizations, recapitalizations,
rights offerings or other increases or reductions of shares of its outstanding
Common Stock, and in the event of the Company being consolidated with or merged
into any other corporation.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19, no such
termination may affect Purchase Rights previously granted, provided that an
Offering Period may be terminated by the Board on a Purchase Date. Except has
provided in Section 19, no amendment make any change in any Purchase Right
theretofore granted which adversely affects the rights of any participant. In
addition, to the extent necessary to comply with Rule 16b-3 under the Exchange
Act, or under Section 423 of the Code (or any successor rule or provision or any
applicable law or regulation), the Company shall obtain shareholder approval in
such a manner and to such a degree as so required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
-9-
<PAGE>
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to a Purchase Right unless the exercise of such Purchase Right and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of a Purchase Right, the Company may
require the person exercising such Purchase Right to represent and warrant at
the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon
the earlier to occur of its adoption by the Board of Directors or its approval
by the shareholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 20.
-10-
<PAGE>
METAWAVE, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
METAWAVE, INC. 1998 Employee Stock Purchase Plan (the "Plan") for the Offering
Period ______________, _____ to _______________, _____, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of _____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 20% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions to not
less than 1% and to not more than 20% of my Compensation on one occasion only
for each rate change during any Purchase Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least five (5) business days prior to the
beginning of such month. Further, I may change the rate of deductions for
future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE>
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "METAWAVE, INC. 1998 Employee Stock Purchase
Plan." I understand that my participation in the Plan is in all respects
subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _____________________________________
(First) (Middle) (Last)
_____________________ _____________________________________
(Relationship) (Address)
_____________________________________
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after
the date of any such disposition, and I will make adequate provision for
federal, state or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the Purchase Right, or (2) 15% of the fair market value of
-2-
<PAGE>
the shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE: _____________________________
SOCIAL SECURITY #: _____________________
DATE: __________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
________________________________________
(Signature)
________________________________________
(Print name)
-3-
<PAGE>
METAWAVE, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation in
the METAWAVE, INC. 1998 Employee Stock Purchase Plan (the "Plan") for the
Offering Period _________. This withdrawal covers all Contributions credited to
my account and is effective on the date designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my Purchase Right for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ ____________________________________________
Signature of Employee
____________________________________________
Social Security Number
<PAGE>
EXHIBIT 10.5
METAWAVE COMMUNICATIONS CORPORATION
1998 DIRECTORS' STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Metawave Communications Corporation, a
Delaware corporation.
(e) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including any officer or
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Option" shall mean a stock option granted pursuant to the Plan.
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(j) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(k) "Optionee" shall mean an Outside Director who receives an Option.
(l) "Outside Director" shall mean a Director who is not an Employee.
(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
<PAGE>
(n) "Plan" shall mean this 1998 Directors' Stock Option Plan.
(o) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(p) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(q) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 300,000 Shares (the "Pool") of Common Stock. The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) Procedure for Grants Effective upon Initial Public Offering. All
grants of Options hereunder after the effectiveness date of a registration
statement under the Securities Act of 1933 relating to the Company's initial
public offering of securities ("IPO Effective Date") shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following
provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director who has not previously been granted
an Option under this Plan shall be automatically granted an Option to purchase
Shares (the "First Option") as follows: (A) with respect to persons who are
Outside Directors on the IPO Effective Date, as determined in accordance with
Section 6 hereof, 25,000 shares on the IPO Effective Date, and (B) with respect
to any other person, 25,000 shares on the date on which such person first
becomes an Outside Director, whether through election by the stockholders of the
Company or appointment by the Board of Directors to fill a vacancy.
-2-
<PAGE>
(iii) After the First Option has been granted to an Outside
Director, such Outside Director shall thereafter be automatically granted an
Option to purchase 5,000 Shares (a "Subsequent Option") on the date of each
Annual Meeting of the Company's stockholders immediately following which such
Outside Director is serving on the Board, provided that, on such date, he or she
shall have served on the Board for at least six (6) months prior to the date of
such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (b) and (c)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares remaining
available for grant by the number of Outside Directors receiving an Option on
such date on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained stockholder
approval of the Plan in accordance with Section 17 hereof shall be conditioned
upon obtaining such stockholder approval of the Plan in accordance with Section
17 hereof.
(vi) The terms of each First Option granted hereunder shall be
as follows:
(A) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof;
(B) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
(C) the First Option shall become exercisable in
installments cumulatively as to 25% of the Shares subject to the First Option on
the first anniversary of the date of grant of the Option and one-forty-eighth
(1/48th) of the total number of shares subject to the Option shall vest ratably
at the end of each month thereafter upon Optionee's completion of each month of
Continuous Status as a Director.
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(A) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof;
(B) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option, determined
in accordance with Section 8 hereof; and
-3-
<PAGE>
(C) the Subsequent Option shall become exercisable in
installments cumulatively as to 25% of the Shares subject to the Subsequent
Option on the first anniversary of the date of grant of the Option and
one-forty-eighth (1/48th) of the total number of shares subject to the Option
shall vest ratably at the end of each month thereafter upon Optionee's
completion of each month of Continuous Status as a Director.
(c) Powers of the Board. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or his or
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. After
the IPO Effective Date, all Options shall be automatically granted in accordance
with the terms set forth in Section 4(b) hereof. An Outside Director who has
been granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
-4-
<PAGE>
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years from
the date of grant thereof.
8. EXERCISE PRICE AND CONSIDERATION
(a) Exercise Price. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
the Board; provided, however, that where there is a public market for the Common
Stock, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-counter market on the date of grant,
as reported in The Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers Automated Quotation
("Nasdaq") System) or, in the event the Common Stock is traded on the Nasdaq
National Market or listed on a stock exchange, the fair market value per Share
shall be the closing price on such system or exchange on the date of grant of
the Option (or, in the event that the Common Stock is not traded on such date,
on the immediately preceding trading date), as reported in The Wall Street
Journal. With respect to any Options granted hereunder concurrently with the
initial effectiveness of the Plan, the fair market value shall be the Price to
Public as set forth in the final prospectus relating to such initial public
offering.
(c) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth by (i) the
Administrator with respect to Options granted prior to the IPO Effective Date
and (ii) by 4(b) hereof with respect to Options granted after the IPO Effective
Date; provided, however, that after the IPO Effective Date, no Options shall be
exercisable prior to stockholder approval of the Plan in accordance with Section
17 hereof.
An Option may not be exercised for a fraction of a Share.
-5-
<PAGE>
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as a Director. If an Outside Director
ceases to serve as a Director, he or she may, but only within ninety (90) days
after the date he or she ceases to be a Director of the Company, exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Option
be exercised after its term set forth in Section 7 has expired. To the extent
that such Outside Director was not entitled to exercise an Option at the date of
such termination, or does not exercise such Option (which he or she was entitled
to exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within six (6) months
(or such other period of time not exceeding twelve (12) months as is determined
by the Board) from the date of such termination, exercise his or her Option to
the extent he or she was entitled to exercise it at the date of such
termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent that
he or she was not entitled to exercise the Option at the date of termination, or
if he or she does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as a Director since the date of grant of
the Option, or within thirty (30) days following termination of Optionee's
Continuous Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise Shares that are not subject to repurchase that had accrued at
the date of death or, if earlier, the date of termination of Optionee's
Continuous Status as a Director. To the extent that Optionee was not entitled
to exercise the Option at the date of death or
-6-
<PAGE>
termination, as the case may be, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Control Transaction.
(i) The Company shall provide each Optionee with notice of the
pendency of any Control Transaction (i) at least thirty (30) days prior to the
expected date of consummation of a Control Transaction that has been approved or
recommended by the Board, or (ii) promptly after the Board becomes aware of the
pendency or occurrence of a proposed or completed Control Transaction that has
not been approved or recommended by the Board.
(ii) Each Optionee shall be entitled to exercise the vested
portion of the Option at any time prior to consummation of a Control
Transaction. If the terms of the Option prescribe a time-based vesting schedule,
the Optionee shall, conditioned upon consummation of
-7-
<PAGE>
the Control Transaction and upon the Optionee continuing to serve as a Director
through the date of such consummation, be entitled to accelerated vesting credit
equal to either twelve months or twenty-four months of additional vesting beyond
that otherwise scheduled, based on whether he or she has been in Continuous
Status as a Director less than two years, or two years or more, respectively, as
of the date of such consummation; provided, however, that this sentence shall
not apply with respect to any Option as to which the Administrator determines,
in its sole discretion, that the Board or the acquiring person or the surviving
corporation, as the case may be, has made equitable and appropriate provision
for the assumption of or the substitution of a new option for the Option on
terms which are, as nearly as practicable, the financial equivalent of the
Option (taking into account the consideration for which the Common Stock is to
be exchanged in the Control Transaction).
(iii) Any exercise may be made contingent upon consummation of a
Control Transaction if so elected by the Optionee in his or her notice of
exercise, and must be made contingent upon such consummation with respect to any
portion of an Option entitled to accelerated vesting under the second sentence
of Section 11(c)(ii) above.
(iv) Upon consummation of a Control Transaction that has been
approved or recommended by the Board, all unexercised Options shall expire,
except to the extent that the Administrator determines otherwise pursuant to the
second sentence of Section 11(c)(ii) above.
(d) Certain Distributions. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. TIME OF GRANTING OPTIONS. With respect to Options granted after the
IPO Effective Date, the date of grant of an Option shall, for all purposes, be
the date determined in accordance with Section 4(b) hereof. Notice of the
determination shall be given to each Outside Director to whom an Option is so
granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
Notwithstanding the foregoing, the provisions set forth in Section 4 of this
Plan (and any other Sections of this Plan that affect the formula award terms
required to be specified in this Plan by Rule 16b-3) shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
-8-
<PAGE>
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
If such stockholder approval is obtained at a duly held stockholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present or represented and entitled to vote
thereon.
-9-
<PAGE>
EXHIBIT 10.6
METAWAVE COMMUNICATIONS CORPORATION
THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
AUGUST 6, 1997
<PAGE>
THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is made as of the 6th day of August, 1997, by and among Metawave
Communications Corporation, a Delaware corporation (the "Company"), and the
investors and the founders listed on Schedule A hereto (the "Investors" and the
"Founders," respectively).
RECITALS
--------
A. The Company and certain of the Investors have entered into the Series D
Preferred Stock Purchase Agreement dated August 6, 1997 (the "Series D
Agreement") pursuant to which the Company shall sell to such Investors (the
"Series D Investors") up to 2,500,000 shares of its Series D Preferred Stock.
B. The Company, the Founders and certain of the Investors who purchased
the Company's Series A Preferred Stock (the "Series A Investors") pursuant to
the Series A Preferred Stock Purchase Agreement dated as of July 7, 1995,
previously entered into that certain Investors' Rights Agreement of even date
therewith (the "First Investors' Rights Agreement"), which granted to the Series
A Investors certain rights with respect to the Series A Preferred Stock.
C. The Company, the Founders, the Series A Investors, and certain of the
Investors who purchased the Company's Series B Preferred Stock (the "Series B
Investors") pursuant to the Series B Preferred Stock Purchase Agreement dated as
of May 30, 1996, subsequently entered into that certain Amended and Restated
Investors' Rights Agreement dated as of even date therewith (the "Restated
Investors' Rights Agreement"), which amended, restated and superseded the First
Investors' Rights Agreement, and which granted to the Series A Investors and the
Series B Investors certain rights with respect to the Series A Preferred Stock
and the Series B Preferred Stock, respectively.
D. The Company, the Founders, the Series A Investors, the Series B
Investors, and certain of the Investors who purchased the Company's Series C
Preferred Stock (the "Series C Investors") pursuant to the Series C Preferred
Stock Purchase Agreement dated as of October 30, 1996, subsequently entered into
that certain Second Amended and Restated Investors' Rights Agreement dated as of
even date therewith (the "Second Restated Investors' Rights Agreement"), which
amended, restated and superseded the Restated Investors' Rights Agreement, and
which granted to the Series A Investors, the Series B Investors and the Series C
Investors certain rights with respect to the Series A Preferred Stock, Series B
Preferred Stock and the Series C Preferred Stock, respectively.
E. The closing of the Series D Agreement, pursuant to which the Series D
Investors will receive Series D Preferred Stock, is subject to certain
conditions, including the condition that the Company, the Founders, the Series A
Investors, the Series B Investors and the Series C Investors grant to the Series
D Investors certain rights as set forth herein.
-1-
<PAGE>
F. The Company, the Founders and the Investors are willing to enter into
this Agreement for the purpose of setting forth certain rights to which the
Investors are entitled.
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, the Founders, the Series A Investors, the Series B
Investors, the Series C Investors and the Series D Investors hereby agree as
follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means Common Stock of the
Company not previously sold to the public and (i) issuable or issued upon
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (whether currently issued or
hereafter acquired), (ii) issued as (or issuable upon the conversion or exercise
of any warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the shares
referenced in (i) above, and (iii) for purposes of Section 1.3 (and other
portions of this Section 1, to the extent they relate to rights or registration
under Section 1.3) the term "Registrable Securities" shall also include shares
of Common Stock of the Company (other than shares described in clauses (i) and
(ii) of this subsection 1.1(f)) eligible for registration pursuant to subsection
1.3(b). Notwithstanding the foregoing, "Registrable Securities" shall exclude
any Registrable Securities to the extent (A) sold by a person in a transaction
in which his rights under this Section 1 are not assigned, or (B) the
registration rights with respect to such Registrable Securities have been
terminated pursuant to Section 1.16.
-2-
<PAGE>
(g) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding that
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities that are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange Commission.
(i) The term "Affiliate" shall refer to any person or entity
controlling, controlled by or under common control with such Investors.
1.2 Request for Registration
(a) If the Company shall receive at any time after the earlier of (i)
June 30, 2000, or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction), a written request, from (i) the Holders of
a majority of the Registrable Securities then outstanding in the case of the
first such written request and (ii) the Holders of at least forty percent (40%)
of the Registrable Securities then outstanding in the case of the second such
request, that the Company file a registration statement under the Act covering
the registration of Registrable Securities then outstanding having an aggregate
offering price, net of underwriting discounts and commissions, of at least
$7,500,000, then the Company shall:
(A) within ten (10) days of the receipt thereof, give written notice
of such request to all Holders; and
(B) effect as soon as practicable, and in any event within sixty (60)
days of the receipt of such request, the registration under the Act of all
Registrable Securities that the Holders request to be registered, subject to the
limitations of subsection 1.2(b), within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 3.5.
(1) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the majority in interest of the
Initiating Holders. In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in
-3-
<PAGE>
subsection 1.4(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting. Notwithstanding
any other provision of this Section 1.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holders shall so advise
all Holders of Registrable Securities that would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders (electing to
include shares in the offering) thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.
(2) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve (12) month
period.
(3) The Company is obligated to effect only two (2) such registrations
pursuant to this Section 1.2.
1.3 Company Registration
(a) If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan or a registration on any form that does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the provisions of Section 1.8, include in the
registration statement all of the Registrable Securities that each such Holder
has requested to be registered.
(b) Each Founder shall be deemed a Holder for purposes of Section
1.3(a) and shall be entitled to include Common Stock held by such Founder in any
registration described in Section 1.3(a) so long as such Founder (A) continues
to serve as an officer or director of the Company on the date the registration
statement is filed by the Company
-4-
<PAGE>
and (B) agrees to be bound by all other provisions of this Agreement and to
participate in any such registration on the same basis as each other Holder in
accordance with all applicable provisions of this Agreement.
1.4 Obligations of the Company. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred twenty (120)
days or until the Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or "Blue Sky"
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
-5-
<PAGE>
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or nationally recognized
quotation system on which similar securities issued by the Company are then
listed.
1.5 Furnish Information
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(ii), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel (not to exceed $10,000) for the
selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for this purpose; the Company
will pay the reasonable fees
-6-
<PAGE>
and disbursements of one counsel (not to exceed $10,000), for the selling
Holders selected by them but excluding underwriting discounts and commissions
relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as the underwriters determine in their sole discretion
will not adversely affect their ability to market the offering. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in
their sole discretion will not adversely affect their ability to market the
offering (the securities so included to be apportioned pro rata among the
selling stockholders according to the total amount of securities owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall (a) the amount of securities
of the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling stockholders may be reduced to a lesser percentage if the
underwriters make the determination described above and no other stockholder's
securities are included or (b) notwithstanding clause (a) above, any shares
being sold by a stockholder exercising a demand registration right similar to
that granted in Section 1.2 be excluded from such offering. For purposes of the
preceding parenthetical concerning apportionment, for any selling stockholder
that is a holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and stockholders of such holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder", and any pro-rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder", as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may
-7-
<PAGE>
become subject under the Act, or the 1934 Act or other federal or state
securities law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Act, or the
1934 Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or other federal or state securities law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 1.10(b) exceed the net
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice
-8-
<PAGE>
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties that may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the effective date of
the first registration statement filed by the Company for the offering of its
securities to the general public;
-9-
<PAGE>
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.12: (i)
if Form S-3 is not available for such offering by the Holders; (ii) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$1,000,000; (iii) if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than 90
days after
-10-
<PAGE>
receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period; (iv) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected (A) one (1)
registration on Form S-3 for the requesting Holder or Holders or (B) two (2)
registrations on Form S-3 pursuant to this Section 1.12; (v) if the Company has
already effected four (4) registrations on Form S-3 pursuant to this Section
1.12; or (vi) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel (not to exceed $10,000) for the
selling Holder or Holders and counsel for the Company, but excluding any
underwriters' discounts or commissions associated with Registrable Securities,
shall be borne by the Company. Registrations effected pursuant to this Section
1.12 shall not be counted as demands for registration or registrations effected
pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who acquires all of the Registrable Securities
previously held by such Holder, or who, after such assignment or transfer, holds
at least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single attorney-
in-fact for the purpose of exercising any rights, receiving notices or taking
any action under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the Registrable Securities then
outstanding, enter into any agreement with any holder or
-11-
<PAGE>
prospective holder of any securities of the Company that would allow such holder
or prospective holder (a) to include such securities in any registration filed
under Section 1.2 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders that is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of either of the dates set forth in
subsection 1.2(a) or within one hundred twenty (120) days of the effective date
of any registration effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
during the period of duration (not to exceed one hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement filed
under the Act for the initial public offering of the Company's Common Stock, it
shall not, to the extent requested by the Company and such underwriter, directly
or indirectly, sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that the
restrictions imposed by this subsection 1.15 shall not apply to Common Stock
purchased by an Investor in the initial public offering of the Company's Common
Stock or acquired by an Investor by purchases in the public market following
such initial public offering; and provided further, that all officers and
directors of the Company and all other persons with registration rights (whether
or not pursuant to this Agreement) enter into similar agreements. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the securities of the Company (except Common Stock
included in such registration) held at any time during such period by each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights
No Holder shall be entitled to exercise any right provided for in this
Section 1 after the earlier of (a) three (3) years following the consummation of
the sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the initial firm commitment underwritten
offering of its securities to the general public, the public offering price of
which was not less than $9.25 per share (adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations), and $15,000,000 in the aggregate,
or (b) as to any Holder, such time at which all Registrable Securities held by
such Holder can be sold in any three month period without registration in
compliance with Rule 144 of the Act.
2. Covenants
2.1 Delivery of Financial Statements. The Company shall deliver
to each Investor:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal
-12-
<PAGE>
year of the Company, an income statement for such fiscal year, a balance sheet
of the Company and statement of stockholder's equity as of the end of such year,
and a statement of cash flows for such year, such year-end financial reports to
be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;
(b) so long as such Investor holds an aggregate of at least 400,000
shares of Series A, Series B, Series C and/or Series D Preferred Stock (or
Common Stock issued upon conversion thereof and as adjusted for subsequent stock
splits, recombinations or reclassifications) as soon as practicable, but in any
event within thirty (30) days after the end of each of the first three (3)
quarters of each fiscal year of the Company, an unaudited income statement,
statement of cash flows for such fiscal quarter and an unaudited balance sheet
as of the end of such fiscal quarter;
(c) so long as such Investor holds an aggregate of at least 400,000
shares of Series A, Series B, Series C and/or Series D Preferred Stock (or
Common Stock issued upon conversion thereof and as adjusted for subsequent stock
splits, recombinations or reclassifications) within thirty (30) days of the end
of each month, an unaudited income statement, statement of cash flows and
balance sheet for and as of the end of such month, in reasonable detail;
(d) so long as such Investor holds an aggregate of at least 400,000
shares of Series A, Series B, Series C and/or Series D Preferred Stock (or
Common Stock issued upon conversion thereof and as adjusted for subsequent stock
splits, recombinations or reclassifications) as soon as practicable, but in any
event thirty (30) days prior to the end of each fiscal year, a budget and
business plan for the next fiscal year, prepared on a monthly basis, including
balance sheets and income statements for such months and, as soon as prepared,
any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in subsections
(b) and (c) of this Section 2.1, an instrument executed by the Chief Financial
Officer or Chief Executive Officer of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information.
-13-
<PAGE>
2.2 Inspection. The Company shall permit each Investor, at such
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information that it
reasonably considers to be a trade secret or similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
covenants set forth in Section 2.1 and Section 2.2 shall terminate as to
Investors and be of no further force or effect (a) when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated, the public offering price of which was not
less than $9.25 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalizations), and $15,000,000 in the aggregate or (b) when the
Company first becomes subject to the periodic reporting requirements of Sections
12(g) or 15(d) of the 1934 Act, whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
specified in this Section 2.4, the Company hereby grants to each Investor a
right of first offer to purchase its pro rata share (in whole or in part) with
respect to future sales by the Company of its Shares (as hereinafter defined).
An Investor shall be entitled to assign or apportion the right of first offer
hereby granted it among itself and its partners and affiliates (including in the
case of a venture capital fund among other venture capital funds affiliated with
such fund) in such proportions as it deems appropriate. For purposes of this
Section 2.4, an Investor's pro rata share of Shares shall mean that number of
Shares that equals the proportion that the number of shares of Common Stock
issued and held by each Investor (assuming full conversion, exercise and/or
exchange of all convertible, exercisable and exchangeable securities) bears to
the total number of shares of Common Stock issued and outstanding immediately
prior to the issuance of Shares (assuming full conversion, exercise and/or
exchange of all convertible, exercisable and exchangeable securities).
Notwithstanding anything herein to the contrary, if the aggregate number of
Shares which the Investors elect to purchase pursuant to this Section 2.4
exceeds sixty-six and two-thirds percent (66 2/3%) of the Shares to be offered
by the Company, the number of Shares to be purchased by each Investor shall be
reduced proportionately so that the aggregate number of Shares to be purchased
by the Investors is no more than sixty-six and two-thirds percent (66 2/3%) of
the Shares to be issued.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice") to
the Investors stating (i) its bona fide intention to offer such Shares, (ii) the
number of such Shares to be offered, and (iii) the price and terms, if any, upon
which it proposes to offer such Shares.
-14-
<PAGE>
(b) By written notification received by the Company within twenty (20)
calendar days after receipt of the Notice, each Investor may elect to purchase
or obtain, at the price and on the terms specified in the Notice, up to its pro
rata share of such Shares.
(c) If all Shares that Investors are entitled to obtain pursuant to
subsection 2.4(b) are not elected to be obtained as provided in subsection
2.4(b) hereof, the Company may, during the 30-day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within 30 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Investors in accordance herewith.
(d) The right of first offer in this Section 2.4 shall not be
applicable (i) to the issuance or sale of no more than 3,950,000 shares of
Common Stock (or options therefor, including the number of options outstanding
as of the date of this Agreement) to employees, consultants or directors for the
primary purpose of soliciting or retaining their services, (ii) to or after
consummation of a bona fide, firmly underwritten public offering of shares of
Common Stock, registered under the Act pursuant to a registration statement on
Form S-1, at an offering price of at least $9.25 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and $15,000,000 in the aggregate, (iii) the issuance of securities pursuant to
the conversion or exercise of convertible or exercisable securities, (iv) the
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise, (v) the issuance of securities in connection
with a transaction the primary purpose of which is to acquire technology, (vi)
the issuance of securities to vendors, suppliers, equipment lessors or bank
lenders where such issuance is not principally for the purpose of raising
additional equity capital; or (vii) the issuance of securities to corporate
partners or in connection with other strategic alliances approved by the Board
of Directors of the Company.
2.5 Board of Directors
(a) With respect to those three (3) directors that the Company's Third
Amended and Restated Certificate of Incorporation provides are to be elected by
holders of Series A, Series B, Series C and Series D Preferred Stock, the
Investors hereby agree to vote all of their shares of Series A, Series B, Series
C and Series D Preferred Stock in favor of the election of one designee of each
of Venrock Associates ("Venrock"), Sevin Rosen Fund IV, L.P. ("Sevin Rosen"),
and Oak Investment Partners VI, L.P. ("Oak"). Notwithstanding the foregoing if
pursuant to Article IV, Section (B), Paragraph 5(b) of the Company's Third
Amended and Restated Certificate of Incorporation (which Paragraph is entitled
"Voting for the Election of Directors"), as such provision may be amended from
time to time, the number of directors to be elected by the holders of Series A,
Series B, Series C and Series D Preferred Stock shall be decreased from three
(3) directors to either two (2) directors or one (1) director, then among
-15-
<PAGE>
Venrock, Sevin Rosen and Oak, those two (2) stockholders (in the case where the
Series A, Series B, Series C and Series D Preferred Stock elects two (2)
directors) or the one (1) stockholder (in the case where the Series A, Series B,
Series C and Series D Preferred Stock elects one (1) director) holding the most
shares of Series A, Series B, Series C and Series D Preferred Stock shall be
entitled to designate the director(s) pursuant to this subsection (a).
(b) So long as (i) Integral Capital Partners III, L.P. ("Integral") or
(ii) Bowman Capital or its related entities ("Bowman") holds an aggregate of at
least 243,507 shares of Series C Preferred Stock and/or Series D Preferred Stock
(or Common Stock issued upon conversion thereof and as adjusted for subsequent
stock splits, recombinations or reclassifications), the Company shall invite one
(1) designated representative of each of Integral and Bowman to attend all
meetings of its Board of Directors in a nonvoting advisory capacity, and so long
as any Investor holds an aggregate of at least 324,675 shares of Series C
Preferred Stock and/or Series D Preferred Stock (or Common Stock issued upon
conversion thereof and as adjusted for subsequent stock splits, recombinations
or reclassifications), the Company shall invite one (1) designated
representative of such Investor to attend all meetings of its Board of Directors
in a nonvoting observer capacity. The Company shall give such designated
representatives copies of all notices, minutes, consents, and other materials
that it provides to its directors at the same time as such materials are
provided to the directors; provided, however, that such representatives shall
agree to hold in confidence and trust and to act in a fiduciary manner with
respect to all information so provided; and, provided further, that the Company
reserves the right to withhold any information and to exclude such
representatives from any meeting or portion thereof if the Company believes,
upon advise of counsel, that such exclusion is reasonably necessary to preserve
the attorney-client privilege, to protect highly confidential information, or
for other similar reasons. The covenants and rights set forth in this Section
2.6 shall terminate and be of no further force or effect upon the closing of the
Company's initial firm commitment underwritten offering of its securities to the
general public, the public offering price of which was not less than $9.25 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations), and $15,000,000 in the aggregate.
3. Miscellaneous
3.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
-16-
<PAGE>
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by facsimile or overnight courier or upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
3.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least sixty-five percent (65%) of the Registrable Securities then
outstanding; provided, however, that in the event such amendment or waiver (a)
adversely affects the rights and/or obligations of an individual Holder in a
different manner than the other Holders, such amendment or waiver shall also
require the written consent of such individual Holder or (b) adversely affects
the rights and/or obligations of the Founders under Section 1 of this Agreement
in a different manner than the other Holders, such amendment or waiver shall
also require the written consent of the Holders of at least a majority of the
Common Stock (assuming the conversion of all outstanding shares of Preferred
Stock) then held by the Founders; or (c) affects the rights and/or obligations
of Integral and/or Bowman under Section 2.5(b) of this Agreement, such amendment
or waiver shall also require the written consent of Integral and/or Bowman, as
the case may be.
3.8 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement, and the balance of the Agreement shall be interpreted as if
such provision were so excluded, and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities of
the Company held or acquired by affiliated stockholders shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement. For purposes of the foregoing, the shares held by any
stockholder that (a) is a partnership or corporation shall be
-17-
<PAGE>
deemed to include shares held by the partners, retired partners and stockholders
of such holder or members of the "immediate family" (as defined below) of any
such partners, retired partners and stockholders, and any custodian or trustee
for the benefit of any of the foregoing persons and (b) is an individual shall
be deemed to include shares held by any members of the stockholder's immediate
family ("immediate family" shall include any spouse, father, mother, brother,
sister, lineal descendant of spouse or lineal descendant) or to any custodian or
trustee for the benefit of any of the foregoing persons.
3.10 Amendment and Restatement. The Company, the Founders and the
Investors consent to the execution of this Agreement, and to any and all other
documents and agreements contemplated hereby and waive any and all rights they
may have to object hereto or thereto and agree that this Agreement supersedes in
all respects all prior agreements relating to the rights set forth herein,
including the Second Restated Investors' Rights Agreement.
[SIGNATURE PAGES FOLLOW]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
-------
METAWAVE COMMUNICATIONS CORPORATION
By:
----------------------------------------------
Vito Palermo
Chief Financial Officer and Secretary
Address: 8700 148th Avenue N.E.
Redmond, WA 98052
INVESTORS:
---------
SPINNAKER TECHNOLOGY FUND, L.P.
By: Bowman Capital Management, L.L.C.
Its: General Partner
By:
------------------------------------------
Its:
-------------------------------------
Address: 1875 South Grant Road, Suite 1600
San Mateo, CA 94402
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
SPINNAKER TECHNOLOGY OFFSHORE FUND LIMITED
By: Bowman Capital Management, L.L.C.
Its: Investment Advisor and Attorney-in-Fact
By:
------------------------------------------
Its:
-------------------------------------
Address: 1875 South Grant Road, Suite 1600
San Mateo, CA 94402
SPINNAKER FOUNDERS FUND, L.P.
By: Bowman Capital Management, L.L.C.
Its: General Partner
By:
------------------------------------------
Its:
-------------------------------------
Address: 1875 South Grant Road, Suite 1600
San Mateo, CA 94402
SPINNAKER CLIPPER FUND, L.P.
By: Bowman Capital Management, L.L.C.
Its: General Partner
By:
------------------------------------------
Its:
-------------------------------------
Address: 1875 South Grant Road, Suite 1600
San Mateo, CA 94402
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
VENROCK ASSOCIATES
By:
----------------------------------------------
Its:
-----------------------------------------
Address: 30 Rockefeller Plaza
Room 5508
New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By:
----------------------------------------------
Its:
-----------------------------------------
Address: 30 Rockefeller Plaza
Room 5508
New York, NY 10112
OAK INVESTMENT PARTNERS VI, L.P.
By:
----------------------------------------------
Its:
-----------------------------------------
Address: 525 University Avenue, Suite 1300
Palo Alto, CA 94301
OAK VI AFFILIATES FUND, L.P.
By:
----------------------------------------------
Its:
-----------------------------------------
Address: 525 University Avenue, Suite 1300
Palo Alto, CA 94301
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
SEVIN ROSEN FUND IV L.P.
By: SRB Associates IV L.P.
Its: General Partner
By:
------------------------------------------
Its: General Partner
Address: 13455 Noel Road., Suite 1670
Dallas, TX 75240
Attn: John V. Jaggers
SEVIN ROSEN FUND V L.P.
By: SRB Associates V L.P.
Its: General Partner
By:
------------------------------------------
Its: General Partner
Address: 13455 Noel Road., Suite 1670
Dallas, TX 75240
Attn: John V. Jaggers
SEVIN ROSEN BAYLESS MANAGEMENT CO.
By:
----------------------------------------------
Its: Vice President
Address: 13455 Noel Road., Suite 1670
Dallas, TX 75240
Attn: John V. Jaggers
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
SEVIN ROSEN V AFFILIATES FUND L.P.
By: SRB Associates V L.P.
Its: General Partner
By:
------------------------------------------
Its: General Partner
Address: 13455 Noel Road., Suite 1670
Dallas, TX 75240
Attn: John V. Jaggers
--------------------------------------------------
Jennifer G. Roberts
Address: c/o The Sevin Rosen Funds
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
--------------------------------------------------
Stephen L. Domenik
Address: c/o The Sevin Rosen Funds
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
--------------------------------------------------
David F. Bellet
Address: c/o Crown Advisors, Ltd.
The Lincoln Building
60 East 42nd Street, Suite 3405
New York, NY 10165
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
INTEGRAL CAPITAL PARTNERS III, L.P.
By: Integral Capital Management III, L.P.
Its: General Partner
By:
------------------------------------------
Its: General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
INTEGRAL CAPITAL PARTNERS INTERNATIONAL III, L.P.
By: Integral Capital Management III, L.P.
Its: Investment General Partner
By:
------------------------------------------
Its: General Partner
Address: 2750 Sand Hill Road
Menlo Park, CA 94025
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
WORLDVIEW TECHNOLOGY PARTNERS I, L.P.
By:
----------------------------------------------
James Wei
Managing Director
-------------------------------------------------
Worldview Capital I, L.P.
Its: General Partner
Address: 435 Tasso Street, Suite 120
Palo Alto, CA 94301
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P.
By:
----------------------------------------------
James Wei
Managing Director
-------------------------------------------------
Worldview Capital I, L.P.
Its: General Partner
Address: 435 Tasso Street, Suite 120
Palo Alto, CA 94301
Address: 435 Tasso Street, Suite 120
Palo Alto, CA 94301
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
STANFORD UNIVERSITY
By:
----------------------------------------------
Its:
-----------------------------------------
Address: 2770 San Hill Rd.
Menlo Park, CA 94025
<PAGE>
WA&H INVESTMENTS, L.L.C.
By: Wessels, Arnold & Henderson Group, L.L.C.
Its: Managing Member
By:
------------------------------------------
Kenneth J. Wessels
CEO/Managing Director
Address: 901 Marquette Avenue
Minneapolis, MN 55402-3280
MONTGOMERY ASSOCIATES, 1992 L.P.
By:
----------------------------------------------
Its:
-----------------------------------------
Address: 600 Montgomery Street
San Francisco, CA 94111
FOUNDERS:
---------
--------------------------------------------------
Thomas S. Huseby
Address: c/o Metawave Communications Corporation
8700 148th Avenue N.E.
Redmond, WA 98052
[SIGNATURE PAGE TO SERIES D INVESTOR RIGHTS AGREEMENT]
<PAGE>
--------------------------------------------------
Douglas O. Reudink
Address: c/o Metawave Communications Corporation
8700 148th Avenue N.E.
Redmond, WA 98052
<PAGE>
Schedule A
SCHEDULE OF INVESTORS
Investors
- ---------
Spinnaker Technology Fund, L.P.
Spinnaker Technology Offshore Fund Limited
Spinnaker Founders Fund, L.P.
Spinnaker Clipper Fund, L.P.
1875 South Grant Road, Suite 1600
San Mateo, CA 94402
Venrock Associates
Venrock Associates II, L.P.
30 Rockefeller Plaza, Room 5508
New York, NY 10112
Oak Investment Partners VI, L.P.
Oak VI Investment Affiliates Fund, L.P.
525 University Avenue, Suite 1300
Palo Alto, CA 94301
Sevin Rosen Fund IV L.P.
Sevin Rosen Fund V L.P.
Sevin Rosen Bayless Management Co.
Sevin Rosen V Affiliates Fund L.P.
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
Jennifer G. Roberts
c/o The Sevin Rosen Funds
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
Stephen L. Domenik
c/o The Sevin Rosen Funds
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
<PAGE>
David F. Bellet
c/o Crown Advisors Ltd.
The Lincoln Building
60 East 42nd Street, Suite 3405
New York, NY 10165
Integral Capital Partners III, L.P.
Integral Capital Partners International III, L.P.
Roger McNamee
2750 Sand Hill Road
Menlo Park, CA 94025
Worldview Technology Partners I, L.P.
Worldview Technology International I, L.P.
Worldview Strategic Partners I, L.P.
James Wei
435 Tasso Street, Suite 120
Palo Alto, CA 94301
Stanford University
Carol Gilmer
2770 Sand Hill Rd.
Menlo Park, CA 94025
David F. Bellett - Trustee
Profit Sharing Plan DLJSC - Cust.
FBO David F. Bellett
Nicole Primack
Donaldson, Lufkin & Jenrette
Investment Services Group - 13th Floor
277 Park Avenue
New York, NY 10172
DMG Technology Ventures, L.L.C.
1550 El Camino Real, Suite 100
Menlo Park, CA 94025
Itochu Corporation
S-1, Kita-Aoyama 2-chome
Minato-ku Tokyo 107-77
Japan
<PAGE>
NVCC No. 1 Investment Enterprise Partnership
7-1-16, Akaska
Minato-ku Tokyo 107
Japan
IBJ Strategic Investments USA, Inc.
1251 Avenue of the Americas
New York, NY 10020
Cowen Investment Partners XXVIII
Two International Place
Boston, MA 02110
Bayview Investors, Ltd.
555 California Street
San Francisco, CA 94104
Wessels, Arnold & Henderson Investment, L.L.C.
601 Second Avenue South, Suite 3100
Minneapolis, MN 55402-4314
Founders
- --------
Thomas S. Huseby
c/o Metawave Communications Corporation
8700 148th Avenue N.E.
Redmond, WA 98052
Doug Reudink
c/o Metawave Communications Corporation
8700 148th Avenue N.E.
Redmond, WA 98052
<PAGE>
EXHIBIT 10.8
* * * * * * * * * * * * * * * * * * * *
---------------------------------------
Lease
-----
WILLOW CREEK CORPORATE CENTER
-----------------------------
* * * * * * * * * * * * * * * * * * * *
---------------------------------------
Between
-------
METAWAVE COMMUNICATIONS CORPORATION, INC.
-----------------------------------------
(Tenant)
--------
and
---
CARR AMERICA REALTY CORPORATION
-------------------------------
(Landlord)
----------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. LEASE AGREEMENT 2
2. RENT 2
A. Types of Rent 2
(1) Base Rent 3
(2) Operating Cost Share Rent 3
(3) Tax Share Rent 3
(4) Additional Rent 3
(5) Rent 3
(6) Skybridge 3
B. Payment of Operating Cost Share Rent and Tax Share Rent 4
(1) Payment of Estimated Operating Cost Share Rent and
Tax Share Rent 4
(2) Correction of Operating Cost Share Rent 4
(3) Correction of Tax Share Rent 4
C. Definitions 4
(1) Included Operating Costs 4
(2) Excluded Operating Costs 5
(3) Taxes 6
(4) Lease Year 7
(5) Fiscal Year 7
D. Computation of Base Rent and Rent Adjustments 7
(1) Prorations 7
(2) Default Interest 7
(3) Rent Adjustments 8
(4) Books and Records 8
(5) Miscellaneous 8
3. PREPARATION AND CONDITION OF PREMISES; POSSESSION
AND SURRENDER OF PREMISES 8
A. Condition of Premises 8
B. Tenant's Possession 9
C. Surrender 9
4. BUILDING AND LANDLORD REPAIR 9
A. Heating and Air Conditioning 9
B. Electricity 10
C. Water 10
D. Janitorial Service 10
E. Landlord's Repair Obligations 10
F. Interruption of Services 11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5. ALTERATIONS AND REPAIRS BY TENANT 11
A. Landlord's Consent and Conditions 11
B. Damage to Systems 12
C. No Liens 12
D. Ownership of Improvements 13
E. Removal at Termination 13
F. Tenant's Repair Obligation 13
6. USE OF PREMISES 14
7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES 14
8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE 15
A. Waiver of Claims 15
B. Indemnification 15
C. Tenant's Insurance 15
D. Insurance Certificates 17
E. Landlord's Insurance 17
9. FIRE AND OTHER CASUALTY 17
A. Termination 17
B. Restoration 17
10. EMINENT DOMAIN 18
11. RIGHTS RESERVED TO LANDLORD 18
A. Name 18
B. Signs 18
C. Window Treatments 18
D. Keys 18
E. Access 18
F. Preparation for Reoccupancy 19
G. Heavy Articles 19
H. Show Premises 19
I. Use of Lockbox 19
J. Repairs and Alterations 19
K. Landlord's Agents 19
L. Building Services 19
M. Other Actions 19
12. TENANT'S DEFAULT 20
A. Rent Default 20
B. Assignment/Sublease Default 20
C. Other Performance Default 20
</TABLE>
<PAGE>
<TABLE>
<S> <C>
D. Credit Default 20
13. LANDLORD REMEDIES 20
A. Termination of Lease or Possession 20
B. Lease Termination Damages 20
C. Possession Termination Damages 21
D. Landlord's Remedies Cumulative 21
E. WAIVER OF TRIAL BY JURY 21
F. Litigation Costs 22
14. SURRENDER 22
15. HOLDOVER 22
16. SUBORDINATION TO GROUND LEASES AND MORTGAGES 22
A. Subordination 22
B. Termination of Ground Lease or Foreclosure of Mortgage 22
C. Security Deposit 23
D. Notice and Right to Cure 23
E. Definitions 23
17. ASSIGNMENT AND SUBLEASE 23
A. In General 23
B. Landlord's Consent 23
C. Procedure 24
D. Change of Ownership 24
E. Excess Payments 24
18. CONVEYANCE BY LANDLORD 24
19. ESTOPPEL CERTIFICATE 25
20. SECURITY DEPOSIT 25
21. FORCE MAJEURE 26
22. TENANT'S PERSONAL PROPERTY AND FIXTURES 26
23. NOTICES 26
A. Landlord 26
B. Tenant 26
24. QUIET POSSESSION 27
25. REAL ESTATE BROKER 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
26. MISCELLANEOUS 28
A. Successors and Assigns 28
B. Date Payments Are Due 28
C. Meaning of "Landlord", "Re-Entry, "including" and "Affiliate" 28
D. Time of the Essence 28
E. No Option 28
F. Severability 28
G. Governing Law 28
H. Lease Modification 29
I. No Oral Modification 29
J. Landlord's Right to Cure 29
K. Captions 29
L. Authority 29
M. Landlord's Enforcement of Remedies 29
N. Entire Agreement 29
O. Landlord's Title 29
P. Light and Air Rights 29
Q. Singular and Plural 29
R. No Recording by Tenant 30
S. Exclusivity 30
T. No Construction Against Drafting Party 30
U. Survival 30
V. Rent Not Based on Income 30
W. Building Manager and Service Providers 30
X. Late Charge and Interest on Late Payments 30
Y. Parking 30
Z. Signage 30
27. UNRELATED BUSINESS INCOME 31
28. HAZARDOUS SUBSTANCES 31
29. EXCULPATION 31
</TABLE>
<PAGE>
LEASE
-----
THIS LEASE (the "Lease") is made as of September 29, 1997 between
-----------
CARRAMERICA REALTY CORPORATION, a Maryland corporation (the "Landlord") and the
--------
Tenant as named in the Schedule below. The term "Project" means the buildings
-------
one through six (individually the "Building" and collectively the "Buildings")
-------- ---------
known as "Willow Creek Corporate Center" and the land (the "Land") located at
----
10525 Willows Road, Redmond, Washington 98073. "Premises" means that part of
--------
the Project leased to Tenant described in the Schedule and outlined on Appendix
A.
The following schedule (the "Schedule") is an integral part of this Lease.
--------
Terms defined in this Schedule shall have the same meaning throughout the Lease.
SCHEDULE
I. TENANT: Metawave Communications Corporation, Inc., a Delaware
corporation.
II. PREMISES: Buildings 1 and 2 of the Project.
III. RENTABLE SQUARE FEET OF THE PREMISES: Approximately 95,838
square feet (Building 1 - 51,286 square feet, Building 2 - 44,552
square feet).
IV. TENANT'S PROPORTIONATE SHARE: 28.62% (based upon a total of
334,906 rentable square feet in the Buildings).
V. SECURITY DEPOSIT: $2,500,000 Letter of Credit.
VI. TENANT'S REAL ESTATE BROKER FOR THIS LEASE: CB Commercial Real
Estate Group, Inc.
VII. LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: N/A.
VIII. TENANT IMPROVEMENTS, IF ANY: See the Tenant Improvement
Agreement attached hereto as Appendix C.
IX. COMMENCEMENT DATE: June 1, 1998. If the Commencement Date is
other than June 1, 1998, Landlord and Tenant shall execute a
Commencement Date Confirmation substantially in the form of Appendix E
promptly following the Commencement Date.
X. TERMINATION DATE/TERM: May 31, 2005, seven (7) years after the
Commencement Date, or if the Commencement Date is not the first day of
a month, then after the first day of the following month.
XI. GUARANTOR: N/A.
1
-
<PAGE>
XII. BASE RENT.
<TABLE>
<CAPTION>
Annual Monthly Per Sq. Ft.
Period Base Rent Base Rent Rent
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
6-1-98 through 5-31-01 [***] [***] [***]
6-1-01 through 5-31-03 [***] [***] [***]
6-1-03 through 5-31-05 [***] [***] [***]
</TABLE>
I. APPENDICES: The following attached Appendices are an integral
part of this Lease and incorporated herein by this reference:
Appendix A-1 - Plan of the Premises
Appendix A-2 - Plan of the Project
Appendix B - Rules and Regulations
Appendix C - Tenant Improvement Agreement
Appendix D - Mortgages Affecting Project
Appendix E - Commencement Date Conformation
Appendix F - Legal Description
Appendix G - Extension Option
Appendix H - Expansion Option
1. LEASE AGREEMENT. On the terms stated in this Lease, Landlord leases
---------------
the Premises to Tenant, and Tenant leases the Premises from Landlord, for the
Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.
2. RENT.
----
A. Types of Rent. Tenant shall pay the following Rent in the form of a
-------------
check to Landlord at the following address:
CARRAMERICA REALTY CORPORATION
WILLOW CREEK CORPORATE CENTER
P.O. Box 198456
Atlanta, GA 30384-7918
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
2
-
<PAGE>
or by wire transfer as follows:
Account Name: CarrAmerica Realty Corporation
Account Number: 3255807986
ABA Number: 061-000-052
Bank Name: NationsBank of Georgia
Notification: Jennifer Malone (CarrAmerica)
Telephone: 202-639-3829
or in such other manner as Landlord may notify Tenant:
(1) Base Rent in monthly installments in advance on or before the
---------
first day of each month of the Term in the amount set forth on the Schedule.
Notwithstanding the foregoing, Landlord and Tenant agree that for the first six
(6) months of the Lease Term Tenant's monthly Base Rent payment shall be [***]
and, thereafter, Tenant s Base Rent obligation shall be as set forth in the
Schedule. Landlord and Tenant agree that in the event Tenant shall occupy any
portion of the approximately 23,000 square feet of Pocket Space as identified in
the Tenant Improvement Agreement, Appendix C, Section 1, the Base Rent during
months one through six (1-6) of the Lease Term shall be increased
proportionately based on [***] PSF for that portion of the Pocket Space occupied
by Tenant.
(2) Operating Cost Share Rent in an amount equal to the Tenant's
-------------------------
Proportionate Share of the Operating Costs for the applicable fiscal year of the
Lease, paid monthly in advance in an estimated amount. Definitions of Operating
Costs and Tenant's Proportionate Share, and the method for billing and payment
of Operating Cost Share Rent are set forth in Sections 2B, 2C and 2D.
(3) Tax Share Rent in an amount equal to the Tenant's Proportionate
--------------
Share of the Taxes for the applicable fiscal year of this Lease, paid monthly in
advance in an estimated amount. A definition of Taxes and the method for
billing and payment of Tax Share Rent are set forth in Sections 2B, 2C and 2D.
(4) Additional Rent in the amount of all costs, expenses,
---------------
liabilities, and amounts which Tenant is required to pay under this Lease,
excluding Base Rent, Operating Cost Share Rent, and Tax Share Rent, but
including any interest for late payment of any item of Rent.
(5) Rent as used in this Lease means Base Rent, Operating Cost Share
----
Rent, Tax Share Rent and Additional Rent. Tenant's agreement to pay Rent is an
independent covenant, with no right of setoff, deduction or counterclaim of any
kind, except as otherwise expressly stated herein.
(6) Skybridge. Tenant hereby agrees to pay to Landlord the costs and
---------
expenses incurred by Landlord in the construction of the skybridge pursuant to
Appendix C(6)(b) as follows: Tenant shall pay monthly throughout the term of
this Lease an amount per month equal to the total cost and expenses of
constructing the skybridge amortized over the seven year term of this Lease at
an annual interest rate of 10.5%. Tenant shall not be required to remove the
skybridge at the termination of the Lease.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
3
-
<PAGE>
B. Payment of Operating Cost Share Rent and Tax Share Rent.
-------------------------------------------------------
(1) Payment of Estimated Operating Cost Share Rent and Tax Share Rent
-----------------------------------------------------------------
Landlord shall estimate the Operating Costs and Taxes of the Project by April 1
of each fiscal year, or as soon as reasonably possible thereafter. Landlord may
revise these estimates whenever it obtains more accurate information, such as
the final real estate tax assessment or tax rate for the Project.
Within ten (10) days after receiving the original or revised estimate
from Landlord, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's
Proportionate Share of this estimate, multiplied by the number of months that
have elapsed in the applicable fiscal year to the date of such payment including
the current month, minus payments previously made by Tenant for the months
elapsed. On the first day of each month thereafter, Tenant shall pay Landlord
one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate, until a
new estimate becomes applicable.
(2) Correction of Operating Cost Share Rent. Landlord shall deliver
---------------------------------------
to Tenant a report for the previous fiscal year (the "Operating Cost Report") by
---------------------
April 1 of each year, or as soon as reasonably possible thereafter, setting
forth (a) the actual Operating Costs incurred, (b) the amount of Operating Cost
Share Rent due from Tenant, and (c) the amount of Operating Cost Share Rent paid
by Tenant. Within twenty (20) days after such delivery, Tenant shall pay to
Landlord the amount due minus the amount paid. If the amount paid exceeds the
amount due, Landlord shall apply the excess to Tenant's payments of Operating
Cost Share Rent next coming due.
(3) Correction of Tax Share Rent. Landlord shall deliver to Tenant a
----------------------------
report for the previous fiscal year (the "Tax Report") by April 1 of each year,
----------
or as soon as reasonably possible thereafter, setting forth (a) the actual
Taxes, (b) the amount of Tax Share Rent due from Tenant, and (c) the amount of
Tax Share Rent paid by Tenant. Within twenty (20) days after such delivery,
Tenant shall pay to Landlord the amount due from Tenant minus the amount paid by
Tenant. If the amount paid exceeds the amount due, Landlord shall apply any
excess as a credit against Tenant's payments of Tax Share Rent next coming due.
C. Definitions.
-----------
(1) Included Operating Costs. "Operating Costs" means any expenses,
------------------------ ---------------
costs and disbursements of any kind other than Taxes, paid or incurred by
Landlord in connection with the management, maintenance, operation, insurance,
repair and other related activities in connection with any part of the Project
and of the personal property, fixtures, machinery, equipment, systems and
apparatus used in connection therewith, including the cost of providing those
repair, maintenance and services required to be furnished by Landlord to the
Premises and Building under this Lease, a management fee
4
-
<PAGE>
in an amount equal to three percent (3%) of the annual Base Rent and accounting
and administration costs incurred by Landlord with respect to the Project.
Operating Costs shall also include the costs of any capital improvements (other
than Landlord's Work, Initial Improvements, and Additional Improvements) which
reduce Operating Costs or improve safety, and those made to keep the Project in
compliance with governmental requirements applicable from time to time
(collectively, "Included Capital Items"); provided, that the costs of any
Included Capital Item shall be amortized by Landlord, together with an amount
equal to interest at ten percent (10%) per annum, over the estimated useful life
of such item and such amortized costs are only included in Operating Costs for
that portion of the useful life of the Included Capital Item which falls within
the Term.
If the Project is not fully occupied during any portion of any fiscal
year, Landlord may adjust (an "Equitable Adjustment") Operating Costs to equal
--------------------
what would have been incurred by Landlord had the Project been fully occupied.
This Equitable Adjustment shall apply only to Operating Costs which are variable
and therefore increase as occupancy of the Project increases. Landlord may
incorporate the Equitable Adjustment in its estimates of Operating Costs.
If Landlord does not furnish any particular service whose cost would
have constituted an Operating Cost to a tenant other than Tenant who has
undertaken to perform such service itself, Operating Costs shall be increased by
the amount which Landlord would have incurred if it had furnished the service to
such tenant.
(2) Excluded Operating Costs. Operating Costs shall not include:
------------------------
(a) costs of alterations of tenant premises;
(b) costs of capital improvements other than Included
Capital Items;
(c) interest and principal payments on mortgages or
any other debt costs, or rental payments on any ground lease of
the Project;
(d) real estate brokers' leasing commissions;
(e) legal fees, space planner fees and advertising
expenses incurred with regard to leasing the Building or portions
thereof;
(f) any cost or expenditure for which Landlord is
reimbursed, by insurance proceeds or otherwise, except by
Operating Cost Share Rent;
5
-
<PAGE>
(g) the cost of any service furnished to any office
tenant of the Project which Landlord does not make available to
Tenant;
(h) depreciation (except on any Included Capital
Items);
(i) franchise or income taxes imposed upon Landlord;
(j) costs of correcting defects in construction of the
Building, including Building Shell, Initial Improvements and
Additional Improvements (as opposed to the cost of normal
repair, maintenance and replacement expected with the
construction materials and equipment installed in the Building in
light of their specifications);
(k) legal and auditing fees which are for the benefit
of Landlord such as collecting delinquent rents, preparing tax
returns and other financial statements, and audits other than
those incurred in connection with the preparation of reports
required pursuant to Section 2B above;
(l) the wages of any employee for services not related
directly to the day to day management, maintenance, operation and
repair of the Building; and
(m) fines, penalties and interest.
(n) amounts paid for deductibles on insurance carried
by Landlord relating to the Project in excess of industry standard deductibles
for insurance policies covering comparable Projects.
(3) Taxes. "Taxes" means any and all taxes, assessments and charges
----- -----
of any kind, general or special, ordinary or extraordinary, levied against the
Project, which Landlord shall pay or become obligated to pay in connection with
the ownership, leasing, renting, management, use, occupancy, control or
operation of the Project or of the personal property, fixtures, machinery,
equipment, systems and apparatus used in connection therewith. Taxes shall
include real estate taxes, personal property taxes, sewer rents, water rents,
special or general assessments, transit taxes, ad valorem taxes, and any tax
levied on the rents hereunder or the interest of Landlord under this Lease (the
"Rent Tax"). Taxes shall also include all fees and other costs and expenses
--------
paid by
6
-
<PAGE>
Landlord in reviewing any tax and in seeking a refund or reduction of any Taxes,
whether or not the Landlord is ultimately successful.
For any year, the amount to be included in Taxes (a) from taxes or
assessments payable in installments, shall be the amount of the installments
(with any interest) due and payable during such year, and (b) from all other
Taxes, shall at Landlord's election be the amount accrued, assessed, or
otherwise imposed for such year or the amount due and payable in such year. Any
refund or other adjustment to any Taxes by the taxing authority, shall apply
during the year in which the adjustment is made.
Taxes shall not include any net income (except Rent Tax), capital,
stock, succession, transfer, franchise, gift, estate or inheritance tax, except
to the extent that such tax shall be imposed in lieu of any portion of Taxes.
(4) Lease Year. "Lease Year" means each consecutive twelve-month
---------- ----------
period beginning with the Commencement Date, except that if the Commencement
Date is not the first day of a calendar month, then the first Lease Year shall
be the period from the Commencement Date through the final day of the twelve
months after the first day of the following month, and each subsequent Lease
Year shall be the twelve months following the prior Lease Year.
(5) Fiscal Year. "Fiscal Year" means the calendar year, except that
----------- -----------
the first fiscal year and the last fiscal year of the Term may be a partial
calendar year.
D. Computation of Base Rent and Rent Adjustments.
---------------------------------------------
(1) Prorations. If this Lease begins on a day other than the first
----------
day of a month, the Base Rent, Operating Cost Share Rent and Tax Share Rent
shall be prorated for such partial month based on the actual number of days in
such month. If this Lease begins on a day other than the first day, or ends on
a day other than the last day, of the fiscal year, Operating Cost Share Rent and
Tax Share Rent shall be prorated for the applicable fiscal year.
(2) Default Interest. Any sum due from Tenant to Landlord not paid
----------------
when due shall bear interest from the date due until paid at ten and one half
percent (10.5%).
(3) Rent Adjustments. The square footage of the Premises and the
----------------
Building set forth in the Schedule are conclusively deemed to be the actual
square footage thereof, without regard to any subsequent remeasurement of the
Premises or the Building. If any Operating Cost paid in one fiscal year relates
to more than one fiscal year, Landlord may proportionately allocate such
Operating Cost among the related fiscal years.
7
-
<PAGE>
(4) Books and Records. Landlord shall maintain books and records
-----------------
reflecting the Operating Costs and Taxes in accordance with sound accounting and
management practices. Tenant and its certified public accountant shall have the
right to inspect Landlord's records at Landlord's office upon at least seventy-
two (72) hours' prior notice during normal business hours during the ninety (90)
days following the respective delivery of the Operating Cost Report or the Tax
Report. The results of any such inspection shall be kept strictly confidential
by Tenant and its agents, and Tenant and its certified public accountant must
agree, in their contract for such services, to such confidentiality restrictions
and shall specifically agree that the results shall not be made available to any
other tenant of the Building. Unless Tenant sends to Landlord any written
exception to either such report within said ninety (90) day period, such report
shall be deemed final and accepted by Tenant. Tenant shall pay the amount shown
on both reports in the manner prescribed in this Lease, whether or not Tenant
takes any such written exception, without any prejudice to such exception. If
Tenant makes a timely exception, Landlord shall cause its independent certified
public accountant to issue a final and conclusive resolution of Tenant's
exception. Tenant shall pay the cost of such certification unless Landlord's
original determination of annual Operating Costs or Taxes overstated the amounts
thereof by more than five percent (5%).
(5) Miscellaneous. So long as Tenant is in default of any obligation
-------------
under this Lease, Tenant shall not be entitled to any refund of any amount from
Landlord. If this Lease is terminated for any reason prior to the annual
determination of Operating Cost Share Rent or Tax Share Rent, either party shall
pay the full amount due to the other within fifteen (15) days after Landlord's
notice to Tenant of the amount when it is determined. Landlord may commingle
any payments made with respect to Operating Cost Share Rent or Tax Share Rent,
without payment of interest.
3. PREPARATION AND CONDITION OF PREMISES; POSSESSION AND SURRENDER OF
------------------------------------------------------------------
PREMISES.
- --------
A. Condition of Premises. Except to the extent of the Tenant
---------------------
Improvements item on the Schedule, and without limiting Landlord s duties under
other provisions of this Lease, Landlord is leasing the Premises to Tenant "as
is", without any obligation to alter, remodel, improve, repair or decorate any
part of the Premises. Landlord shall cause the Premises to be completed in
accordance with the Tenant Improvement Agreement attached as Appendix C.
B. Tenant's Possession. Tenant's taking possession on the Commencement
-------------------
Date of any portion of the Premises shall be conclusive evidence that the
Premises was in good order, repair and condition, other than latent and other
defects which are not discoverable upon reasonable inspection by Tenant at the
time of taking possession. If Landlord authorizes Tenant to take possession of
any part of the Premises prior to the Commencement Date for purposes of doing
business, all terms of this Lease shall apply to such pre-Term possession,
including Base Rent at the rate set forth for the First Lease
8
-
<PAGE>
Year in the Schedule prorated for any partial month. Notwithstanding the
foregoing, Tenant shall be granted access to the Premises thirty (30) days prior
to the Commencement Date for the purposes of installing Tenant s furniture,
fixtures and equipment.
In the event that through no fault of Tenant, and subject to force majeure,
Landlord has not substantially completed (as defined in Appendix C) the Premises
in accordance with Appendix C by the Commencement Date, as Tenant s sole and
exclusive remedy, Landlord shall provide Tenant with two (2) days of Base Rent
abatement credit for each day of late delivery until the Premises are
substantially complete provided, however, that in the event that Premises are
not delivered within 120 days of the Commencement Date, Tenant shall have the
right to terminate this Lease.
C. Surrender. Subject to Landlord's obligations set forth herein and
---------
paragraph 4E, throughout the Term, Tenant shall maintain, repair and replace the
Premises in their condition as of the Completion Date, loss or damage caused by
the elements, ordinary wear, and fire and other casualty excepted, and at the
termination of this Lease, or Tenant's right to possession, Tenant shall return
the Premises to Landlord in broom-clean condition. To the extent Tenant fails
to perform either obligation, Landlord may, but need not, restore the Premises
to such condition and Tenant shall pay the cost thereof.
4. BUILDING AND LANDLORD REPAIR.
----------------------------
Landlord shall furnish the services, repair and maintenance to the Premises
and Buildings ("Building Services"), unless otherwise stated herein, as follows:
A. Heating and Air Conditioning. Landlord shall furnish heating and air
----------------------------
conditioning system to the Premises as part of the Building Shell to provide a
comfortable temperature, in Landlord's judgment, for normal business operations.
Tenant may install supplementary stand alone air conditioning units in the
Premises, if necessary to maintain comfortable temperature for normal business
operations, provided that such improvements by Tenant shall be of Tenant's sole
cost and expense, and subject to Landlord's reasonable prior approval and the
terms of Article 5 hereof. Tenant shall pay to Landlord upon demand as
Additional Rent the cost of operation, repair and maintenance thereof.
B. Electricity. Landlord shall furnish to the Premises as part of the
-----------
Building Shell sufficient electricity to operate normal office equipment.
Tenant shall not install or operate in the Premises any electrically operated
equipment or other machinery, other than business machines and equipment
normally employed for general office use (other than equipment installed in
Tenant's "equipment demo rooms", engineering laboratories and on the production
floor) which do not require high electricity consumption for operation. If any
of Tenant's equipment requires electricity consumption in excess of the capacity
of the electrical system installed by Landlord in the Premises, all additional
9
-
<PAGE>
transformers, distribution panels and wiring that may be required to provide the
amount of electricity required for Tenant's equipment shall be installed by
Landlord at the cost and expense of Tenant except to the extent covered by the
Landlord Contribution. Tenant shall pay the cost of electricity it consumes as
recorded by the electric meter serving the Premises directly to the electric
company. In the event that the Premises are not separately metered, Tenant
shall be billed periodically by Landlord based upon such consumption or shall be
made part of the Operating Cost Share Rent.
C. Water. Landlord shall furnish hot and cold tap water for drinking and
-----
toilet purposes to the Premises as part of the Building Shell. Tenant shall pay
directly to the water company for water furnished and consumed. Tenant shall
not permit water to be wasted.
D. Janitorial Service. Tenant shall provide, at its own cost and
------------------
expense, janitorial services to the Premises. At Tenant's request, Landlord may
furnish janitorial to the Premises. Tenant shall reimburse Landlord such costs
as Additional Rent.
E. Landlord's Repair Obligations. Subject to Tenant's obligations set
-----------------------------
forth in paragraph 5F below and Landlord's rights to reimbursement of costs and
expenses as set forth in this Lease, Landlord shall repair, maintain and
replace, as necessary, the Building shell, the roof, exterior walls and
structural parts of the Premises, and equipment and fixtures comprising the
Building Services (unless otherwise expressly excluded as set forth in this
paragraph 4). Tenant shall pay to and reimburse Landlord for the cost and
expense of Landlord's obligations hereunder as Operating Costs, or if such
services are provided solely to Tenant and the Premises, Landlord shall invoice
Tenant and Tenant shall pay Landlord, as Additional Rent, the cost of such
services. Notwithstanding the foregoing, Landlord shall not (i) be required to
make repairs necessitated by reason of the negligence or willful misconduct of
Tenant or anyone claiming under Tenant, by reason of the failure of Tenant to
perform or observe any conditions or agreements of this Lease, or by reason of
any improvements or alterations made by Tenant, or (ii) be liable to Tenant for
failure to make repairs as herein specifically required of it unless Tenant has
notified Landlord, in writing (except in emergencies) of the need for such
repairs and Landlord has failed to commence said repairs within ten (10)
business days following receipt of Tenant's notification.
F. Interruption of Services. If any of the Building utilities systems,
------------------------
equipment or machinery provided or maintained by Landlord ceases to function
properly for any cause, Landlord shall use reasonable diligence to repair the
same promptly. Landlord's inability to furnish, to any extent, the Building
Services set forth in this Section 4, or any cessation thereof resulting from
any causes, including any entry for repairs pursuant to this Lease, and any
renovation, redecoration or rehabilitation of any area of the Building shall not
render Landlord liable for damages to either person or property or for
interruption or loss to Tenant's business, nor be construed as an eviction of
Tenant, nor work an abatement of any portion of rent, nor relieve Tenant from
fulfillment
10
--
<PAGE>
of any covenant or agreement hereof; provided, however, in the event that an
interruption of the Building Services set forth in this Section 4 to the extent
caused by Landlord's negligence or performance of its duties under this Lease
causes the Premises to be untenantable for a period of at least five (5)
consecutive business days, monthly Rent shall be abated proportionately.
5. ALTERATIONS AND REPAIRS BY TENANT.
---------------------------------
A. Landlord's Consent and Conditions.
---------------------------------
Tenant shall not make any improvements or alterations to the Premises (the
"Work"), in excess of ten thousand dollars ($10,000) without in each instance
----
submitting plans to Landlord and obtaining Landlord's prior written consent,
which shall not be unreasonably withheld. For purposes of this Section, the
term "Work" shall not include Tenant's furniture, fixtures or equipment.
Landlord will be deemed to be acting reasonably in withholding its consent for
any Work which (a) impacts the base structural components or systems of the
Building, (b) impacts any other tenant's premises, or (c) is visible from
outside the Premises, with the exception of antennas installed pursuant to
Section 6 hereof. With respect to any consent required herein, Landlord shall
respond within ten (10) days.
Tenant shall reimburse Landlord for actual costs incurred for review of the
plans and all other items submitted by Tenant. Tenant shall pay for the cost of
all Work. All Work shall become the property of Landlord upon its installation,
except for Tenant's trade fixtures and for items which Landlord requires Tenant
to remove at Tenant's cost at the termination of the Lease pursuant to Section
5E.
The following requirements shall apply to all Work:
(1) Prior to commencement, Tenant shall furnish to Landlord building
permits, certificates of insurance satisfactory to Landlord, and, at Landlord's
request, security for payment of all costs.
(2) Tenant shall perform all Work so as to maintain peace and harmony
among other contractors serving the Project and shall avoid interference with
other work to be performed or services to be rendered in the Project.
(3) The Work shall be performed in a good and workmanlike manner,
meeting the standard for construction and quality of materials in the Building,
and shall comply with all insurance requirements and all applicable governmental
laws, ordinances and regulations ("Governmental Requirements").
-------------------------
11
--
<PAGE>
(4) Tenant shall perform all Work so as to minimize or prevent
disruption to other tenants, and Tenant shall comply with all reasonable
requests of Landlord in response to complaints from other tenants.
(5) Tenant shall perform all Work in compliance with Landlord's
"Policies, Rules and Procedures for Construction Projects" in effect at the time
the Work is performed.
(6) Tenant shall permit Landlord to supervise all Work. Landlord may
charge a supervisory fee not to exceed five percent (5%) of labor, material, and
all other costs of the Work, if Landlord's employees or contractors perform the
Work.
(7) Upon completion, Tenant shall furnish Landlord with contractor's
affidavits and full and final statutory waivers of liens, as-built plans and
specifications, and receipted bills covering all labor and materials.
B. Damage to Systems. If any part of the mechanical, electrical or other
-----------------
systems in the Premises provided or maintained by landlord shall be damaged as a
result of Tenant's improvements or alterations, Tenant shall promptly notify
Landlord, and Landlord shall repair such damage. Landlord may also at any
reasonable time make any repairs or alterations which Landlord deems necessary
for the safety or protection of the Project, or which Landlord is required to
make by any court or pursuant to any Governmental Requirement. During any
period of Tenant's alteration or improvement of the Premises, Tenant shall at
its expense make all other repairs required as a result or caused by Tenant's
construction of alterations and improvements necessary to keep the Premises, and
Tenant's fixtures and personal property, in good order, condition and repair; to
the extent Tenant fails to do so, Landlord may make such repairs itself. The
cost of any repairs made by Landlord on account of Tenant's default, or on
account of the mis-use or neglect by Tenant or its invitees, contractors or
agents anywhere in the Project, shall become Additional Rent payable by Tenant
on demand.
C. No Liens. Tenant has no authority to cause or permit any lien or
--------
encumbrance of any kind to affect Landlord's interest in the Project; any such
lien or encumbrance shall attach to Tenant's interest only. If any mechanic's
lien shall be filed or claim of lien made for work or materials furnished to
Tenant, then Tenant shall at its expense within ten (10) days thereafter either
discharge or contest the lien or claim. If Tenant contests the lien or claim,
then Tenant shall (i) within such ten (10) day period, provide Landlord adequate
security for the lien or claim, (ii) contest the lien or claim in good faith by
appropriate proceedings that operate to stay its enforcement, and (iii) pay
promptly any final adverse judgment entered in any such proceeding. If Tenant
does not comply with these requirements, Landlord may discharge the lien or
claim, and the amount paid, as well as attorney's fees and other expenses
incurred by Landlord, shall become Additional Rent payable by Tenant on demand.
12
--
<PAGE>
D. Ownership of Improvements. All improvements, alterations or work to
-------------------------
the Premises as defined in this Section 5, partitions, hardware, equipment,
machinery and all other improvements and all fixtures except trade fixtures,
constructed in the Premises by either Landlord or Tenant, (i) shall become
Landlord's property upon installation without compensation to Tenant, unless
Landlord consents otherwise in writing, and (ii) shall at Landlord's option
either (a) be surrendered to Landlord with the Premises at the termination of
the Lease or of Tenant's right to possession, or (b) be removed in accordance
with Subsection 5E below (unless Landlord at the time it gives its consent to
the performance of such construction expressly waives in writing the right to
require such removal).
E. Removal at Termination. Upon the termination of this Lease or
----------------------
Tenant's right of possession Tenant shall remove from the Project its trade
fixtures, furniture, moveable equipment and other personal property, any
improvements which Landlord elects shall be removed by Tenant pursuant to
Section 5D, and any improvements to any portion of the Project other than the
Premises, provided, however, that Tenant is not required to remove any Initial
Improvements, Additional Improvements, Landlord's Work, or the skybridge. If
Tenant does not timely remove such property, then Tenant shall be conclusively
presumed to have, at Landlord's election (i) conveyed such property to Landlord
without compensation or (ii) abandoned such property, and Landlord may dispose
of or store any part thereof in any manner at Tenant's sole cost, without
waiving Landlord's right to claim from Tenant all expenses arising out of
Tenant's Sailure to remove the property, and without liability to Tenant or any
other person. Landlord shall have no duty to be a bailee of any such personal
property. If Landlord elects abandonment, Tenant shall pay to Landlord, upon
demand, any expenses incurred for disposition.
F. Tenant's Repair Obligation. Subject to Landlord's obligations set
--------------------------
forth in paragraph 4E, Tenant shall, throughout the term of this Lease and at
its own cost and expense, maintain, repair and replace, as necessary, or
required by applicable law or ordinances, the Premises improvements, fixtures,
equipment, mechanical and electrical systems in their condition as of the
Commencement Date, ordinary wear and tear excepted. Tenant shall provide its
own garbage service to the Premises at its own cost and expense. All
replacements made by Tenant shall be of like kind and quality to the items
replaced as they existed when originally installed. With respect to any
maintenance or repair of mechanical and electrical systems in the Premises and
required be maintained by Tenant hereunder, Tenant shall contract and pay for
periodic inspection and maintenance and the repair and replacement, as
necessary, subject to the Landlord's approval and satisfaction which shall not
be unreasonably withheld or delayed.
6. USE OF PREMISES. Tenant shall use the Premises only for general
---------------
office and light manufacturing purposes, which shall include product
demonstration to customers, equipment testing and storage. Tenant shall not
allow any use of the Premises which will negatively affect the cost of coverage
of Landlord's insurance on the Project.
13
--
<PAGE>
Tenant shall not allow any inflammable or explosive liquids or materials to be
kept on the Premises (other than propane tanks used for vehicles on the
Premises). Tenant shall not allow any use of the Premises which would cause the
value or utility of any part of the Premises to diminish or would interfere with
any other Tenant or with the operation of the Project by Landlord. Tenant shall
not permit any nuisance or waste upon the Premises, or allow any offensive noise
or odor in or around the Premises.
If any governmental authority shall deem the Premises to be a "place of
public accommodation" under the Americans with Disabilities Act or any other
comparable law as a result of Tenant's use, Tenant shall either modify its use
to cause such authority to rescind its designation or be responsible for any
alterations, structural or otherwise, required to be made to the Building or the
Premises under such laws.
Tenant, its employees, agents, contractors or invitees shall be allowed
access to the building roof for the purpose of installing servicing, monitoring,
testing and changing its equipment; provided that Landlord shall be notified
prior to any installation work and such work satisfies the requirements of
Section 3 and 5.
7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Landlord shall comply
--------------------------------------------
with all Governmental Regulations applicable to the design or construction of
the Premises, the Building shell, the Initial Improvements and the Additional
Improvements. Tenant shall comply with all Governmental Requirements applying
to its use of the Premises. Tenant shall also comply with all reasonable rules
established for the Project from time to time by Landlord. The present rules
and regulations are contained in Appendix B. Failure by another tenant to
comply with the rules or failure by Landlord to enforce them shall not relieve
Tenant of its obligation to comply with the rules or make Landlord responsible
to Tenant in any way. Landlord shall use reasonable efforts to apply the rules
and regulations uniformly with respect to Tenant and tenants in the Project
under leases containing rules and regulations similar to this Lease. In the
event of alterations and repairs performed by Tenant, Tenant shall comply with
the provisions of Section 5 of this Lease and also landlord s Policies, Rules
and Regulations for Construction Projects".
8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.
--------------------------------------------
A. Waiver of Claims. To the extent permitted by law, Tenant waives any
----------------
claims it may have against Landlord or its officers, directors, employees or
agents for business interruption or damage to property sustained by Tenant
constituting insurable risks covered by the insurance policies required to be
maintained by the parties hereunder as the result of any act or omission of
Landlord.
To the extent permitted by law, Landlord waives any claims it may have
against Tenant or its officers, directors, employees or agents for loss of rents
or damage to property sustained by Landlord constituting insurable risks covered
by the insurance
14
--
<PAGE>
policies required to be maintained by the parties hereunder as the result of any
act or omission of Tenant.
B. Indemnification. Tenant shall indemnify, defend and hold harmless
---------------
Landlord and its officers, directors, employees and agents against any claim by
any third party for injury to any person or damage to or loss of any property
occurring in the Project and arising from the use of the Premises or from any
other act or omission or negligence of Tenant or any of Tenant's employees or
agents. Tenant's obligations under this section shall survive the termination
of this Lease.
Landlord shall indemnify, defend and hold harmless Tenant and its officers,
directors, employees and agents against any claim by any third party for injury
to any person or damage to or loss of any property occurring in the Project and
arising from any other act or omission or negligence of Landlord or any of
Landlord's employees or agents. Landlord's obligations under this section shall
survive the termination of this Lease.
TENANT HEREBY WAIVES ITS IMMUNITY WITH RESPECT TO LANDLORD UNDER THE
INDUSTRIAL INSURANCE ACT (RCW TITLE 51) AND/OR THE LONGSHOREMAN S AND
HARBORWORKER S ACT AND/OR ANY EQUIVALENT ACTS AND TENANT EXPRESSLY AGREES TO
ASSUME POTENTIAL LIABILITY FOR ACTIONS BROUGHT AGAINST LANDLORD BY TENANT S
EMPLOYEES EXCEPT TO THE EXTENT CAUSED BY LANDLORD. THIS WAIVER HAS BEEN
SPECIFICALLY NEGOTIATED BY THE PARTIES TO THIS LEASE AND TENANT HAS HAD THE
OPPORTUNITY TO, AND HAS BEEN ENCOURAGED, TO CONSULT WITH INDEPENDENT COUNSEL
REGARDING THIS WAIVER.
C. Tenant's Insurance. Tenant shall maintain insurance as follows, with
------------------
such other terms, coverages and insurers, as Landlord shall reasonably require
from time to time:
(1) Commercial General Liability Insurance, with (a) Contractual
Liability including the indemnification provisions contained in this Lease, (b)
a severability of interest endorsement, (c) limits of not less than One Million
Dollars ($1,000,000) combined single limit per occurrence and not less than Two
Million Dollars ($2,000,000) in the aggregate for bodily injury, sickness or
death, and property damage, and umbrella coverage of not less than Five Million
Dollars ($5,000,000).
(2) Property Insurance against "Special Form, All Risks" of physical
loss covering the replacement cost of all improvements, fixtures and personal
property.
(3) Workers compensation or similar insurance in form and amounts
required by law, and Employers Liability with not less than the following
limits:
15
--
<PAGE>
Each Accident $100,000
Disease--Policy Limit $500,000
Disease--Each Employee $100,000
Tenant's insurance shall be primary and not contributory to that carried by
Landlord, its agents, or mortgagee. Landlord, and if any, Landlord s building
manager or agent and ground lessor shall be named as additional insureds as
respects to insurance required of the Tenant in Section 8C(1). The company or
companies writing any insurance which Tenant is required to maintain under this
Lease, as well as the form of such insurance, shall at all times be subject to
Landlord's approval, and any such company shall be licensed to do business in
the state in which the Building is located. Such insurance companies shall have
a A.M. Best rating of A VI or better.
Tenant shall cause any contractor of Tenant performing work on the Premises
to maintain insurance as follows, with such other terms, coverages and insurers,
as Landlord shall reasonably require from time to time:
(1) Commercial General Liability Insurance, including contractor's
liability coverage, contractual liability coverage, completed operations
coverage, broad form property damage endorsement, and contractor's protective
liability coverage, to afford protection with limits, for each occurrence, of
not less than One Million Dollars ($1,000,000) with respect to personal injury,
death or property damage.
(2) Workers compensation or similar insurance in form and amounts
required by law, and Employer's Liability with not less than the following
limits:
Each Accident $100,000
Disease--Policy Limit $500,000
Disease--Each Employee $100,000
Tenant's contractor's insurance shall be primary and not contributory to
that carried by Tenant, Landlord, their agents or mortgagees. Tenant and
Landlord, and if any, Landlord's building manager or agent, mortgagee or ground
lessor shall be named as additional insured on Tenant's contractor's insurance
policies.
D. Insurance Certificates. Tenant shall deliver to Landlord certificates
----------------------
evidencing all required insurance no later than five (5) days prior to the
Commencement Date and each renewal date. Each certificate will provide for
thirty (30) days prior written notice of cancellation to Landlord and Tenant.
E. Landlord's Insurance. Landlord shall maintain "Special Form, All-
--------------------
Risk" property insurance at replacement cost, including loss of rents, on the
Building, and Commercial General Liability insurance policies covering the
common areas of the
16
--
<PAGE>
Building, each with such terms, coverages and conditions as are normally carried
by reasonably prudent owners of properties similar to the Project.
F. Waiver of Subrogation. With respect to all policies of insurance to
---------------------
be maintained hereunder by Tenant and Landlord, Landlord and Tenant mutually
waive all rights of subrogation, and the respective "All-Risk" coverage property
insurance policies carried by Landlord and Tenant shall contain enforceable
waiver of subrogation endorsements.
9. FIRE AND OTHER CASUALTY.
-----------------------
A. Termination. If a fire or other casualty causes substantial damage to
-----------
the Building or the Premises, Landlord shall engage a registered architect to
certify within one (1) month of the casualty to both Landlord and Tenant the
amount of time needed to restore the Building and the Premises to tenantability,
using standard working methods. If the time needed exceeds twelve (12) months
from date of damage, or two (2) months therefrom if the restoration would begin
during the last twelve (12) months of the Lease, then in the case of the
Premises, either Landlord or Tenant may terminate this lease, and in the case of
the Building, Landlord may terminate this Lease, by notice to the other party
within ten (10) days after the notifying party's receipt of the architect's
certificate. The termination shall be effective thirty (30) days from the date
of the notice and Rent shall be paid by Tenant to that date, with an abatement
for any portion of the Premises which has been untenantable after the casualty.
B. Restoration. If a casualty causes damage to the Building or the
-----------
Premises but this Lease is not terminated for any reason, then subject to the
rights of any mortgagees or ground lessors, Landlord shall obtain the applicable
insurance proceeds and diligently restore the Building and the Premises subject
to current Governmental Requirements. Tenant shall replace its damaged
improvements, personal property and fixtures. Rent shall be abated on a per
diem basis during the restoration for any portion of the Premises which is
untenantable, except to the extent that Tenant's negligence caused the casualty.
10. EMINENT DOMAIN. If a part of the Project is taken by eminent domain
--------------
or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking. In the
event that seventy five percent (75%) or more of the Project is taken without
affecting the Premises, then Landlord may terminate this Lease as of the date of
such taking. Rent shall abate from the date of the taking in proportion to any
part of the Premises taken. Subject to Tenant's rights to pursue claims
described below, the entire award for a taking of any kind shall be paid to
Landlord, and Tenant shall have no right to share in the award. All obligations
accrued to the date of the taking shall be performed by each party.
Notwithstanding the foregoing, nothing herein shall be deemed a waiver of
Tenant's rights to receive an award for a
17
--
<PAGE>
taking of its personal property, good will, relocation expense and/or interest
in the Lease provided Tenant's award does not reduce or adversely affect
Landlord's award.
11. RIGHTS RESERVED TO LANDLORD.
---------------------------
Landlord may exercise at any time any of the following rights respecting
the operation of the Project without liability to the Tenant of any kind:
A. Name. To change the name or street address (but only to extent such
----
changes in street address is required by a governmental authority) of the
Building or the suite number(s) of the Premises.
B. Signs. Subject to applicable law, to install and maintain any signs
-----
on the exterior and in the interior of the Building, and to approve at its
reasonable discretion, prior to installation, any of Tenant's signs in the
Premises visible from the common areas or the exterior of the Building.
C. Window Treatments. To approve, at its discretion, prior to
-----------------
installation, any shades, blinds, ventilators or window treatments of any kind,
as well as any lighting within the Premises that may be visible from the
exterior of the Building or any interior common area.
D. Keys. To retain and use at any time passkeys to enter the Premises or
----
any door within the Premises after reasonable notice (except in emergency).
E. Access. To have access to inspect the Premises, and to perform its
------
obligations, or make repairs, alterations, additions or improvements, as
permitted by this Lease.
F. Preparation for Reoccupancy. To decorate, remodel, repair, alter or
---------------------------
otherwise prepare the Premises for reoccupancy at any time after Tenant abandons
the Premises, without relieving Tenant of any obligation to pay Rent.
G. Heavy Articles. To approve the weight, size, placement and time and
--------------
manner of movement within the Building of any safe, central filing system or
other heavy article of Tenant's property. Tenant shall move its property
entirely at its own risk.
H. Show Premises. To show the Premises to prospective purchasers,
-------------
tenants, brokers, lenders, investors, rating agencies or others at any
reasonable time, provided that Landlord gives prior notice to Tenant and does
not materially interfere with Tenant's use of the Premises.
I. Use of Lockbox. To designate a lockbox collection agent for
--------------
collections of amounts due Landlord. In that case, the date of payment of Rent
or other sums shall be
18
--
<PAGE>
the date of the agent's receipt of such payment or the date of actual collection
if payment is made in the form of a negotiable instrument thereafter dishonored
upon presentment. However, Landlord may reject any payment for all purposes as
of the date of receipt or actual collection by mailing to Tenant within 21 days
after such receipt or collection a check equal to the amount sent by Tenant.
J. Repairs and Alterations. To make repairs or alterations to the
-----------------------
Project and in doing so transport any required material through the Premises, to
close entrances, doors, corridors, elevators and other facilities in the
Project, to open any ceiling in the Premises, or to temporarily suspend services
or use of common areas in the Building. Landlord may perform any such repairs
or alterations during ordinary business hours, provided that Landlord gives
prior notice to Tenant and does not materially interfere with Tenant s use of
the Premises, except that Tenant may require any Work in the Premises to be done
after business hours if Tenant pays Landlord for overtime and any other expenses
incurred. Landlord may do or permit any work on any nearby building, land,
street, alley or way.
K. Landlord's Agents. If Tenant is in default under this Lease,
-----------------
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.
L. Building Services. To install, use and maintain through the Premises,
-----------------
pipes, conduits, wires and ducts serving the Building, provided that such
installation, use and maintenance does not unreasonably interfere with Tenant's
use of the Premises.
M. Other Actions. To take any other action which Landlord deems
-------------
reasonable in connection with the operation, maintenance or preservation of the
Building.
12. TENANT'S DEFAULT.
----------------
Any of the following shall constitute a default by Tenant:
A. Rent Default. Tenant fails to pay any Rent when due within five (5)
------------
days of written notice to Tenant.
B. Assignment/Sublease Default. Tenant defaults in its obligations under
---------------------------
Section 17 Assignment and Sublease;
C. Other Performance Default. Tenant fails to perform any other
-------------------------
obligation to Landlord under this Lease, and, in the case of only the first two
(2) such failures during the Term of this Lease, this failure continues for ten
(10) days after written notice from Landlord, except that if Tenant begins to
cure its failure within the ten (10) day period but cannot reasonably complete
its cure within such period, then, so long as Tenant continues
19
--
<PAGE>
to diligently attempt to cure its failure, the ten (10) day period shall be
extended to sixty (60) days, or such lesser period as is reasonably necessary to
complete the cure;
D. Credit Default. One of the following credit defaults occurs:
--------------
(1) Tenant commences any proceeding under any law relating to
bankruptcy, insolvency, reorganization or relief of debts, or seeks appointment
of a receiver, trustee, custodian or other similar official for the Tenant or
for any substantial part of its property, or any such proceeding is commenced
against Tenant and either remains undismissed for a period of thirty days or
results in the entry of an order for relief against Tenant which is not fully
stayed within seven days after entry;
(2) Tenant becomes insolvent or bankrupt, does not generally pay its
debts as they become due, or admits in writing its inability to pay its debts,
or makes a general assignment for the benefit of creditors;
13. LANDLORD REMEDIES.
-----------------
A. Termination of Lease or Possession. If Tenant defaults, Landlord may
----------------------------------
elect by notice to Tenant either to terminate this Lease or to terminate
Tenant's possession of the Premises without terminating this Lease. In either
case, Tenant shall immediately vacate the Premises and deliver possession to
Landlord, and Landlord may repossess the Premises and may, at Tenant's sole
cost, remove any of Tenant's signs and any of its other property, without
relinquishing its right to receive Rent or any other right against Tenant.
B. Lease Termination Damages. If Landlord terminates the Lease, Tenant
-------------------------
shall pay to Landlord all Rent due on or before the date of termination, plus
Landlord's reasonable estimate of the aggregate Rent that would have been
payable from the date of termination through the Termination Date, reduced by
the rental value of the Premises calculated as of the date of termination for
the same period, taking into account reletting expenses and market concessions,
both discounted to present value at the rate of five percent (5%) per annum. If
Landlord shall relet any part of the Premises for any part of such period before
such present value amount shall have been paid by Tenant or finally determined
by a court, then the amount of Rent payable pursuant to such reletting (taking
into account any concessions) shall be deemed to be the reasonable rental value
for that portion of the Premises relet during the period of the reletting.
C. Possession Termination Damages. If Landlord terminates Tenant's right
------------------------------
to possession without terminating the Lease and Landlord takes possession of the
Premises itself, Landlord may relet any part of the Premises for such Rent, for
such time, and upon such terms as Landlord in its sole discretion shall
determine, without any obligation to do so prior to renting other vacant areas
in the Building. Any proceeds from reletting the Premises shall first be
applied to the expenses of reletting, including redecoration, repair,
alteration, advertising, brokerage, legal, and other reasonably necessary
expenses. If the
20
--
<PAGE>
reletting proceeds after payment of expenses are insufficient to pay the full
amount of Rent under this Lease, Tenant shall pay such deficiency to Landlord
monthly upon demand as it becomes due. Any excess proceeds shall be retained by
Landlord.
D. Landlord's Remedies Cumulative. All of Landlord's remedies under this
------------------------------
Lease shall be in addition to all other remedies Landlord may have at law or in
equity. Waiver by Landlord of any breach of any obligation by Tenant shall be
effective only if it is in writing, and shall not be deemed a waiver of any
other breach, or any subsequent breach of the same obligation. Landlord's
acceptance of payment by Tenant shall not constitute a waiver of any breach by
Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or
termination of the Lease or of Tenant's right to possession, the acceptance
shall not affect such notice or termination. Acceptance of payment by Landlord
after commencement of a legal proceeding or final judgment shall not affect such
proceeding or judgment. Landlord may advance such monies and take such other
actions for Tenant s account as reasonably may be required to cure or mitigate
any default by Tenant. Tenant shall immediately reimburse Landlord for any such
advance, and such sums shall bear interest at the default interest rate until
paid.
E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY JURY IN THE EVENT
-----------------------
OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS LEASE.
EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH THIS
LEASE IN A FEDERAL OR STATE COURT LOCATED IN WASHINGTON, CONSENTS TO THE
JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING
TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT
FORUM.
F. Litigation Costs. Tenant shall pay Landlord's reasonable attorneys'
----------------
fees and other costs in any action brought to enforce this Lease.
14. SURRENDER. Upon termination of this Lease or Tenant's right to
---------
possession, Tenant shall return the Premises to Landlord in good order and
condition, ordinary wear and casualty damage excepted. If Landlord requires
Tenant to remove any alterations, then Tenant shall remove the alterations in a
good and workmanlike manner and restore the Premises to its condition prior to
their installation.
15. HOLDOVER. If Tenant retains possession of any part of the Premises
--------
after the Term, Tenant shall become a month-to-month tenant for the entire
Premises upon all of the terms of this Lease as might be applicable to such
month-to-month tenancy, except that Tenant shall pay all of Base Rent, Operating
Cost Share Rent and Tax Share Rent at one hundred twenty five percent (125%) of
the rate in effect immediately prior to such holdover, computed on a monthly
basis for each full or partial month Tenant remains in possession. Tenant shall
also pay Landlord all of Landlord's
21
<PAGE>
direct and consequential damages if such holdover is without consent. No
acceptance of Rent or other payments by Landlord under these holdover provisions
shall operate as a waiver of Landlord's right to regain possession or any other
of Landlord's remedies.
16. SUBORDINATION TO GROUND LEASES AND MORTGAGES.
--------------------------------------------
A. Subordination. Subject to Section 16B, this Lease shall be
-------------
subordinate to any present or future ground lease or mortgage respecting the
Project, and any amendments to such ground lease or mortgage, at the election of
the ground lessor or mortgagee as the case may be, effected by notice to Tenant
in the manner provided in this Lease. The subordination shall be effective upon
such notice, but at the request of Landlord or ground lessor or mortgagee,
Tenant shall within ten (10) days of the request, execute and deliver to the
requesting party any reasonable documents provided to evidence the
subordination.
B. Termination of Ground Lease or Foreclosure of Mortgage. If any ground
------------------------------------------------------
lease is terminated or mortgage foreclosed or deed in lieu of foreclosure given
and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall
thereby become the owner of the Project, Tenant shall attorn to such ground
lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and
this Lease shall continue in effect as a direct lease between Tenant and such
ground lessor, mortgagee or purchaser. The ground lessor or mortgagee or
purchaser shall be liable as Landlord only during the time such ground lessor or
mortgagee or purchaser is the owner of the Project. At the request of Landlord,
ground lessor or mortgagee, Tenant shall execute and deliver within ten (10)
days of the request any document furnished by the requesting party to evidence
Tenant's agreement to attorn.
C. Security Deposit. Any ground lessor or mortgagee shall be responsible
----------------
for the return of any security deposit by Tenant only to the extent the security
deposit is received by such ground lessor or mortgagee.
D. Notice and Right to Cure. The Project is subject to any ground lease
------------------------
and mortgage identified with name and address of ground lessor or mortgagee in
Appendix D to this Lease (as the same may be amended from time to time by
written notice to Tenant). Tenant agrees to send by registered or certified mail
to any ground lessor or mortgagee identified either in such Appendix or in any
later notice from Landlord to Tenant a copy of any notice of default sent by
Tenant to Landlord. If Landlord fails to cure such default within the required
time period under this Lease, but ground lessor or mortgagee begins to cure
within ten (10) days after such period and proceeds diligently to complete such
cure, then ground lessor or mortgagee shall have such additional time as is
necessary to complete such cure, including any time necessary to obtain
possession if possession is necessary to cure, and Tenant shall not begin to
enforce its remedies so long as the cure is being diligently pursued.
22
<PAGE>
E. Definitions. As used in this Section 16, "mortgage" shall include
-----------
"trust deed" and "mortgagee" shall include "trustee", "mortgagee" shall include
the mortgagee of any ground lessee, and "ground lessor", "mortgagee", and
"purchaser at a foreclosure sale" shall include, in each case, all of its
successors and assigns, however remote.
17. ASSIGNMENT AND SUBLEASE.
-----------------------
A. In General. Tenant shall not, without the prior consent of Landlord
----------
in each case, (i) make or allow any assignment or transfer, by operation of law
or otherwise, of any part of Tenant's interest in this Lease, (ii) grant or
allow any lien or encumbrance, by operation of law or otherwise, upon any part
of Tenant's interest in this Lease, (iii) sublet any part of the Premises, or
(iv) permit anyone other than Tenant and its employees to occupy any part of the
Premises. Tenant shall remain primarily liable for all of its obligations under
this Lease, notwithstanding any assignment or transfer. No consent granted by
Landlord shall be deemed to be a consent to any subsequent assignment or
transfer, lien or encumbrance, sublease or occupancy. Tenant shall pay
reasonable Landlord's attorneys' fees and other expenses incurred in connection
with any consent requested by Tenant or in reviewing any proposed assignment or
subletting. Any assignment or transfer, grant of lien or encumbrance, or
sublease or occupancy without Landlord's prior written consent shall be void.
B. Landlord's Consent. Landlord will not unreasonably withhold its
------------------
consent to any proposed assignment or subletting. It shall be reasonable for
Landlord to withhold its consent to any assignment or sublease if (i) Tenant is
in default under this Lease, (ii) the proposed assignee or sublessee is a tenant
in the Project and Landlord has appropriate available space in the Project,
(iii) the financial condition, nature of business, and character of the proposed
assignee or subtenant are not all reasonably satisfactory to Landlord, (iv) in
the reasonable judgment of Landlord the purpose for which the assignee or
subtenant intends to use the Premises (or a portion thereof) is not in keeping
with Landlord's standards for the Building or are in violation of the terms of
this Lease or any other leases in the Project. The foregoing shall not exclude
any other reasonable basis for Landlord to withhold its consent.
C. Procedure. Tenant shall notify Landlord of any proposed assignment or
---------
sublease at least thirty (30) days prior to its proposed effective date. The
notice shall include the name and address of the proposed assignee or subtenant,
its corporate affiliates in the case of a corporation and its partners in a case
of a partnership, an execution copy of the proposed assignment or sublease, and
sufficient information to permit Landlord to determine the financial condition
and character of the proposed assignee or subtenant. As a condition to any
effective assignment of this Lease, the assignee shall execute and deliver in
form satisfactory to Landlord at least fifteen (15) days prior to the effective
date of the assignment, an assumption of all of the obligations of Tenant under
this Lease. As a condition to any effective sublease, subtenant shall execute
and deliver in form satisfactory to Landlord at least fifteen (15) days prior to
the
23
--
<PAGE>
effective date of the sublease, an agreement to comply with all of Tenant's
obligations under this Lease, and at Landlord's option, an agreement (except for
the economic obligations which subtenant will undertake directly to Tenant) to
attorn to Landlord under the terms of the sublease in the event this Lease
terminates before the sublease expires.
D. Change of Ownership. Any direct or indirect change in 50% or more of
-------------------
the ownership interest in Tenant shall constitute an assignment of this Lease;
provided, however, that Landlord hereby consents to any such assignment that is
in connection with (i) transfer of shares between existing shareholders, (ii)
redemption of shares by Tenant, or (iii) a public offering of Tenant s stock
under the Securities Act of 1933, as amended. Notwithstanding Landlord's prior
consent to the foregoing, Tenant shall provide Landlord with written notice
required hereunder.
E. Excess Payments. If Tenant shall assign this Lease or sublet any part
---------------
of the Premises for consideration in excess of the pro-rata portion of Rent
applicable to the space subject to the assignment or sublet, then Tenant shall
pay to Landlord as Additional Rent 50% of any such excess immediately upon
receipt.
18. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its
----------------------
interest in the Project or this Lease, provided that the transferee shall
expressly assume in writing all duties of Landlord in this Lease, Landlord shall
be released of any obligations accruing after such transfer, except the
obligation to return to Tenant any security deposit not delivered to its
transferee, and Tenant shall look solely to Landlord's successors for
performance of such obligations. This Lease shall not be affected by any such
transfer.
19. ESTOPPEL CERTIFICATE. Each party shall, within ten (10) days of
--------------------
receiving a request from the other party, execute, acknowledge in recordable
form, and deliver to the other party or its designee a certificate stating,
subject to a specific statement of any applicable exceptions, that the Lease as
amended to date is in full force and effect, that the Tenant is paying Rent and
other charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has no
offsets or claims. The certifying party may also be required to state the date
of commencement of payment of Rent, the Commencement Date, the Termination Date,
the Base Rent, the current Operating Cost Share Rent and Tax Share Rent
estimates, the status of any improvements required to be completed by Landlord,
the amount of any security deposit, and such other matters as may be reasonably
requested. Failure to deliver such statement within the time required shall be
conclusive evidence against the non-certifying party that this Lease, with any
amendments identified by the requesting party, is in full force and effect, that
there are no uncured defaults by the requesting party, that not more than one
month's Rent has been paid in advance, that the non-certifying party has not
paid any security deposit, and that the non-certifying party has no claims or
offsets against the requesting party.
24
--
<PAGE>
20. SECURITY DEPOSIT. Tenant shall arrange for the issuance and delivery
----------------
to Landlord on the date of this Lease, as security for the performance of all of
its obligations of Tenant hereunder an irrevocable, standby letter of credit
(the "Letter of Credit") from Silicon Valley Bank, Imperial Bank or such other
commercial bank of Tenant's choosing and reasonably acceptable and in form and
content reasonably satisfactory to Landlord, in the amount set forth on the
Schedule. Upon the execution of this Lease, Tenant shall deliver a Letter of
Credit in the amount of $1,000.000. The amount of the Letter of Credit shall be
increased by $1,000,000 on January 1, 1998 and then by $500,000 on the
Commencement Date. If Tenant defaults under this Lease, Landlord may use any
part of the Letter of Credit or Security Deposit to make any defaulted payment,
to pay for Landlord's cure of any defaulted obligation, or to compensate
Landlord for any loss or damage resulting from any default. Landlord agrees to
release the Letter of Credit upon satisfaction of all of the following
conditions: (i) Tenant s Operating Income from continuing operations under GAAP
exceeds $500,000 for four consecutive quarters; (ii) Tenant s cash and
receivables are a minimum of $10,000,000; (iii) a current ratio (defined as
current assets divided by current liabilities) of at least two times; and (iv)
Tenant has delivered a certificate of the President of Tenant representing and
warranting the foregoing and the amount of one month s rent as a Security
Deposit. Landlord may keep the Security Deposit, if cash, in its general funds
and shall not be required to pay interest to Tenant on the deposit amount. If
Tenant shall perform all of its obligations under this Lease and return the
Premises to Landlord at the end of the Term, Landlord shall return all of the
remaining Security Deposit to Tenant within thirty (30) days after the end of
the Term. The Security Deposit shall not serve as an advance payment of Rent or
a measure of Landlord's damages for any default under this Lease.
If Landlord transfers its interest in the Project or this Lease, Landlord
shall transfer the Security Deposit to its transferee. Upon such transfer,
Landlord shall have no further obligation to return the Security Deposit to
Tenant, and Tenant's right to the return of the Security Deposit shall apply
solely against Landlord's transferee.
21. FORCE MAJEURE. Landlord shall not be in default under this Lease to
-------------
the extent Landlord is unable to perform any of its obligations on account of
any strike or labor problem, energy shortage, governmental pre-emption or
prescription, national emergency, or any other cause of any kind beyond the
reasonable control of Landlord ("Force Majeure"). This Section 21 shall not
limit Tenant's rights to any abatement of rent expressly allowed in this Lease.
22. TENANT'S PERSONAL PROPERTY AND FIXTURES. Intentionally omitted.
---------------------------------------
23. NOTICES. All notices, consents, approvals and similar communications
-------
to be given by one party to the other under this Lease, shall be given in
writing, mailed or personally delivered as follows:
25
<PAGE>
A. Landlord. To Landlord as follows:
--------
CARRAMERICA REALTY CORPORATION
18640 NE 67th Court, Suite 150
Redmond, WA 98052
Attn: Market Officer
Fax No. 425-558-2246
with a copy to:
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Lease Administration
or to such other person at such other address as Landlord may designate by
notice to Tenant.
B. Tenant. To Tenant as follows:
------
(i) After Commencement Date:
Metawave Communications Corporation, Inc.
10525 Willows Road
Redmond, WA 98073
Attn: CFO
with a copy to:
Metawave Communications Corporation, Inc.
10525 Willows Road
Redmond, WA 98073
Attn: General Counsel
(ii) Prior to Commencement Date:
Metawave Communications Corporation, Inc.
8700 - 148th Avenue N.E.
Redmond, WA 98052
Attn: CFO
Fax No. 425-702-5972
with a copy to:
Metawave Communications Corporation, Inc.
26
<PAGE>
8700 - 148th Avenue N.E.
Redmond, WA 98052
Attn: General Counsel
Fax No. 425-702-5976
or to such other person at such other address as Tenant may designate by notice
to Landlord.
Notices shall be sent by United States certified or registered mail, by a
reputable national overnight courier service, postage prepaid, hand delivery, or
by facsimile transmission. Mailed notices shall be deemed to have been given on
the earlier of actual delivery or three (3) business days after posting in the
United States mail in the case of registered or certified mail, and one business
day in the case of overnight courier.
24. QUIET POSSESSION. So long as Tenant shall perform all of its
----------------
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against Landlord or any party claiming through the Landlord.
Interruption of Tenant's peaceful and quiet possession, unless caused by Tenant,
shall title Tenant to an appropriate abatement of rent.
25. REAL ESTATE BROKER. Tenant represents to Landlord that Tenant has not
------------------
dealt with any real estate broker with respect to this Lease except for any
broker(s) listed in the Schedule, and no other broker is in any way entitled to
any broker's fee or other payment in connection with this Lease. Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind in connection with this Lease. Landlord shall
pay to CB Commercial Real Estate Group Inc. a real estate leasing commission per
a separate agreement and Tenant shall have no responsibility for such
commission.
26. MISCELLANEOUS.
-------------
A. Successors and Assigns. Subject to the limits on Tenant's assignment
----------------------
contained in Section 17, the provisions of this Lease shall be binding upon and
inure to the benefit of all successors and assigns of Landlord and Tenant.
B. Date Payments Are Due. Except for payments to be made by Tenant under
---------------------
this Lease which are due upon demand, Tenant shall pay to Landlord any amount
for which Landlord renders a statement of account within ten days of Tenant's
receipt of Landlord's statement.
C. Meaning of "Landlord", "Re-Entry, "including" and "Affiliate". The
-------------------------------------------------------------
term "Landlord" means only the owner of the Project and the lessor's interest in
this Lease from time to time. The words "re-entry" and "re-enter" are not
restricted to their technical legal meaning. The words "including" and similar
words shall mean "without limitation."
27
<PAGE>
The word "affiliate" shall mean a person or entity controlling, controlled by or
under common control with the applicable entity. "Control" shall mean the power
directly or indirectly, by contract or otherwise, to direct the management and
policies of the applicable entity.
D. Time of the Essence. Time is of the essence of each provision of this
-------------------
Lease.
E. No Option. This document shall not be effective for any purpose until
---------
it has been executed and delivered by both parties; execution and delivery by
one party shall not create any option or other right in the other party.
F. Severability. The unenforceability of any provision of this Lease
------------
shall not affect any other provision.
G. Governing Law. This Lease shall be governed in all respects by the
-------------
laws of the state of Washington, without regard to the principles of conflicts
of laws.
H. Lease Modification. Tenant agrees to modify this Lease in any way
------------------
requested by a mortgagee which does not cause increased expense to Tenant or
otherwise materially adversely affect Tenant's interests under this Lease.
I. No Oral Modification. No modification of this Lease shall be
--------------------
effective unless it is a written modification signed by both parties.
J. Landlord's Right to Cure. If Landlord breaches any of its obligations
------------------------
under this Lease, Tenant shall notify Landlord in writing and shall take no
action respecting such breach so long as Landlord immediately begins to cure the
breach and diligently pursues such cure to its completion. Landlord may cure any
default by Tenant; any expenses incurred shall become Additional Rent due from
Tenant on demand by Landlord.
K. Captions. The captions used in this Lease shall have no effect on the
--------
construction of this Lease.
L. Authority. Landlord and Tenant each represents to the other that it
---------
has full power and authority to execute and perform this Lease.
M. Landlord's Enforcement of Remedies. Landlord may enforce any of its
----------------------------------
remedies under this Lease either in its own name or through an agent.
N. Entire Agreement. This Lease, together with all Appendices,
----------------
constitutes the entire agreement between the parties. No representations or
agreements of any kind have been made by either party which are not contained in
this Lease.
28
<PAGE>
O. Landlord's Title. Without limiting Tenant s right to peaceful and
----------------
quiet possession of the Premises, Landlord's title shall always be paramount to
the interest of the Tenant, and nothing in this Lease shall empower Tenant to do
anything which might in any way impair Landlord's title.
P. Light and Air Rights. Landlord does not grant in this Lease any
--------------------
rights to light and air in connection with Project. Landlord reserves to itself,
the Land, the Building below the improved floor of each floor of the Premises,
the Building above the ceiling of each floor of the Premises, the exterior of
the Premises and the areas on the same floor outside the Premises, along with
the areas within the Premises required for the installation and repair of
utility lines and other items required to serve other tenants of the Building.
Q. Singular and Plural. Wherever appropriate in this Lease, a singular
-------------------
term shall be construed to mean the plural where necessary, and a plural term
the singular. For example, if at any time two parties shall constitute Landlord
or Tenant, then the relevant term shall refer to both parties together.
R. No Recording by Tenant. Tenant shall not record in any public records
----------------------
any memorandum or any portion of this Lease except as may be required by
applicable securities laws.
S. Exclusivity. Landlord does not grant to Tenant in this Lease any
-----------
exclusive right except the right to occupy its Premises.
T. No Construction Against Drafting Party. The rule of construction that
--------------------------------------
ambiguities are resolved against the drafting party shall not apply to this
Lease.
U. Survival. All obligations of Landlord and Tenant under this Lease
--------
shall survive the termination of this Lease.
V. Rent Not Based on Income. No rent or other payment in respect of the
------------------------
Premises shall be based in any way upon net income or profits from the Premises.
Tenant may not enter into or permit any sublease or license or other agreement
in connection with the Premises which provides for a rental or other payment
based on net income or profit.
W. Building Manager and Service Providers. Landlord may perform any of
--------------------------------------
its obligations under this Lease through its employees or third parties hired by
the Landlord.
X. Late Charge and Interest on Late Payments. Without limiting the
-----------------------------------------
provisions of Section 12A, if Tenant fails to pay any installment of Rent or
other charge
29
<PAGE>
to be paid by Tenant pursuant to this Lease within five (5) business days after
the same becomes due and payable, then Tenant shall pay a late charge equal to
the greater of three and one-half percent (3-1/2%) of the amount of such payment
or $250. In addition, interest shall be paid by Tenant to Landlord on any late
payments of Rent from the date due until paid at the rate provided in Section
2D(2). Such late charge and interest shall constitute additional Rent due and
payable by Tenant to Landlord upon the date of payment of the delinquent payment
referenced above.
Y. Parking. Landlord will provide an allowance of three (3) cars per
-------
1,000 rentable square feet of Premises to Tenant on the Premises.
Z. Signage. Tenant shall have exclusive right, subject to Landlord's
-------
reasonable approval to install Tenant's signage on the exterior of Buildings 1 &
2, provided the signage complies with all ordinances and orders.
27. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel at
-------------------------
any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.
28. HAZARDOUS SUBSTANCES. Tenant shall not cause or permit any Hazardous
--------------------
Substances to be brought upon, produced, stored, used, discharged or disposed of
in or near the Project unless Landlord has consented to such storage or use in
its sole discretion. "Hazardous Substances" include those hazardous substances
--------------------
described in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any
other applicable federal, state or local law, and the regulations adopted under
these laws. If any lender or governmental agency shall require testing for
Hazardous Substances in the Premises, Tenant shall pay for such testing.
29. EXCULPATION. Without limiting Tenant's rights to abatement of rent as
-----------
expressly allowed in this Lease, Landlord shall have no personal liability under
this Lease; its liability shall be limited to its interest in the Project, and
shall not extend to any other property or assets of the Landlord. In no event
shall any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's obligations
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
LANDLORD:
30
--
<PAGE>
CARRAMERICA REALTY CORPORATION
a Maryland corporation
By: /s/ Philip L. Hawkins
--------------------------------------
Print Name: Philip L. Hawkins
--------------------------------------
Print Title: Managing Director
--------------------------------------
TENANT:
METAWAVE COMMUNICATIONS
CORPORATION, INC.
a Delaware corporation
By: /s/ Vito Palermo
---------------------------------------
Print Name: Vito Palermo
---------------------------------------
Print Title: Chief Financial Officer
---------------------------------------
DISTRICT OF COLUMBIA )
) ss.
)
On this _______ day of __________, 1997, before me, the undersigned, a
Notary Public in and for the District of Columbia, duly commissioned and sworn
as such, personally appeared _________________, to me known to be the
___________________ of __________________________, the corporation that executed
the within and foregoing instrument, and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned, and on oath stated that he was authorized to execute
said instrument, and that the seal affixed is the corporate seal of said
corporation.
WITNESS my hand and official seal the day and year in this certificate
first above written.
Printed Name: ______________________
NOTARY PUBLIC in and for the District of Columbia,
residing at ________________
My commission expires: _______________
STATE OF DELAWARE )
31
<PAGE>
) ss.
COUNTY OF KING )
On this _______ day of _________________, 1997, before me, the undersigned,
a Notary Public in and for the State of Delaware, duly commissioned and sworn as
such, personally appeared __________________________________, to me known to be
the _______________ of _________________________, the corporation that executed
the within and foregoing instrument, and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned, and on oath stated that he/she was authorized to
execute said instrument, and that the seal affixed is the corporate seal of said
corporation.
WITNESS my hand and official seal the day and year in this certificate
first above written.
Printed Name: ______________________
NOTARY PUBLIC in and for the State of Delaware,
residing at ________________
My commission expires: _______________
32
<PAGE>
APPENDIX A
PLAN OF THE PREMISES
(attach floor plan depicting the Premises)
APPENDIX A
Page 1 of 1
<PAGE>
APPENDIX B
RULES AND REGULATIONS
1. Tenant shall not place anything, or allow anything to be placed near
the glass of any window, door, partition or wall which may, in Landlord's
judgment, appear unsightly from outside of the Project.
2. The Project directory shall be available to Tenant solely to display
names and their location in the Project, which display shall be as directed by
Landlord.
3. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used by Tenant for any purposes
other than for ingress to and egress from the Premises. Tenant shall lend its
full cooperation to keep such areas free from all obstruction and in a clean and
sightly condition and shall move all supplies, furniture and equipment as soon
as received directly to the Premises and move all such items and waste being
taken from the Premises (other than waste customarily removed by employees of
the Building) directly to the shipping platform at or about the time arranged
for removal therefrom. The halls, passages, exits, entrances, elevators,
stairways, balconies and roof are not for the use of the general public and
Landlord shall, in all cases, retain the right to control and prevent access
thereto by all persons whose presence in the judgment of Landlord, reasonably
exercised, shall be prejudicial to the safety, character, reputation and
interests of the Project. Except as allowed in the Lease, neither Tenant nor
any employee or invitee of Tenant shall go upon the roof of the Project.
4. The toilet rooms, urinals, wash bowls, showers and other apparatuses
shall not be used for any purposes other than that for which they were
constructed, and no foreign substance of any kind whatsoever shall be thrown
therein, and to the extent caused by Tenant or its employees or invitees, the
expense of any breakage, stoppage or damage resulting from the violation of this
rule shall be borne by Tenant.
5. Tenant shall not cause any unnecessary janitorial labor or services by
reason of Tenant's carelessness or indifference in the preservation of good
order and cleanliness.
6. Tenant shall not install or operate any refrigerating, heating or air
conditioning apparatus, or carry on any mechanical business without the prior
written consent of Landlord; use the Premises for housing, lodging or sleeping
purposes (other than wellness rooms used by sick employees); or permit
preparation or warming of food in the Premises (warming of coffee and individual
or group meals with employees and guests excepted). Tenant shall not occupy or
use the Premises or permit the Premises to
APPENDIX B
Page 1 of 5
<PAGE>
be occupied or used for any purpose, act or thing which is in violation of any
Governmental Requirement or which may be dangerous to persons or property.
7. Tenant shall not bring upon, use or keep in the Premises or the
Project any kerosene, gasoline or inflammable or combustible fluid or material,
or any other articles deemed hazardous to persons or property (other than
propane tanks used for vehicles such as forklifts), or use any method of heating
or air conditioning other than that supplied by Landlord.
8. Landlord shall have sole power to direct electricians as to where and
how telephone and other wires are to be introduced. No boring or cutting for
wires is to be allowed without the consent of Landlord. The location of
telephones, call boxes and other office equipment affixed to the Premises shall
be subject to the approval of Landlord.
9. No additional locks shall be placed upon any doors, windows or
transoms in or to the Premises and Tenant shall not change existing locks or the
mechanism thereof without prior notification to Landlord. During the Term and
upon termination of the lease, Tenant shall deliver to Landlord all keys and
passes for offices, rooms, parking lot and toilet rooms which shall have been
furnished Tenant.
In the event of the loss of keys so furnished, Tenant shall pay
Landlord therefor. Tenant shall not make, or cause to be made, any such keys
and shall order all such keys solely from Landlord and shall pay Landlord for
any keys in addition to the two sets of keys originally furnished by Landlord
for each lock.
10. Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord.
11. Tenant shall not take or permit to be taken in or out of other
entrances of the Building, or take or permit on other elevators, any item
normally taken in or out through the trucking concourse or service doors or in
or on freight elevators.
12. Tenant shall cause all doors to the Premises to be closed and securely
locked before leaving the Project at the end of the day.
13. Without the prior written consent of Landlord, Tenant shall not use
the name of the Project or any picture of the Project in connection with, or in
promoting or advertising the business of, Tenant, except Tenant may use the
address of the Project as the address of its business.
14. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Project's heating and air
conditioning, and shall refrain
APPENDIX B
----------
Page 1 of 5
-----------
<PAGE>
from attempting to adjust any controls, other than room thermostats installed
for Tenant's use. Tenant shall keep corridor doors closed.
15. Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which may arise from a cause other than Landlord's
negligence, which includes keeping doors locked and other means of entry to the
Premises closed and secured.
16. Peddlers, solicitors and beggars shall be reported to the office of
the Project or as Landlord otherwise requests.
17. Tenant shall not advertise the business, profession or activities of
Tenant conducted in the Project in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.
18. No motorized vehicle (other than freight handling equipment) and no
animals or pets shall be allowed in the Premises, halls, freight docks, or any
other parts of the Building except that blind persons may be accompanied by
"seeing eye" dogs. Tenant shall not make or permit any noise, vibration or odor
to emanate from the Premises, or do anything therein tending to create, or
maintain, a nuisance, or do any act tending to injure the reputation of the
Building.
19. Tenant acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Project.
Accordingly:
(a) Landlord may, at any time, or from time to time, or for regularly
scheduled time periods, as deemed advisable by Landlord and/or its agents, in
their sole discretion, require that persons entering or leaving the Project or
the Property identify themselves to watchmen or other employees designated by
Landlord, by registration, identification or otherwise.
(b) Tenant agrees that it and its employees will cooperate fully with
Project employees in the implementation of any and all security procedures.
(c) Such security measures shall be the sole responsibility of
Landlord, and Tenant shall have no liability for any action taken by Landlord in
connection therewith, it being understood that Landlord is not required to
provide any security procedures and shall have no liability for such security
procedures or the lack thereof.
20. Tenant shall not do or permit the manufacture, sale or purchase of any
fermented, intoxicating or alcoholic beverages without obtaining written consent
of Landlord.
21. Tenant shall not disturb the quiet enjoyment of any other tenant.
<PAGE>
22. Landlord may retain a pass key to the Premises and be allowed
admittance thereto at all times to enable its representatives to examine the
Premises from time to time and to exhibit the same in accordance with Section
11(H) of the Lease and Landlord may place and keep on the windows and doors of
the Premises at any time signs advertising the Premises for Rent.
23. No equipment, mechanical ventilators, awnings, special shades or other
forms of window covering shall be permitted either inside or outside the windows
of the Premises without the prior written consent of Landlord, and then only at
the expense and risk of Tenant, and they shall be of such shape, color,
material, quality, design and make as may be approved by Landlord.
24. Tenant shall not during the term of this Lease canvas or solicit other
tenants of the Building for any purpose except as expressly allowed in the Lease
or these regulations.
25. Except as allowed in the Lease or related to Tenant's use of the
Premises, Tenant shall not install or operate any phonograph, musical or sound-
producing instrument or device, radio receiver or transmitter, TV receiver or
transmitter, or similar device in the Building which would interfere with any
tenant in the Project, nor install or operate any antenna, aerial, wires or
other equipment inside or outside the Building, nor operate any electrical
device from which may emanate electrical waves which may interfere with or
impair radio or television broadcasting or reception from or in the Building or
elsewhere, without in each instance the prior written approval of Landlord. The
use thereof, if permitted, shall be subject to control by Landlord to the end
that others shall not be disturbed.
26. Tenant shall promptly remove all rubbish and waste from the Premises.
27. Tenant shall not exhibit, sell or offer for sale, Rent or exchange in
the Premises or at the Project any article, thing or service, except those
ordinarily embraced within the use of the Premises specified in Section 6 of
this Lease, without the prior written consent of Landlord.
28. Tenant shall not overload any floors in the Premises or any public
corridors or elevators in the Building.
29. Whenever Landlord's consent, approval or satisfaction is required
under these Rules, then unless otherwise stated, any such consent, approval or
satisfaction must be obtained in advance, such consent or approval may be
granted or withheld in Landlord's sole discretion, and Landlord's satisfaction
shall be determined in its sole judgment provided, however, Landlord shall
respond to any such request within ten (10) days.
<PAGE>
30. Tenant and its employees shall cooperate in all fire drills conducted
by Landlord in the Building.
31. In the event of a conflict between these Rules and Regulations and the
provisions of the Lease, the provisions of the Lease shall prevail.
<PAGE>
APPENDIX C
TENANT IMPROVEMENT AGREEMENT
1. INITIAL IMPROVEMENTS. Landlord shall cause to be performed the
improvements (the "Initial Improvements") in the Premises provided for in the
--------------------
plans and specifications prepared by _________________________ dated
_______________ and agreed to by Landlord and Tenant (the "Plans"). The Initial
-----
Improvements shall be performed by _________________________ (the "Contractor"),
----------
using Building standard materials. Landlord shall use commercially reasonable
efforts to cause the Work to be substantially completed on or before the
Commencement Date specified in the Schedule to the Lease, subject to Tenant
Delay (as defined in Section 4 hereof) and any Force Majeure. Notwithstanding
the foregoing, Landlord shall be required to deliver only 73,000 square feet of
the Premises on the Commencement Date. The remaining 23,000 square feet shall
be delivered within 180 days of Tenant s written notice of its intent to occupy
the remaining space; provided, however, that rent shall commence no later than
January 1, 1999 regardless of the date Tenant occupies such space. Landlord may
charge a supervisory fee not to exceed three percent (3%) of labor, material and
all other costs of the Initial Improvements and the Additional Improvements.
2. ADDITIONAL IMPROVEMENTS. If Tenant shall require improvements
("Additional Improvements") to the Premises in addition, revision of, or
-----------------------
substitution for the Initial Improvements, Tenant shall deliver to Landlord for
its approval plans and specifications for such Additional Improvements. If
Landlord does not approve of the plans for Additional Improvements, Landlord
shall advise Tenant of the revisions required. Tenant shall revise and redeliver
the plans and specifications to Landlord within five (5) business days of
Landlord's advice or Tenant shall be deemed to have abandoned its request for
such Additional Improvements. Tenant shall pay for all such preparations and
revisions of plans and specifications, and the construction of all Additional
Improvements, subject to Landlord s Contribution.
3. LANDLORD'S CONTRIBUTION. Landlord shall contribute an amount of
Twenty Dollars ($20.00) per square foot ("Landlord's Contribution") toward the
-----------------------
costs incurred by Landlord for the Initial Improvements or Additional
Improvements or other items Tenant is responsible for hereunder that constitute
a physical improvement to the Premises such as cabling and security. Landlord
has no obligation to pay for costs of the Initial Improvements in excess of
Landlord's Contribution. If the cost of the Initial Improvements exceeds the
Landlord's Contribution, Tenant shall pay such overage to Landlord upon
completion of construction of the Initial Improvements. Tenant shall also pay
to Landlord prior to commencement of construction, the cost of all Additional
Improvements above the Landlord's Contribution.
4. COMMENCEMENT DATE DELAY. Commencement Date shall be
APPENDIX C
Page 1 of 4
<PAGE>
delayed until the Initial Improvements have been substantially completed (the
"Completion Date"), except to the extent that the delay shall be caused by any
---------------
one or more of the following (a "Tenant Delay"):
------------
(a) Tenant's request for Additional Improvements whether or not any
such Additional Improvements are actually performed; or
(b) Contractor's performance of any Additional Improvements; or
(c) Tenant's request for materials, finishes or installations
requiring unusually long lead times; or
(d) Tenant's delay in reviewing, revising or approving plans and
specifications beyond the periods set forth herein; or
(e) Any other act or omission by Tenant, its agents, contractors or
persons employed by any of such persons.
If the Commencement Date is delayed for any reason, then Landlord shall
cause Landlord's Architect to certify the date on which the Initial Improvements
would have been completed but for such Tenant Delay, or were in fact completed
without any Tenant Delay.
5. ACCESS BY TENANT PRIOR TO COMMENCEMENT OF TERM. Landlord shall permit
Tenant and its agents to enter the Premises thirty (30) days prior to the
Commencement Date to prepare the Premises for Tenant's use and occupancy. Any
such permission shall constitute a license only, conditioned upon Tenant's:
(a) working in harmony with Landlord and Landlord's agents, contractors,
workmen, mechanics and suppliers and with other tenants and occupants of the
Building;
(b) obtaining in advance Landlord's approval of the contractors proposed
to be used by Tenant and depositing with Landlord in advance of any work (i)
security satisfactory to Landlord for the completion thereof, and (ii) the
general contractor's affidavit for the proposed work and the waivers of lien
from the general contractor and all subcontractors and suppliers of material;
and
(c) furnishing Landlord with such insurance as Landlord may require
against liabilities which may arise out of such entry.
Landlord shall not be liable in any way for any injury, loss or damage
which may occur to any of Tenant's property or installations in the Premises
prior to the Commencement Date. Tenant shall protect, defend, indemnify and
save harmless
APPENDIX C
Page 2 of 4
<PAGE>
Landlord from all liabilities, costs, damages, fees and expenses arising out of
the activities of Tenant or its agents, contractors, suppliers or workmen in the
Premises or the Building. Any entry and occupation permitted under this Section
shall be governed by Section 5 and all other terms of the Lease.
6. MISCELLANEOUS.
(a) Landlord s Work. In addition to the Initial Improvements, Landlord
shall construct Building 1 and Building 2 in accordance with Plans and
Specifications dated ____________ ("Landlord s Work"). Landlord shall use its
best efforts to substantially complete the Landlord s Work on or before the
Commencement Date, subject to force majeure and actions or omissions of Tenant
causing delay. The Improvements to be constructed by Landlord shall include as
part of the Building Shell (and shall not be included in the Initial
Improvements) the following:
Landlord shall provide as part of the Building Shell:
Building HVAC system per the building specifications dated 7-1-97 and the
McKinstry Drawings dated 6-30-97
Finished Building Restroom and Core per the building specifications dated
7-1-97 and the G2 Architectural Drawings dated 6-30-97. Landlord to
provide one set of showers per building as a component of the shell.
Elevator per G2 Architectural Drawings dated 6-30-97 and building
specifications dated 7-1-97.
One on grade loading door per building per the G2 Architectural Drawings
dated 6-30-97.
Landlord to provide one dock height loading area at Building One per
mutually developed and approved drawings.
Insulated perimeter walls.
Blinds installed on the exterior windows.
Ceiling tiles, grid and lights for the entire Premises of the types
identified in the building specifications dated ______________. In the
event that the plans and specifications for the Initial Improvements are
such that fewer ceiling tiles, less grid or fewer lights are required than
if the entire Premises were improved for initial use as office space,
Tenant shall receive a credit equal to Landlord's resulting cost savings,
which shall be applied against any part of the Initial
APPENDIX C
Page 3 of 4
<PAGE>
Improvements, Additional Improvements or other items that become a physical
part of the Building (such as security systems, rooftop work and
telecommunications improvements) for which Tenant would otherwise be
responsible to pay.
Landlord to provide a comprehensive signage program for Willow Creek
Corporate Center. The park signage package will include park entry and
park directional signage, building directory signage and building
informational signage.
(b) Landlord shall construct a skybridge between Building 1 and Building 2,
in accordance with plans and specifications prepared by Landlord, subject to
Tenant s approval of such plans and specifications. The construction of the
skybridge shall be undertaken, if possible, in conjunction with Landlord s work
and the Initial Improvements. Costs of the skybridge shall be advanced by
Landlord and repaid by Tenant in accordance with the terms of the Lease. Tenant
shall not be required to remove the Skybridge at the termination of the Lease.
(c) Substantial Completion as used in this Lease and Appendix shall mean
completion of work so that (i) Tenant can use the Premises and Building for
intended use without material interference to Tenant, (ii) the only incomplete
items are minor or insubstantial details of construction and "punch list" items,
and (iii) Landlord has obtained a temporary or permanent certificate of
occupancy from the appropriate governmental agency.
(d) Landlord shall provide Tenant with two (2) preliminary Space Planning
meetings and two (2) Space Plans at its sole cost and expense, exclusive of the
Tenant Allowance.
(e) Landlord shall cooperate with Tenant to assist Tenant in its efforts to
allow Tenant the benefits of the R&D Tax Deferral available from the State of
Washington, provided that Landlord shall not be required to undertake any act or
take any position that in Landlord s reasonable judgment would expose Landlord
to any liability, cost or expense.
Terms used in this Appendix C shall have the meanings assigned to them in
the Lease. The terms of this Appendix C are subject to the terms of the Lease.
APPENDIX C
Page 4 of 4
<PAGE>
APPENDIX D
MORTGAGES CURRENTLY AFFECTING THE PROJECT
APPENDIX D
Page 1
<PAGE>
APPENDIX E
COMMENCEMENT DATE CONFIRMATION
Landlord: CARRAMERICA REALTY CORPORATION, a Maryland corporation
Tenant: ____________________, a _____________
This Commencement Date Confirmation is made by Landlord and Tenant pursuant
to that certain Lease dated as of _________, 199__ (the "Lease") for certain
premises known as Suite ____ in the building commonly known as WILLOW CREEK
CORPORATE CENTER (the "Premises"). This Confirmation is made pursuant to Item 9
of the Schedule to the Lease.
1. Lease Commencement Date, Termination Date. Landlord and Tenant hereby
-----------------------------------------
agree that the Commencement Date of the Lease is _____________, 199__, and the
Termination Date of the Lease is _______________, _____.
2. Acceptance of Premises. Subject to the terms of the Lease, Tenant has
----------------------
inspected the Premises and affirms that the Premises is acceptable in all
respects in its current "as is" condition.
3. Incorporation. This Confirmation is incorporated into the Lease, and
-------------
forms an integral part thereof. This Confirmation shall be construed and
interpreted in accordance with the terms of the Lease for all purposes.
TENANT:
,
a
Name:_________________________________
Title:________________________________
LANDLORD:
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By:__________________________________
Name:________________________________
Title:_______________________________
APPENDIX E
Page 1
<PAGE>
APPENDIX F
LEGAL DESCRIPTION
PARCEL A:
THE SOUTH 10 ACRES OF THE SOUTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION
34, TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON.
PARCEL B:
BEGINNING AT THE SOUTHEAST CORNER OF THE NORTH THREE-FOURTHS OF THE SOUTHEAST
QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 34, TOWNSHIP 26 NORTH, RANGE 5
EAST, W.M., IN KING COUNTY, WASHINGTON;
THENCE NORTH 88 29 27" WEST ALONG THE SOUTH LINE THEREOF 333.48 FEET;
THENCE NORTH 1 30 33" EAST 700.00 FEET;
THENCE SOUTH 88 29 27" EAST 703.19 FEET TO THE WESTERLY MARGIN OF THE C.D.
STIMSON ROAD (NOW KNOWN AS WILLOWS ROAD); THENCE SOUTH 6 20 48" EAST ALONG SAID
WESTERLY MARGIN 708.26 FEET TO THE SOUTH LINE OF THE NORTH THREE-FOURTHS OF THE
SOUTHWEST QUARTER OF THE NORTHEAST QUARTER OF SAID SECTION 34;
THENCE NORTH 88 17 35" WEST ALONG SAID SOUTH LINE 466.52 FEET TO THE POINT OF
BEGINNING;
EXCEPT THAT PORTION, IF ANY, LYING WITHIN WILLOWS ROAD AS CONVEYED TO THE CITY
OF REDMOND BY DEED RECORDED UNDER RECORDING NO. 8002070845;
(BEING KNOWN AS PARCEL 2 OF CITY OF REDMOND LOT LINE ADJUSTMENT NO. SS-83-29
RECORDED UNDER RECORDING NO. 8310270925).
PARCEL C:
THAT PORTION OF THE SOUTH HALF OF THE SOUTH HALF OF THE SOUTHWEST QUARTER OF THE
NORTHEAST QUARTER OF SECTION 34, TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING
COUNTY, WASHINGTON, LYING WESTERLY OF RIGHT-OF-WAY OF NORTHERN PACIFIC RAILWAY
COMPANY;
EXCEPT ANY PORTION LYING WITHIN THE WILLOWS ROAD.
APPENDIX F
Page 1 of 3
<PAGE>
PARCEL D:
THE NORTH 100 FEET OF THAT PORTION OF THE NORTHWEST QUARTER OF THE SOUTHEAST
QUARTER OF SECTION 34, TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY,
WASHINGTON, LYING WESTERLY OF THE RIGHT-OF-WAY OF THE NORTHERN PACIFIC RAILWAY
COMPANY;
EXCEPT THAT PORTION THEREOF CONVEYED TO KING COUNTY FOR ROAD BY DEED RECORDED
UNDER RECORDING NO. 956171.
PARCEL E:
LOTS 1, 2 AND 3 OF CITY OF REDMOND SHORT PLAT NO. SS-79-37 RECORDED UNDER
RECORDING NO. 8010230411;
PARCEL F:
THE NORTH HALF OF THE NORTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 34,
TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON;
EXCEPT THE SOUTH 400 FEET OF THE NORTH 430 FEET OF THE EAST 228 FEET THEREOF.
PARCEL G:
THE SOUTH 400 FEET OF THE NORTH 430 FEET OF THE EAST 228 FEET OF THE FOLLOWING
DESCRIBED PROPERTY:
THE NORTH HALF OF THE NORTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 34,
TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON.
PARCEL H:
THE NORTH HALF OF THE SOUTH HALF OF THE NORTHEAST QUARTER OF THE SOUTHWEST
QUARTER OF SECTION 34, TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY,
WASHINGTON.
APPENDIX F
Page 2 of 3
<PAGE>
PARCEL I:
THE EAST ONE-HALF OF THE FOLLOWING DESCRIBED TRACT:
THE SOUTH 10 ACRES OF THE NORTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION
34, TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON, ACCORDING
TO SURVEY THEREOF AS SHOWN BY THE SUBDIVISIONAL PLAT APPROVED BY DECREE OF THE
SUPERIOR COURT OF KING COUNTY IN CAUSE NO. 106237.
PARCEL I-1:
AN EASEMENT FOR SANITARY SEWER AND UNDERGROUND UTILITIES OVER AND ACROSS THE
NORTH 25 FEET OF THE FOLLOWING DESCRIBED PROPERTY:
BEGINNING AT THE NORTHWEST CORNER OF THE SOUTHWEST QUARTER OF THE SOUTHEAST
QUARTER OF SECTION 34, TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M.;
THENCE SOUTH 370 FEET ALONG THE WESTERLY BOUNDARY OF SAID SOUTHWEST QUARTER OF
THE SOUTHEAST QUARTER;
THENCE EAST PARALLEL TO THE NORTH BOUNDARY LINE OF SAID SOUTHWEST QUARTER OF THE
SOUTHEAST QUARTER TO THE COUNTY ROAD AS NOW LAID OUT AND ESTABLISHED;
THENCE NORTHWEST ALONG SAID COUNTY ROAD TO THE NORTH BOUNDARY LINE OF SAID
SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER;
THENCE WEST ALONG SAID NORTH BOUNDARY LINE OF SAID SOUTHWEST QUARTER OF THE
SOUTHEAST QUARTER TO THE POINT OF BEGINNING;
TOGETHER WITH THE NORTH 70.42 FEET OF THE SOUTH 295 FEET OF THE NORTH 665 FEET
OF THAT PORTION OF THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 34,
TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., LYING WESTERLY OF COUNTY ROAD (ALSO KNOWN
AS WILLOWS ROAD) IN KING COUNTY, WASHINGTON.
ALL SITUATE IN THE COUNTY OF KING, STATE OF WASHINGTON.
APPENDIX F
Page 3 of 3
<PAGE>
APPENDIX G
EXTENSION OPTION
EXTENSION OPTION. Subject to Subsection B below, Tenant may at its option
----------------
extend the Term of this Lease for TWO (2) successive periods of FIVE (5) YEARS
each. Each such period is called a "Renewal Term", and the first such FIVE (5)
------------
YEAR period is called the "First Renewal Term" and the second such five (5) year
------------------
period is called the "Second Renewal Term". Each Renewal Term shall be upon the
-------------------
same terms contained in this Lease except for the payment of Base Rent during
the Renewal Term; and any reference in the Lease to the "Term" of the Lease
shall be deemed to include any Renewal Term and apply thereto, unless it is
expressly provided otherwise. Tenant shall have no additional extension
options.
A. The Base Rent during a Renewal Term shall be the greater of (i) the
Base Rent applicable to the last day of the final Lease Year prior to the
applicable Renewal Term, or (ii) 100% of the Market Rate (defined hereinafter)
for such space for a term commencing on the first day of the Renewal Term.
"Market Rate" shall mean the then prevailing market rate for a five (5) year
-----------
term commencing on the first day of the Renewal Term for tenants of comparable
size and creditworthiness for comparable buildings in the general vicinity of
the Project. Determination of the Market Rate shall include, without
limitation, then current applicable market conditions such as rent abatements,
tenant allowances, cash incentives, broker commissions, Tenant's use,
availability of space in the Redmond area, the build out of the Premises and
such additional factors as might reasonably be considered in determining the
Market Rate.
B. To exercise any option, Tenant must deliver a binding notice to
Landlord not less than twelve (12) months prior to the expiration of the initial
Term of this Lease, or the first Renewal Term, as the case may be. Thereafter,
the Market Rate for the particular Renewal Term shall be calculated pursuant to
Subsection C below and Landlord shall inform Tenant of the Market Rate. Such
calculations shall be final and shall not be recalculated at the actual
commencement of such Renewal Term. If Tenant fails to timely give its notice of
exercise, Tenant will be deemed to have waived its option to extend.
C. Market Rate shall be determined as follows:
(i) If Tenant provides Landlord with its binding notice of exercise
pursuant to Subsection B above, then at some point between thirteen (13)
and eleven (11) months prior to the commencement of the applicable Renewal
Term (or, at Landlord s election, at an earlier point), Landlord shall
calculate and inform Tenant of the Market Rate. At the same time Landlord
shall provide to Tenant in writing supporting information used by Landlord
to calculate the Market Rate including rental rates and lease terms on
comparable buildings, which Landlord
APPENDIX G
Page 1 of 2
<PAGE>
shall identify by name and location. If Tenant rejects the Market Rate as
calculated by Landlord, Tenant shall inform Landlord of its rejection
within twenty (20) days after Tenant s receipt of Landlord s calculation,
and Landlord and Tenant shall commence negotiations to agree upon the
Market Rate. If Tenant fails to timely reject Landlord s calculation of the
Market Rate it will be deemed to have accepted such calculation. If
Landlord and Tenant are unable to reach agreement within twenty-one (21)
days after Landlord s receipt of Tenant s notice of rejection, then the
Market Rate shall be determined in accordance with (ii) below.
(ii) If Landlord and Tenant are unable to reach agreement on the
Market Rate within said twenty-one (21) day period, then within seven (7)
days, Landlord and Tenant shall each simultaneously submit to the other in
a sealed envelope its good faith estimate of the Market Rate. If the
higher of such estimates is not more than one hundred five percent (105%)
of the lower, then the Market Rate shall be the average of the two.
Otherwise, the dispute shall be resolved by arbitration in accordance with
(iii) below.
(iii) Within seven (7) days after the exchange of estimates, the
parties shall select as an arbitrator an independent MAI appraiser with at
least five (5) years of experience in appraising office space in the
metropolitan area in which the Project is located (a "Qualified
Appraiser"). If the parties cannot agree on a Qualified Appraiser, then
within a second period of seven (7) days, each shall select a Qualified
Appraiser and within ten (10) days thereafter the two appointed Qualified
Appraisers shall select a third Qualified Appraiser and the third Qualified
Appraiser shall be the sole arbitrator. If one party shall fail to select
a Qualified Appraiser within the second seven (7) day period, then the
Qualified Appraiser chosen by the other party shall be the sole arbitrator.
(iv) Within twenty-one (21) days after submission of the matter to
the arbitrator, the arbitrator shall determine the Market Rate by choosing
whichever of the estimates submitted by Landlord and Tenant the arbitrator
judges to be more accurate. The arbitrator shall notify Landlord and Tenant
of its decision, which shall be final and binding. If the arbitrator
believes that expert advice would materially assist him, the arbitrator may
retain one or more qualified persons to provide expert advice. The fees of
the arbitrator and the expenses of the arbitration proceeding, including
the fees of any expert witnesses retained by the arbitrator, shall be paid
by the party whose estimate is not selected. Each party shall pay the fees
of its respective counsel and the fees of any witness called by that party.
D. Tenant's option to extend this Lease is subject to the conditions
that: (i) on the date that Tenant delivers its binding notice exercising an
option to extend, Tenant is
APPENDIX G
Page 2 of 2
<PAGE>
not in default under this Lease after the expiration of any applicable notice
and cure periods.
APPENDIX G
Page 3 of 2
<PAGE>
APPENDIX H
EXPANSION OPTION AND LETTER OF CREDIT
1. EXPANSION OPTION. Subject to the terms and conditions of this
----------------
paragraph, Landlord hereby grants to Tenant an option (the "Option") to lease
Building 6 located in the Project as shown on Exhibit A attached hereto (the
"Expansion Space"). To exercise the Option, Tenant must deliver a binding
written notice to Landlord of its intent to lease the Expansion Space on or
before May 1, 1999. In the notice of intent to lease, Tenant shall specify the
date on which the Landlord shall deliver the Expansion Space to Tenant, which
date (i) shall not be less than nine (9) months from the date of the notice, and
(ii) shall be no later than February 1, 2000 . Tenant hereby acknowledges that
time is of the essence with respect to delivery of the notice and that failure
to deliver such written notice to Landlord within the time required shall result
in the termination of Tenant s Option to lease the Expansion Space. Upon proper
exercise of Tenant s Option, Landlord shall deliver to Tenant the Expansion
Space on the specific delivery date, unless otherwise mutually agreed by
Landlord and Tenant. Tenant s notice of its election to exercise its Option for
the Expansion Space shall be subject to the following conditions: (a) the Lease
shall be in full force and effect at the time of the exercise of such Option;
and (b) Tenant shall not be in default (subject to any notice and cure periods)
under the Lease.
Tenant s lease of the Expansion Space shall be on the same terms and
conditions of this Lease of the Premises, including, without limitation, at the
rental rates paid at the time of such election for the Premises and, except for
Extension Options without further extension of the term of the Lease (it being
the intent of the parties that the lease of the Expansion Space shall be co-
terminus with the lease of the Premises). Landlord and Tenant hereby agree to
execute an Amendment to Lease evidencing the lease of the Expansion Space in
form consistent with the terms hereof and satisfactory to the parties. Landlord
shall deliver to Tenant the Expansion Space in a similar condition and terms as
the Premises were delivered to Tenant, including, Landlord s work and the Tenant
improvement allowance set forth in the Lease for the initial Premises.
2. LETTER OF CREDIT. Section 12 of the Lease is hereby supplemented and
----------------
modified by adding the following language as Section 12E:
APPENDIX H
Page 1 of 2
<PAGE>
E. Default Relating to Letter of Credit. In the event that thirty (30)
------------------------------------
days prior to the expiry date set forth in the Letter of Credit or replacement
Letter of Credit required to be provided by Tenant pursuant to Article 20 hereof
and which is in effect at such time, Tenant fails to (1) obtain an extension of
such Letter of Credit or (2) provide a new Letter of Credit, as security for the
performance of all of its obligations hereunder in form and substance
satisfactory to Landlord, Landlord may, at its sole and exclusive remedy for
such default, present drafts for payment of the entire amount of the Letter of
Credit and such amounts shall be held by Landlord as a Security Deposit pursuant
to the terms of Article 20 hereof.
APPENDIX H
Page 2 of 2
<PAGE>
EXHIBIT 10.9
360 degrees PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of this 21st day of
October, 1997 (the "Effective Date") between Metawave Communications
Corporation, a Delaware corporation ("Seller"), and 360 COMMUNICATIONS COMPANY,
a Delaware corporation (the "Company").
The parties, in consideration of the mutual covenants, agreements and
promises of the other set forth in this Agreement and intending to be legally
bound, agree as follows:
1. AGREEMENT
Seller agrees to manufacture, sell and deliver to the Company, and the
Company agrees to purchase, the Products identified in Exhibit A to this
Agreement (the "Initial Order") in accordance with the specifications and the
terms and conditions hereof. As part of the Initial Order, Seller agrees to
provide and the Company agrees to purchase, the Services identified in Exhibit A
to this Agreement. Notwithstanding any other provision of this Agreement or any
other contract between the parties to the contrary, the provisions of this
Agreement shall apply to the Initial Order as well as all additional Orders for
the Products in excess of the Initial Order (the "Additional Orders") during the
term of this Agreement unless the parties expressly agree by written
modification to this Agreement that the provisions of this Agreement shall not
apply. ANY ADDITIONAL OR DIFFERENT TERMS IN ANY ACKNOWLEDGMENT, INVOICE OR
OTHER COMMUNICATION TO THE COMPANY SHALL BE DEEMED OBJECTED TO BY THE COMPANY
WITHOUT NEED OF FURTHER NOTICE OF OBJECTION AND SHALL BE OF NO EFFECT AND NOT IN
ANY CIRCUMSTANCE BINDING UPON THE COMPANY UNLESS EXPRESSLY ACCEPTED BY THE
COMPANY IN WRITING.
2. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
"Acceptance Test Procedure" shall mean the testing procedures and protocols
described and administered as set forth in Exhibit C.
"Certification of Acceptance" shall mean the Company's certification of
Seller's satisfactory completion of the Acceptance Test Procedure in the form
set forth in Exhibit C.
"Order" shall mean this Agreement, together with any purchase order or
other communication the Company may deliver to Seller for the purchase of the
Products and Services which incorporates the terms and conditions of this
Agreement and which has been accepted by Seller.
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[***]
[***]
"Products" shall mean the products listed on Exhibit A hereto and the
Software referenced in Exhibit E or any additional products set forth in any
amendments to Exhibit A or E as may be subsequently agreed to from time to time
by Seller and the Company or in an Order.
"Purchase Price" shall mean the price of the Products shown on Exhibit A
attached hereto and incorporated herein or any other amount set forth in any
amendments to Exhibit A as may be subsequently agreed to from time to time by
Seller and the Company.
"Software" shall mean the object-code computer programs, including firmware
object code, licensed by Seller for use solely with the Products which enables
the Products to perform its functions and processes.
"Software License" shall mean the software license for the software to be
delivered to the Company for use with the Products set forth in Exhibit E.
"Specifications" shall mean the specifications for the Products set forth
in Exhibit B attached hereto and incorporated herein.
3. PURCHASE PRICE
The Purchase Price(s) for the Products set forth in Exhibit A are no higher
than the prices quoted by Seller to the Company in Seller's written bid
therefor, unless agreed to by the Company in writing.
4. DELIVERY OF PRODUCTS
All dates for delivery of Products are firm, and time is of the essence.
Seller shall deliver the Products in the Initial Order to the Company's
designated location on or before the date(s) specified in Exhibit A hereto, or
to the location on or before the date specified in an Order, failing which
Seller shall pay to the Company a charge, for every [***] of delay, equal to the
rate of [***] of the Purchase Price of the Products which have been delayed,
such charge to begin to accrue [***] after the date specified for delivery.
Such charges shall not exceed in the aggregate [***]. In the event that the
delivery of an Order is delayed more than [***] beyond the delivery date
specified in such Order, Customer shall have the right to cancel such Order
without penalty.
5. SHIPPING INSTRUCTIONS, CHARGES AND PACKING
a. Unless otherwise instructed by the Company, Seller shall (1) ship all
Products for a designated location complete; (2) ship to the destination
designated in Exhibit A or in an Order; (3) enclose a packing memorandum with
each shipment; (4) reference this Agreement on all packages and shipping papers;
and (5) render
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
invoices in accordance with Section 10 below. The Company shall be responsible
for payment of all shipping charges.
b. Shipping charges to the destinations specified in Exhibit A shall be
as specified in Exhibit A. If the Company rejects or cancels for good cause any
Products, Seller shall bear all shipping charges relating to such Products.
c. Products shall be packed by Seller, at no additional charge to the
Company, in containers adequate to prevent damage during shipping, handling and
storage.
6. ORDERS; CHANGES AND CANCELLATIONS
a. The Company shall order all Products and Services pursuant to this
Agreement (other than the Initial Order set forth in Exhibit A) by an Order,
which shall be delivered to Seller not later than [***] days prior to the date
of delivery for such Products and Services specified in the Order. Each Order
shall only become binding on Seller and Customer when agreement has been reached
by the parties on all of the terms therein and Seller has confirmed its
acceptance of the Purchase Order.
b. Customer shall give Seller, for planning purposes, a non-binding
forecast of its estimated requirements for the Products and Services for the
forthcoming [***] and such forecast shall be updated on a quarterly basis. The
first such forecast shall be delivered by the Company to the Seller in December
1997.
c. The Company may, by 30 days' written notice to Seller at any time
before delivery is made, make changes, including changes to quantities,
specifications, destinations or other terms set forth in an Order, [***].
d. In the event of destruction of all or a portion of a Product located
at one of Customer's cell sites (e.g., by fire, flood, theft or other natural
or man-made causes), the Company shall ship a replacement Product (or parts)
within [***] of receipt of notice from Customer to be followed within [***] by
an Order from Customer.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
7. TITLE; RISK OF LOSS
a. Unless otherwise specified herein, title to Products sold by Seller to
the Company shall vest in the Company when the Products have been delivered to
the Company to the location specified in Exhibit A hereto or in an Order (except
title to software shall never pass).
b. Seller shall bear the risk of loss of or damage to any Product until
delivery of the Product to the destination specified in Exhibit A or in an Order
and acceptance by the Company.
8. PERFORMANCE EVALUATION FOR INITIAL ORDER
a. At the end of the Performance Evaluation Period for the Initial Order,
Seller and the Company shall review the data for the Products in the Initial
Order in accordance with the methodology set forth in Exhibit D and shall
mutually agree on the Performance Results. [***].
b. There shall be no Performance Evaluation Period for any Additional
Order.
9. WARRANTY
a. Seller warrants that all Products furnished hereunder will conform in
all material respects with the requirements of this Agreement and the
Specifications; that all Products are free from defects in design, materials,
workmanship and title. These warranties shall survive delivery, acceptance and
payment of the Purchase Price for a period of [***] from the date of delivery of
each such Product to the Company. The warranties in this Agreement are given in
lieu of all other warranties express or implied which are specifically excluded,
including, without limitation, implied warranties of merchantibility and fitness
for a particular purpose.
b. If the Company believes that there is a breach of any warranty set
forth herein, the Company will notify Seller, setting forth in writing the
nature of the claimed
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
breach. Seller shall promptly investigate such breach and advise the Company of
Seller's planned corrective action. Thereafter, Seller shall promptly repair or
replace such Product or Products or take such other action as may be acceptable
to the Company to correct such breach of warranty at no additional charge to the
Company. If such breach of warranty has not been corrected to the Company's
satisfaction within a reasonable time (not to exceed thirty (30) days from the
date of the Company's notice to Seller of the breach), the Company may, in
addition to all other rights and remedies provided by law or this Agreement,
suspend delivery of any then undelivered portion of the Products to be sold by
the Seller to the Company under this Agreement.
c. This warranty is void if (i) the Product is used in other than its
normal and customary manner; (ii) the Product has been subject to misuse,
accident, neglect or damage; (iii) the Product has been installed, optimized or
moved from its original installation site by any person other than Seller or a
person who has been trained by Seller to provide such services; or (iv)
unauthorized alterations or repairs have been made, or unapproved parts used in
the equipment.
d. Seller warrants that the Software will not abnormally end or provide
invalid or incorrect results arising from the use of date data beyond the year
1999.
10. INVOICES AND PAYMENT
a. Seller shall render an invoice for the Initial Order promptly
following agreement by the parties on the Performance Results. Seller shall
render an invoice for Additional Orders promptly upon Acceptance of the Products
and Services. In either case, the invoice shall be computed on the basis of the
prices set forth in Exhibit A [***] and shall identify and show separately
quantities, type of Services, total amounts for each item, shipping charges,
applicable sales or use taxes and total amount due. The Company shall promptly
pay Seller the amount due within 30 days of the date of invoice, unless it is in
dispute; provided, however, that unless otherwise agreed, payment for shortages
and/or non-conforming Products may be withheld by the Company. The Company shall
pay a late fee at the rate of one and one-half percent (1.5%) of the amount due
for each month or portion thereof that the amount remains unpaid.
b. If the Company disputes any invoices rendered or amount paid, the
Company will so notify Seller, and the parties will use their reasonable efforts
to resolve such dispute expeditiously. [***].
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
11. TAXES
The Purchase Price(s) set forth herein include all taxes of whatever nature
except state sales and use taxes, which shall be added as applicable and stated
as separate items on the invoice applicable to each delivery of Products.
12. INFRINGEMENT INDEMNITY
a. Seller shall defend the Company against (or, at its option, settle) a
claim that the Products supplied hereunder infringe a United States patent or
copyright provided that (i) the Company promptly notifies Seller in writing of
the claim, (ii) the Company gives Seller full opportunity and authority to
assume sole control of the defense and all related settlement negotiations, and
(iii) the Company gives Seller information and assistance for the defense (the
Company will be reimbursed for reasonable costs and expenses incurred in
rendering such assistance, against receipt of invoices therefor). Subject to
the conditions and limitations of liability stated in this Agreement, Seller
shall indemnify and hold harmless the Company from all payments, which by final
judgments in such suits, may be assessed against the Company on account of such
alleged infringement and shall pay resulting settlements, costs (including
reasonable attorneys' fees) and damages finally awarded against the Company by a
court of law.
b. The Company agrees that if the Products become, or in Seller's opinion
are likely to become, the subject of such a claim, the Company will permit
Seller, at its option and expense, either to procure the right for the Company
to continue using such Products or to replace or modify same so that they become
non-infringing, and, if neither of the foregoing alternatives is available on
terms which are acceptable to Seller, the Company shall at the written request
of Seller, return the infringing or potentially infringing Products. The Company
shall receive a refund of the prorated undepreciated portion of the Purchase
Price actually paid by the Company to Seller for the returned portion of the
Products. The Purchase Price shall be depreciated over a five (5) year period.
c. Seller disclaims any and all liability for any claim of patent or
copyright infringement (i) based upon adherence to specifications, designs or
instructions furnished by the Company, (ii) based upon the combination,
operation or use of any Products supplied hereunder with products, software or
data not supplied by Seller, or (iii) based upon alteration of the Products or
modification of any Software made by any party other than Seller.
13. [***]
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[***]
14. INDEPENDENT CONTRACTOR
Seller hereby declares and agrees that Seller is engaged in an independent
business and will perform its obligations under this Agreement as an independent
contractor and not as the agent or employee of the Company; that the persons
performing services hereunder are not agents or employees of the Company; that
Seller has and hereby retains the right to exercise full control of and
supervision over the performance of Seller's obligations hereunder and full
control over the employment, direction, compensation and discharge of all
employees assisting in the performance of such obligations; that Seller will be
solely responsible for all matters relating to payment of such employees,
including compliance with workers' compensation, unemployment, disability
insurance, social security, withholding and all other federal, state and local
laws, rules and regulations governing such matters; and that Seller will be
responsible for Seller's own acts and those of Seller's agents, employees and
contractors during the performance of Seller's obligations under this Agreement.
15. NONEXCLUSIVE MARKET RIGHTS
It is expressly understood that this Agreement does not grant Seller an
exclusive privilege to furnish to the Company any or all of the type of products
which are the subject of this Agreement which the Company may require. The
Company expressly reserves the right to contract with others for the purchase of
products comparable or identical to the products and services which are the
subject of this Agreement.
16. INDEMNIFICATION
Seller shall indemnify the Company, its employees and directors, and each
of them, against any loss, cost, damage, claim, expense or liability, including
but not limited to liability as a result of injury to or death of any person or
damage to or loss or destruction of any property arising out of, as a result of,
or in connection with the performance of this Agreement and directly caused, in
whole or in part, by the acts or omissions, negligent or otherwise, of Seller or
a contractor or an agent of Seller or an employee of anyone of them, except
where such loss, cost, damage, claim, expense or liability arises from the sole
negligence or willful misconduct of the Company or its employees. As used in the
preceding sentence, the words "any person" shall include but shall not be
limited to, a contractor or an agent of the Company or Seller, and an employee
of the Company, Seller or any such contractor or agent; and the words " any
property" shall include, but shall not be limited to, property of the Company,
Seller or any such contractor or agent, or an employee of any of them. Seller
shall, at its own expense, defend any suit asserting a claim for any loss,
damage or liability specified above, and Seller shall pay any costs and
attorneys' fees that may me incurred by the Company in connection with any such
claim or suit or in enforcing
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
the indemnity granted above, provided that Seller (i) is given prompt notice of
any such claim or suit and (ii) full opportunity to assume control of the
defense or settlement.
17. TERM AND TERMINATION
The term of this Agreement shall be [***] from the Effective Date. If
either party is in material default of any of its obligations under this
Agreement and such default continues for thirty (30) days after written notice
thereof by the party not in default, the nondefaulting party may cancel this
Agreement and/or the delivery of any Products which may be affected by such
default.
18. ASSIGNMENT
a. Any assignment by Seller of this Agreement or any other interest
hereunder without the Company's prior written consent, shall be void, except
assignment to a person or entity who acquires all or substantially all of the
assets, business or stock of Seller, whether by sale, merger or otherwise.
b. The Company reserves the right to assign this Agreement or any portion
hereof to any present or future affiliate, subsidiary or parent corporation.
c. Subject to the provisions of paragraphs a and b above, this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns, if any, of the parties hereto.
19. NOTICES
Except as otherwise specified in this Agreement, all notices or other
communications hereunder shall be deemed to have been duly given when made in
writing and delivered in person or deposited in the United States mail, postage
prepaid, certified mail, return receipt requested, or by a reputable overnight
courier service providing proof of delivery, or by confirmed facsimile
transmission and addressed as follows:
TO SELLER TO THE COMPANY:
Metawave Communications Corporation 360 degrees Communications Company
8700 148th Avenue NE 8725 Higgins Road
Redmond WA 98052 Chicago, Illinois 60636
Attn:VP, Sales Attn: Tim Thompson
Copy to: General Counsel Copy to: Steve Podrzycki
Fax: 425 702 5970 Fax: 773-399-7291
The address to which notices or communications may be given to either party
may be changed by written notice given by such party to the other pursuant to
this section 18.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
20. COMPLIANCE WITH LAWS
Seller shall comply with all applicable federal, state and local laws,
regulations and codes, including the procurement of permits and licenses when
needed, in the performance of this Agreement. Seller shall indemnify the Company
against any loss or damage that may be sustained by reason of Seller's failure
to comply with such federal, state and local laws, regulations and codes.
21. FORCE MAJEURE
Except for payment of moneys due, neither party shall be liable for delays in
delivery or performance or for failure to manufacture, deliver or perform
resulting from acts beyond the reasonable control of the party responsible for
performance. Such acts shall include, but not be limited to(a) acts of God, acts
of a public enemy, acts or failures to act by the other party, acts of civil or
military authority, governmental priorities, strikes or other labor
disturbances, hurricanes, earthquakes, fires, floods, epidemics, embargoes, war,
riots, and loss or damage to goods in transit; or (b) inability to obtain
necessary products, components, services or facilities on account of causes
beyond the reasonable control of the delayed party or its suppliers. In the
event of any such delay, the date(s) of delivery or performance shall be
extended for as many days are reasonably required due to the delay.
22. GENERAL PROVISIONS
a. All information, data and materials provided by either party under
this Agreement shall be subject to the terms and conditions of the Non-
Disclosure Agreement between the parties dated March 26, 1996.
b. Except as otherwise provided in this Agreement, the provisions of this
Agreement are for the benefit of the parties hereto and not for any other
person.
c. Waiver by either party of any obligation or default by the other party
shall not be deemed a waiver by such party of any other obligation or default.
d. The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
e. This Agreement and each Order shall be construed in accordance with
the internal laws of the State of Illinois, without regard to its choice of law
provisions .
f. Any rights of cancellation, termination or other remedies prescribed
in this Agreement are cumulative and are not intended to be exclusive of any
other remedies to which the injured party may be entitled at law or equity
(including but not limited to the remedies of specific performance and cover) in
case of any breach or threatened breach by the other party of any provision of
this Agreement, unless such other remedies which are not prescribed in this
Agreement are specifically limited or excluded by this Agreement. The use of one
or more available remedies shall not bar the use of any other remedy for the
purpose of
<PAGE>
enforcing the provisions of this Agreement; provided, however, that a party
shall not be entitled to retain the benefit of inconsistent remedies.
g. If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Agreement, but rather the entire Agreement shall
be construed as if not containing the particular invalid or unenforceable
provisions, and the rights and obligations or Seller and the Company shall be
construed and enforced accordingly.
h. This Agreement, including all Exhibits attached to or referenced in
this Agreement, shall constitute the entire agreement between the Company and
Seller with respect to the subject matter hereof.
i. No provision of this Agreement shall be deemed waived, amended or
modified by any party hereto, unless such waiver, amendment or modification is
in writing and signed by a duly authorized representative of each of the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
Metawave Communications Corporation 360 degrees Communications Company
By:/s/ Robert Hunsberger By:/s/ Gary Burge
---------------------- ------------------------
Title: President & CEO Title: Senior Vice President of
------------------- -------------------------
Engineering & Network Operations
--------------------------------
Date Signed: 10/20/97 Date Signed: 10/21/97
------------- --------------------
EXHIBITS ATTACHED:
A Products and Services Pricing
B Product Specifications
C Acceptance Test Procedure
D Performance Criteria for Initial Order
E Software License
<PAGE>
EXHIBIT A
---------
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORPORATION ("SELLER")
AND
360 COMMUNICATIONS COMPANY ("COMPANY")
PRODUCTS AND SERVICES PRICING
-----------------------------
For the purposes of uniformity and brevity, references to Agreement or to an
Exhibit shall refer to the Purchase Agreement to which this document is Exhibit
A and to the other Exhibits to that Agreement. All definitions set forth in the
Agreement shall apply hereto unless otherwise expressly defined herein.
INTRODUCTION
This Exhibit A (Products and Services Pricing) lists the pricing for the Initial
Order of Products and Services as of the Effective Date of the Agreement. All
payments for the Products and Services shall be made according to the terms set
forth in the Agreement.
<PAGE>
EXHIBIT A: PRODUCTS AND SERVICES PRICING (CONT.)
------------------------------------------------
<TABLE>
<CAPTION>
SPOTLIGHT PRICING (LPAS WITH 30 WATT MODULES)
- ----------------------------------------------------------------------------
SPOTLIGHT
CONFIGURATIONS [***] [***] [***] [***]
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[***] [***] [***] [***] [***]
- ----------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- ----------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- ----------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- ----------------------------------------------------------------------------
</TABLE>
* The software licensing fee for the current version of LampLighter is included
in the purchase price of each unit.
<TABLE>
<CAPTION>
SPOTLIGHT PRICING
(LPAS WITH 40 WATT MODULES)
- -------------------------------------------
SPOTLIGHT
CONFIGURATIONS [***]
- -------------------------------------------
<S> <C>
[***] [***]
- -------------------------------------------
[***] [***]
- -------------------------------------------
[***] [***]
- -------------------------------------------
[***] [***]
- -------------------------------------------
[***] [***]
- -------------------------------------------
[***] [***]
- -------------------------------------------
[***] [***]
- -------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SPOTLIGHT RECOMMENDED SPARES
- -------------------------------------------------------------------------
PART NUMBER DESCRIPTION [***] [***]
- -------------------------------------------------------------------------
<S> <C> <C> <C>
[***] [***] [***] [***]
- -------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------
TOTAL [***]
- -------------------------------------------------------------------------
</TABLE>
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT A: PRODUCTS AND SERVICES PRICING (CONT.)
INITIAL ORDER
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT A: PRODUCTS AND SERVICES PRICING (CONT.)
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT A: PRODUCTS AND SERVICES PRICING (CONT.)
2.0 SPOTLIGHT FIELD REPLACEABLE UNITS PRICING LIST
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Exhibit B: Performance Specifications
to the Products and Services Purchase Agreement
SpotLight(TM) Multibeam Antenna Platform 2.0
Transmit/Receive
(for use with Motorola HDII Base Station Equipment)
________________________________________________________________________________
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1997 METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
________________________________________________________________________________
<PAGE>
<TABLE>
<S> <C>
1. INTRODUCTION........................................................ 3
2. SYSTEM DESCRIPTION.................................................. 4
2.1 Introduction.................................................... 4
2.2 General System Overview......................................... 4
2.2.1 Operational Overview.................................... 5
2.2.2 SIG/SCAN................................................ 7
2.2.3 Antennas................................................ 7
2.2.4 Lightning Arrestor...................................... 7
2.2.5 Rack Mounted Components................................. 7
2.2.6 Interfaces.............................................. 9
2.3 SpotLight Specifications........................................ 10
2.3.1 RF Performance.......................................... 10
2.3.2 Electrical Specifications............................... 10
2.3.3 Environmental Specifications............................ 10
2.3.4 Physical Specifications................................. 11
2.3.5 Alarming................................................ 11
2.3.6 Reset................................................... 11
2.3.7 SMAP Frequency Reference................................ 11
2.4 RF Performance.................................................. 11
2.4.1 Angular Diversity....................................... 11
2.4.2 Improved C/I Ratio...................................... 12
2.4.3 Increased Range Extension............................... 12
2.4.4 Transmit Output Power................................... 12
2.4.5 Transmit Spurious Emissions............................. 12
2.5 System Software................................................. 12
2.5.1 LampLighter Software.................................... 12
2.5.2 Embedded System Software................................ 13
2.6 Software Performance............................................ 13
2.6.1 Program Upgrades........................................ 13
2.6.2 Programming and Development Standards................... 13
2.6.3 Built-In-Self-Test...................................... 14
2.6.4 Response Times.......................................... 14
3. REGULATORY REQUIREMENTS............................................. 14
3.1 US.......................................................... 14
</TABLE>
<PAGE>
For purposes of uniformity and brevity, references to Agreement or to an Exhibit
shall refer to the Products and Services Purchase Agreement to which this
document is Exhibit B and to the other Exhibits to that Agreement. All
definitions set forth in the Agreement shall apply hereto.
1. INTRODUCTION
The purpose of this document is to describe and specify Metawave's
SpotLight 2.0 Multibeam Antenna Platform including:
. System operation
. Hardware and software elements of the SpotLight equipment
. Interconnect between SpotLight equipment and the base station equipment
While the specifications contained in this document are based on the most
current information available, such information is based on cell site
specific data and may not apply to all cell sites contained within a
system. The specifications contained in this document may change from cell
site to cell site. Metawave reserves the right to make changes to any
design, specification, manufacturing techniques and/or product testing
procedures.
ACRONYMS AND TERMS DEFINITION
-----------------------------
C/I Carrier to Interference Ratio
FRU Field Replaceable Unit
LNA Low Noise Amplifier
LPA Linear Power Amplifier
RCU Radio Channel Unit (P/O Motorola Cell Equipment)
RF Radio Frequency
RX Receive
SMAP Spotlight Multibeam Antenna Platform
SMU Spectrum Management Unit
TX Transmit
TXCD Transmit Combiner Driver
<PAGE>
2. SYSTEM DESCRIPTION
2.1 Introduction
The Spotlight Multibeam Antenna Platform (SMAP) brings enhanced performance
to existing cellular technology. The system replaces the existing antenna
components at a cell site with a high performance antenna array coupled to
an RF switch matrix and control system. This upgrade provides a
dramatically improved carrier-to-interference ratio (C/I) and is the basis
for many other performance enhancements, such as improved audio quality,
extended range and greater traffic capacity.
2.2 General System Overview
The SMAP provides the necessary hardware and software to allow the most
appropriate narrow beam antennas (2 receive paths and 1 transmit path) to
be connected to base station RCUs. The major subsystem components which
make up the SpotLight Multibeam Antenna Platform (SMAP) including antennas,
RF switch matrix, and controller are depicted in Figure 1.
<PAGE>
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
3. REGULATORY REQUIREMENTS
This section specifies requirements which are set primarily by local and/or
national governing bodies, consortiums and standards committees.
3.1 US
The SpotLight system complies with appropriate US FCC regulations
(includes both RF and EMI). Specifically, the SMAP shall comply with the
regulations defined in CFR 47 part 22 and part 15.
<PAGE>
EXHIBIT C: ACCEPTANCE TEST PROCEDURE
(ATP)
TO THE PRODUCTS AND SERVICES PURCHASE AGREEMENT
SPOTLIGHT MULTIBEAM ANTENNA PLATFORM
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
________________________________________________________________________________
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1997, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. INTRODUCTION...................................................... 3
2. ACCEPTANCE TESTS.................................................. 3
2.1. LampLighter Installation Test................................ 4
2.2. System Configuration Test.................................... 5
2.3. Transmit Effective Radiated Power (Tx ERP) Test.............. 6
2.4. Receive Sensitivity Test..................................... 7
2.5. Call Processing Test......................................... 8
2.6. Alarm Functionality Test..................................... 9
</TABLE>
<PAGE>
SPOTLIGHT ACCEPTANCE TEST PROCEDURE
For purposes of uniformity and brevity, references to Agreement or to an
Exhibit shall refer to the Products and Services Purchase Agreement to
which this document is Exhibit C and to the other Exhibits to that
Agreement. All definitions set forth in the Agreement shall apply hereto.
1. INTRODUCTION
The objective of the Acceptance Test Procedure (ATP) is to demonstrate the
proper installation and operation of the SpotLight Multibeam Antenna
Platform ("SpotLight"). Acceptance shall occur upon the demonstration of
the proper installation and optimization of SpotLight. Within [***] after
Metawave has advised Customer that installation and optimization are
complete, Customer shall furnish representatives to witness the Acceptance
Tests as set forth in this Exhibit C. The representatives shall then be
available on a continuous basis to witness the ATP. A SpotLight Certificate
of Acceptance, included at the end of this Exhibit C, contains a test
results checklist that Metawave and Customer fill out and sign.
2. [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT D
---------
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORPORATION ("SELLER")
AND
360 DEGREES COMMUNICATIONS COMPANY ("COMPANY")
SPOTLIGHT PERFORMANCE CRITERIA
------------------------------
For the purposes of uniformity and brevity, references to Agreement or to an
Exhibit shall refer to the Purchase Agreement to which this document is Exhibit
D and to the other Exhibits to that Agreement.
360 degrees Communications - Southeast Region
<PAGE>
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT E
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORPORATION ("SELLER")
AND
360 DEGREES COMMUNICATIONS COMPANY ("COMPANY")
SOFTWARE LICENSE
----------------
For purposes of uniformity and brevity, references to Agreement or to an Exhibit
shall refer to the Purchase Agreement to which this document is Exhibit E and to
the other Exhibits to that Agreement. All definitions set forth in the
Agreement shall apply hereto.
1. SCOPE
Pursuant to the above-identified Agreement, Software will be delivered by
Seller to Company for use with the Products according to the terms of the
Agreement and this Exhibit. Company shall then become a licensee with
respect to such Software.
2. LICENSING GRANT
2.1 Concurrent with execution of the Agreement, Seller grants to Company a
revocable, non-exclusive and non-transferable license under Seller's
applicable proprietary rights to use Software delivered to Company
hereunder in accordance with the terms and conditions set forth
herein.
2.2 Company agrees to pay the Licensing Fees for the right to use the
Software and features and for any support thereof as set forth in
Exhibit A (Price List) or in an Amendment thereto.
3. LIMITATIONS ON USE OF SOFTWARE
3.1 Without the prior written consent of Seller, Company shall only use
the Software in conjunction with a single Product existing within the
site specified in the Order ("Designated Product").
3.2 Company may use the Software to routinely operate and maintain the
Designated Product. For purposes of this Subsection, "maintain" shall
be construed to mean performing diagnostic testing consistent with
Company's obligation to provide the first level of maintenance. Under
no condition shall the Software be used for any other purpose,
including, but not limited to, substituted products, or products not
owned by Company, or products located at a location other than the
site specified in the Order.
3.3 The License granted to Company in Section 2 is personal and may not be
transferred to another product or site without the written consent of
Seller.
<PAGE>
3.4 To the extent specified in Exhibit A or an Amendment thereto and
provided Company has paid any applicable licensing fees, Company shall
have the right to use features in accordance with the terms of this
Exhibit. Company acknowledges that the Software may contain therein
several additional features which are each covered by separate
licensing fees. Company agrees not to use, and the license
specifically does not extend to, such additional features unless they
are specified in Exhibit A or an amendment thereto and provided
Company has paid the applicable licensing fees for such additional
features.
3.5 The Software is subject to laws protecting trade secrets, know-how,
confidentiality and copyright.
3.6 Company shall not translate, modify, adapt, decompile, disassemble, or
reverse engineer the Software or any portion thereof.
3.7 Unless otherwise expressly agreed by Seller, Company shall not permit
its directors, officers, employees or any other person under its
direct or indirect control, to write, develop, produce, sell, or
license any software that performs the same functions as the Software
by means directly attributable to access to the Software (e.g. reverse
engineering or copying).
3.8 Company shall not export the Software from the United States without
the written permission of Seller. If written permission is granted for
export of the Software, then Company shall comply with all U.S. laws
and regulations for such exports and shall hold Seller harmless,
including legal fees and expenses for any violation or attempted
violation of the U.S. export laws.
4. RIGHT TO COPY, PROTECTION AND SECURITY
4.1 Software provided hereunder may be copied (for back-up purposes only)
in whole or in part, in printed or machine-readable form for Company's
internal use only, provided, however, that no more than two (2)
printed copies and two (2) machine-readable copies shall be in
existence at any one time without the prior written consent of Seller,
other than copies resident in the Products.
4.2 With reference to any copyright notice of Seller associated with
Software, Company agrees to include the same on all copies it makes in
whole or in part. Seller's copyright notice may appear in any of
several forms, including machine-readable form. Use of a copyright
notice on the Software does not imply that such has been published or
otherwise made generally available to the public.
4.3 Company agrees to keep confidential, in accordance with the terms of
the Agreement, and not provide or otherwise make available in any form
any Software or its contents, or any portion thereof, or any
documentation pertaining to the Software, to any person other than
employees of Company or Seller.
4.4 Software, including features is the sole and exclusive property of
Seller and no title or ownership rights to the Software or any of its
parts, including documentation, is transferred to Company.
4.5 Company acknowledges that it is the responsibility of Company to take
all reasonable measures to safeguard Software and to prevent its
unauthorized use or duplication.
<PAGE>
5. REMEDIES
Company acknowledges that violation of the terms of this Exhibit or the
Agreement shall cause Seller irreparable harm for which monetary damages
may be inadequate, and Company agrees that Seller may seek temporary or
permanent injunctive relief without the need to prove actual harm in order
to protect Seller's interests.
6. TERM
Unless otherwise terminated pursuant to Section 7 herein, the term of the
license granted pursuant to Section 2 herein shall be co-extensive with the
term of any licensing and/or maintenance fees paid by Company to Seller
pursuant to Exhibit A or an Amendment thereto.
7. TERMINATION
7.1 The license granted hereunder may be terminated by Company upon one
(1) month's prior written notice.
7.2 Seller may terminate the license granted hereunder if Company is in
default of any of the terms and conditions of the Agreement or
Exhibits, and such termination shall be effective if Company fails to
correct such default within ten (10) days after written notice thereof
by Seller. The provisions of Sections 4 and 5 herein shall survive
termination of any such license.
7.3 Within one (1) month after termination of the license granted
hereunder, Company shall furnish to Seller a document certifying that
through its best efforts and to the best of its knowledge, the
original and all copies in whole or in part of all Software, in any
form, including any copy in an updated work, have been returned to
Seller or destroyed. With prior written consent from Seller, Company
may retain one (1) copy for archival purposes only.
8. RIGHTS OF THE PARTIES
8.1 Nothing contained herein shall be deemed to grant, either directly or
by implication, estoppel, or otherwise, any license under any patents
or patent applications of Seller; except that Company shall have a
non-exclusive, license under Seller's patents and patent applications
to use, in Seller-supplied equipment only, Software supplied
hereunder, when such license is implied or otherwise arises by
operation of law by virtue of the purchase of such copies from Seller.
8.2 Rights in programs or operating systems of third parties, if any, are
further limited by their license agreements with such third parties,
which agreements are hereby incorporated by reference thereto and made
a part hereof as if fully set forth herein. Company agrees to abide
thereby.
8.3 During the term of the license granted pursuant to Section 2 herein
and for a period of one (1) year after expiration or termination,
Seller, and where applicable, its licensor(s), or their
representatives may, upon prior notice to Company, a) inspect the
files, computer processors, equipment, facilities and premises of
Company during normal working hours to verify Company's compliance
with this Agreement, and b) while conducting such inspection, copy or
retain all Software,
<PAGE>
including the medium on which it is stored and all documentation that
Company may possess in violation of the license or the Agreement.
8.4 Company acknowledges that the provisions of this Exhibit E are
intended to inure to the benefit of Seller and its licensors and their
respective successors in interest. Company acknowledges that Seller or
its licensors have the right to enforce these provisions against
Company, whether in Seller's or its licesnsor's name.
9. LIMITATIONS ON SOFTWARE
Company understands that errors occur in Software and Seller makes no
warranty that the Software will perform without error. Company agrees that
it is Company's responsibility to select and test the Software to be sure
it meets Company's needs. Company accepts the Software "as is".
10. ENTIRE UNDERSTANDING
Notwithstanding anything to the contrary in other agreements, purchase
orders or order acknowledgments; the Agreement and this Exhibit E set forth
the entire understanding and obligations regarding use of Software, implied
or expressed.
<PAGE>
EXHIBIT 10.10
METAWAVE COMMUNICATIONS CORPORATION
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of this 12th day of
December, 1997, (the "Effective Date") between Metawave Communications
Corporation, a Delaware corporation ("Seller"), and Telefonica Celular del
Paraguay S.A., a Paraguay corporation ("Customer"), a subsidiary of Millicom
International Cellular S.A., a Luxembourg corporation ("Millicom").
The parties, in consideration of the mutual covenants, agreements and promises
of the other set forth in this Agreement and intending to be legally bound,
agree as follows:
1. AGREEMENT
Seller agrees to sell to Customer, and Customer agrees to purchase, the
Products and Services identified on Exhibit A to this Agreement in accordance
with the specifications and the terms and conditions hereof and at the Purchase
Prices set forth in Exhibit A. Notwithstanding any other provision of this
Agreement or any other contract between the parties to the contrary, the
provisions of this Agreement shall apply to all Purchase Orders for the Products
and Services during the term of this Agreement unless the parties expressly
agree by written modification to this Agreement that the provisions of this
Agreement shall not apply. Any additional or different terms in any
acknowledgment, invoice, Purchase Order or other communication from one party to
the other shall be deemed objected to without need of further notice of
objection and shall be of no effect and not in any circumstance binding upon
either party unless expressly accepted by both parties in writing.
2. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth
below:
"Acceptance Date" shall mean for the Initial Order, a date which is no later
than the date specified in Exhibit C on which the Products in the Initial Order
shall satisfy the Acceptance Test Procedure and for Follow-on Orders, the date
that the Products satisfy the Acceptance Test Procedure.
"Acceptance Test Procedure" shall mean the testing procedures and protocols to
be agreed by the parties by January 15, 1998 and set forth in Exhibit C.
"Affiliate" shall mean any partnership, corporation or other entity (i) in which
Customer, directly or indirectly, owns a controlling interest or (ii) which owns
a controlling interest in Customer.
"Certificate of Acceptance" shall mean the Customer's certification of Seller's
satisfactory completion of the Acceptance Test Procedure in the form set forth
in Exhibit C.
<PAGE>
"Change Order" shall mean any subsequent change to a Purchase Order initiated by
either Seller or Customer, including but not limited to, changes in Site
configuration, pricing and delivery date, which is mutually agreed to by both
parties.
"Follow-on Order" shall mean any Products (and associated Services) in excess of
the Initial Order purchased by Customer pursuant to the terms and conditions of
this Agreement.
"Initial Order" shall mean the Products (and any associated Services) identified
in Exhibit A as the Initial Order which are purchased by Customer pursuant to
the terms and conditions of this Agreement.
[***]
[***]
[***]
"Products" shall mean the products listed on Exhibit A hereto or any additional
products set forth in any amendments to Exhibit A as may be subsequently agreed
to from time to time by Seller and Customer.
"Purchase Order" shall mean any purchase order Customer may deliver to Seller
for the purchase of the Products and Services which incorporates the terms and
conditions of this Agreement and which has been accepted by Seller.
"Purchase Price" shall mean the price of the Products and the price of the
Services shown on Exhibit A or any other amount set forth in any amendments to
Exhibit A as may be subsequently agreed to from time to time by Seller and
Customer.
"Services" shall mean the engineering services listed on Exhibit A hereto or
any additional services set forth in any amendments to Exhibit A as may be
subsequently agreed to from time to time by Seller and Customer.
"Site" shall mean each of the Customer cell site locations at which a Product is
installed.
"Software" shall mean the object-code computer programs, including firmware
object code, licensed by Seller for use solely with the Products which enables
the Products to perform its functions and processes.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
"Software License" shall mean the software license for the software to be
delivered to Customer for use with the Products as set forth in Exhibit D.
"Specifications" shall mean the specifications for the Products set forth in
Exhibit B and incorporated herein.
3. DELIVERY AND ACCEPTANCE OF PRODUCTS
Seller shall, for both the Initial Order and Follow-on Orders, (i) properly
deliver the Products to Customer's designated location on or before the date(s)
specified in a Purchase Order, and (ii) satisfy the Acceptance Test Procedure by
the Acceptance Date, failing which Seller shall pay to Customer (or credit
against amounts owed to Seller by Customer) a charge, [***] of delay in
delivery, equal to the rate of [***] of the Products which have been delayed,
provided, however, that such charge shall not apply to any delay caused by an
act of force majeure, as set forth in section 15 hereof or to any delays in the
Acceptance Date for the Initial Order. Such charges shall not exceed [***] of
each Product so delayed.
4. SHIPPING, CHARGES AND PACKING
a. Unless otherwise instructed by Customer, Seller shall ship all
Products to the destination designated in a Purchase Order and render
invoices in accordance with Section 8 below.
b. Products shall be packed by Seller, at no additional charge to
Customer, in containers adequate to prevent damage during shipping,
handling and storage. Seller shall adequately insure Products during
shipment from Seller's facility to the Sites.
c. Customer shall reimburse Seller at cost for (or pay directly) all
shipping costs, insurance costs, customs clearance charges, duties, levies
and any other charges in connection with the sale of the Products and their
delivery to the Sites.
5. PURCHASE ORDERS; CHANGES AND CANCELLATIONS
a. Customer shall order all Products and Services pursuant to this
Agreement by a Purchase Order, which shall specify the date of delivery for
such Products and Services mutually agreed by the parties. Each Purchase
Order shall only become binding on Seller and Customer when agreement has
been reached by the parties on all of the terms therein and Seller has
confirmed its acceptance of the Purchase Order in writing (such acceptance
not to be unreasonably withheld) subject to completion of the Site survey
for each Product pursuant to section 5(b) below. At its sole option, Seller
may decline acceptance of a Purchase Order if (i) Seller has determined
that the costs associated with the sale of the Products and Services to the
Sites specified in the Purchase Order are prohibitive or the conditions at
such Sites are unacceptable; or (ii) the sale and delivery of the Products
and Services would contravene section 18(h) of this Agreement.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
b. The Product configurations set forth in Exhibit A hereto or in a
Purchase Order are subject to change following the completion of a Site
survey by Seller. A change to such configurations may result in a change in
the Purchase Price of the Products or Services or in the delivery date. Any
such change shall be agreed to in a written Change Order executed by both
parties.
c. Promptly following execution of this Agreement, Customer shall give
Seller, for planning purposes, a non-binding forecast of its estimated
requirements for the Products and Services for the forthcoming [***] and
such forecast shall be updated on a quarterly basis.
d. Customer may, by written notice no less than 30 days prior to Seller's
shipment of a Product , make changes to destinations specified in the
Purchase Order, provided the new destination is within the same country as
the original destination.
e. Customer may, by written notice no less than 45 days prior to delivery
date specified in Purchase Order, delay the delivery schedule,
provided that such delay does not extend the delivery date specified
in the Purchase Order beyond 180 days from Seller's acceptance of the
Purchase Order.
f. Customer may cancel delivery of a Product prior to the Seller's
shipment of a Product provided that if Customer directs such
cancellation (a) with less than [***] written notice from delivery
date specified in Purchase Order, Customer shall pay to Seller [***]
and (b) with between [***] written notice from delivery date specified
in Purchase Order, Customer shall pay to Seller a fee [***] of each
Product affected by such cancellation.
6. TITLE; RISK OF LOSS
a. [***].
b. Title to the Products supplied hereunder shall pass to Customer upon
delivery to a carrier at Metawave's factory in Redmond WA, USA.
7. WARRANTY
a. Seller warrants that (i) all Products furnished hereunder will conform
in all material respects with the requirements of this Agreement and
the Specifications, (ii) all Products are free from defects in
materials, workmanship and title, (iii) the media on which the
Software is contained will be free from defects in material and
workmanship under normal use and (iv) the Software will substantially
conform to the documentation provided by Seller for a period of [***]
from the date of execution of the Certificate of Acceptance for each
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Product. The warranties in this Agreement are given in lieu of all
other warranties express or implied which are specifically excluded,
including, without limitation, implied warranties of merchantibility
and fitness for a particular purpose.
b. If Customer believes that there is a breach of any warranty set forth
herein, Customer will notify Seller, setting forth in writing the
nature of the claimed breach. Seller shall promptly investigate such
breach and advise Customer of Seller's planned corrective action.
Thereafter, Seller shall promptly repair or replace such Product or
Products which includes Software or take such other action as may be
acceptable to Customer to correct such breach of warranty at no
additional charge to Customer. Any item replaced will be deemed to be
on an exchange basis and any item retained by Seller through
replacement will become the property of Seller. Items repaired or
replaced will be warranted for (i) ninety (90) days from the date that
any such item is placed into operation (Customer shall place any
repaired or replaced item into operation promptly upon receipt from
Seller) and functions properly (the repaired or replaced items shall
be deemed to have been placed into operation and to be functioning
properly within 30 days of receipt by Customer unless Seller is
otherwise notified in writing of non-operation by Customer) or (ii)
the balance of the remaining warranty period, whichever period of time
is longer. Such action on the part of Seller shall be the full extent
of Seller's liability and Customer's exclusive remedy hereunder.
c. This warranty is void if (i) the Product is used in other than its
normal and customary manner; (ii) the Product has been subject to
misuse, accident, neglect or damage; (iii) the Product has been
installed, optimized or moved from its original installation site by
any person other than Seller or a person who has been trained by
Seller to provide such services; or (iv) unauthorized alterations or
repairs have been made, or unapproved parts used in the equipment.
d. Seller shall negotiate in good faith an agreement with Customer
regarding its Product Maintenance Program to be set forth in Exhibit G
hereof and to be completed January 15, 1998. The Product Maintenance
Program will include an extended hardware and software warranty.
8. INVOICES AND PAYMENT
a. [***]
1. [***].
2. [***].
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
3. [***].
4. [***].
b. [***].
c. [***].
d. For the Initial Order only, Seller shall render invoices to Customer
every seven (7) days for reimbursement of air and ground
transportation and other expenses (as set forth in Exhibit A or an
Amendment) for Seller personnel providing Services. For all Follow-on
Orders, Seller shall charge a flat fee for Services, which shall
include expenses for the provision of the Services.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
e. All invoices sent by Seller to Customer shall be computed on the basis
of the prices set forth in Exhibit A and any Change Orders or
amendments and shall identify and show separately quantities of
Products, type of Services, total amounts for each item, shipping
charges, applicable sales or use taxes and total amount due. Customer
shall pay Seller the total amount due in an invoice (in U.S. Dollars)
and shall use best efforts to pay by wire transfer the amount due
within fifteen (15) days of the date of the invoices rendered pursuant
to subsections a(1) and (2) hereof. For all other invoices rendered
pursuant to subsections a(3), a(4), b and d hereof, Customer shall
promptly pay Seller by wire transfer in U.S. Dollars the amount due
within forty-five (45) days of the date of the invoice. Customer shall
pay a late fee at the rate of one and one-half percent (1.5%) of the
amount due for each month or portion thereof that the amount remains
unpaid, provided, however, that such late fee shall not apply in the
case of payments due under subsections a(1) and (2) hereof for the
first ten (10) days of delay.
f. Customer shall be responsible for the payment of all sales, use and
any other taxes applicable to the Products and Services outside the
United States provided by the Seller pursuant to this Agreement. When
Seller is required by law to collect such taxes, 100% thereof will be
added to invoices as separately stated charges and paid by Customer in
accordance with this section.
g. If Customer disputes any invoices rendered or amount paid, Customer
will so notify Seller, and the parties will use their reasonable
efforts to resolve such dispute expeditiously. [***].
9. INFRINGEMENT INDEMNITY
a. Seller shall defend Customer against (or, at its option, settle) a
claim that the Products supplied hereunder infringe a United States
patent or copyright provided that (i) Customer promptly notifies
Seller in writing of the claim, (ii) Customer gives Seller full
opportunity and authority to assume sole control of the defense and
all related settlement negotiations, and (iii) Customer gives Seller
information and assistance for the defense (Customer will be
reimbursed for reasonable costs and expenses incurred in rendering
such assistance, against receipt of invoices therefor). Subject to the
conditions and limitations of liability stated in this Agreement,
Seller shall indemnify and hold harmless Customer from all payments,
which by final judgments in such suits, may be assessed against
Customer on account of such alleged infringement and shall pay
resulting settlements, costs and damages finally awarded against
Customer by a court of law.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
b. Customer agrees that if the Products become, or in Seller's opinion
are likely to become, the subject of such a claim, Customer will
permit Seller, at its option and expense, either to procure the right
for Customer to continue using such Products or to replace or modify
same so that they become non-infringing, and, if neither of the
foregoing alternatives is available on terms which are acceptable to
Seller, Customer shall at the written request of Seller, return the
infringing or potentially infringing Products. Customer shall receive
a refund of the prorated undepreciated portion of the Purchase Price
actually paid by Customer to Seller for the returned portion of the
Products. The Purchase Price shall be depreciated over a seven (7)
year period.
c. Seller shall have no obligation to Customer with respect to any claim
of patent or copyright infringement which is based upon or related to
(i) adherence to customized specifications, designs or instructions
furnished by Customer, (ii) the interconnection or interface of any
Products supplied hereunder with base station products or software not
approved by Seller (such products approved by Seller are set forth in
Exhibit B, section 2.2.7.), or (iii) the alteration of the Products or
modification of any Software made by any party other than Seller.
10. INDEPENDENT CONTRACTOR
Seller hereby declares and agrees that Seller is engaged in an independent
business and will perform its obligations under this Agreement as an independent
contractor and not as the agent or employee of Customer.
11. INDEMNIFICATION
Seller shall indemnify Customer, its employees and directors, and each of them,
against any loss, cost, damage, claim, expense or liability, including but not
limited to liability as a result of injury to or death of any person or damage
to or loss or destruction of any property arising out of, as a result of, or in
connection with the performance of this Agreement and directly caused, in whole
or in part, by the acts or omissions, negligent or otherwise, of Seller or a
contractor or an agent of Seller or an employee of anyone of them, except where
such loss, cost, damage, claim, expense or liability arises from the sole
negligence or willful misconduct of Customer or its employees. Seller shall, at
its own expense, defend any suit asserting a claim for any loss, damage or
liability specified above, and Seller shall pay any costs and attorneys' fees
that may me incurred by Customer in connection with any such claim or suit or in
enforcing the indemnity granted above, provided that Seller (i) is given prompt
notice of any such claim or suit and (ii) full opportunity to assume control of
the defense or settlement. Seller shall not be liable to Customer for indirect
or consequential damages, including but not limited to lost profits.
12. TERM AND TERMINATION
The term of this Agreement shall be [***] from the Effective Date. If either
party is in material default of any of its obligations under this Agreement and
such default continues for thirty (30) days after written notice thereof by the
party not in default, the nondefaulting party
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
may cancel this Agreement. In addition, a party may cancel this Agreement if
a petition in bankruptcy or under any insolvency law is filed by or against the
other party and is not dismissed within sixty (60) days of the commencement
thereof. Any agreements between the parties pursuant to the terms and conditions
of Exhibit G hereto (Product Maintenance Program) shall survive the termination
of this Agreement.
13. ASSIGNMENT
a. Any assignment by either party of this Agreement or any other interest
hereunder without the other party's prior written consent, shall be
void, except assignment to a person or entity who acquires all or
substantially all of the assets, business or stock of either party,
whether by sale, merger or otherwise.
b. The Software license granted to Customer in the form of Exhibit D
(Software License), may not be sublicensed, assigned or otherwise
transferred by Customer.
c. Subject to the provisions of paragraphs a and b above, this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns, if any, of the parties hereto.
14. NOTICES
Except as otherwise specified in this Agreement, all notices or other
communications hereunder shall be deemed to have been duly given when made in
writing and delivered in person or deposited in the United States mail, postage
prepaid, certified mail, return receipt requested, or by a reputable overnight
courier service providing proof of delivery, or by confirmed facsimile
transmission and addressed as follows:
TO SELLER: TO CUSTOMER:
Metawave Communications Corporation Telefonica Celular del Paraguay S.A.
8700 148th Avenue NE F.R. Moreno 509.6to.PISO
Redmond WA 98052 Asuncion, Paraguay
Attn: VP, Sales Attn.: Mr. Mario Zanotti-Cavazzoni
Copy to: General Counsel Copy to:
Fax: 425 702 5976 Fax: (1-595-21) 505 661
The address to which notices or communications may be given to either party may
be changed by written notice given by such party to the other pursuant to this
section 17.
15. COMPLIANCE WITH LAWS
Subject to section 5(a)(ii), Seller shall comply with all applicable federal,
state and local laws, regulations and codes, including the procurement of type
acceptance, permits and licenses when needed, in the performance of this
Agreement. Customer shall assist Seller (including making available to Seller
the assistance of Customer's employees in the countries where the Sites are
<PAGE>
located) in obtaining such type acceptance, permits and licenses (including the
local equivalents of FCC equipment authorization).
16. FORCE MAJEURE
Except for payment of moneys due, neither party shall be liable for delays in
delivery or performance or for failure to manufacture, deliver or perform
resulting from acts beyond the reasonable control of the party responsible for
performance. Such acts shall include, but not be limited to(a) acts of God, acts
of a public enemy, acts or failures to act by the other party, acts of civil or
military authority, governmental priorities, strikes or other labor
disturbances, hurricanes, earthquakes, fires, floods, epidemics, embargoes, war,
riots, and loss or damage to goods in transit; (b) inability to obtain necessary
products, components, services or facilities on account of causes beyond the
reasonable control of the delayed party or its suppliers or (c) a delay in
permits, governmental approvals and any other documentation required for the
delivery, installation and operation of the Products at the Sites (including
visas and work permits for Metawave personnel providing Services if such visas
and work permits are unreasonably withheld and can not be obtained from another
source.). In the event of any such delay, the date(s) of delivery or performance
shall be extended for as many days are reasonably required due to the delay.
17. GOVERNING LAW; DISPUTE RESOLUTION
a. This Agreement and each Purchase Order shall be construed in
accordance with the internal laws of the State of New York, without
regard to its choice of law provisions.
b. Any and all disputes arising between the parties shall be resolved in
the following order: (i) by good faith negotiation between
representatives of Customer and Seller who have authority to fully and
finally resolve the dispute to commence within ten (10) days of the
request of either party; (ii) in the event that the parties have not
succeeded in negotiating a resolution of the dispute within ten (10)
days after the first meeting, then the dispute will be resolved by
nonbinding mediation in a mutually agreed location and to be conducted
in English by a mutually agreed upon non-affiliated neutral party
having experience with or knowledge in the wireless communications
equipment industry to be chosen within twenty (20) days after written
notice by either party demanding mediation(the costs therefor to be
shared equally); and (iii) if within sixty (60) days of the initial
demand for mediation by one of the parties, the dispute cannot be
resolved by mediation, then the dispute shall be submitted by the
parties to final and binding arbitration under the then current
arbitration rules of the International Chamber of Commerce to be
conducted in English by three (3) arbitrators having experience with
or knowledge in the wireless telecommunications industry to be held in
a mutually agreeable location (the costs therefor to be shared
equally).
<PAGE>
18. GENERAL PROVISIONS
a. All information, data and materials provided by either party under
this Agreement or prior to the Effective Date of this Agreement shall
be subject to the terms and conditions of the Non-Disclosure Agreement
to be executed by the parties concurrently with this Agreement and
attached hereto as Exhibit E.
b. Seller and Customer may issue a joint press release concerning the
execution of this Agreement. Such press release shall be subject to
prior review and written approval by both parties, not to be
unreasonably withheld.
c. Waiver by either party of any obligation or default by the other party
shall not be deemed a waiver by such party of any other obligation or
default.
d. Any rights of cancellation, termination or other remedies prescribed
in this Agreement are cumulative and are not intended to be exclusive
of any other remedies to which the injured party may be entitled at
law or equity (including but not limited to the remedies of specific
performance and cover) in case of any breach or threatened breach by
the other party of any provision of this Agreement, unless such other
remedies which are not prescribed in this Agreement are specifically
limited or excluded by this Agreement. The use of one or more
available remedies shall not bar the use of any other remedy for the
purpose of enforcing the provisions of this Agreement; provided,
however, that a party shall not be entitled to retain the benefit of
inconsistent remedies.
e. If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable the entire Agreement, but rather
the entire Agreement shall be construed as if not containing the
particular invalid or unenforceable provisions, and the rights and
obligations or Seller and Customer shall be construed and enforced
accordingly.
f. This Agreement, including all Exhibits attached to or referenced in
this Agreement, shall constitute the entire agreement between Customer
and Seller with respect to the subject matter hereof and supersedes
all prior discussions, agreements and representations, whether oral or
written.
g. No provision of this Agreement shall be deemed waived, amended or
modified by any party hereto, unless such waiver, amendment or
modification is in writing and signed by a duly authorized
representative of each of the parties.
h. Each party shall comply with all applicable U.S. and foreign export
control laws and regulations and shall not export or re-export any
technical data or Products or Services except in compliance with the
applicable export control laws and regulations of the U.S. and any
foreign country.
i. The parties shall not disclose the financial value of this Agreement
to third parties unless the parties mutually agreed to disclose such
information.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
Metawave Communications Corporation Telefonica Celular del Paraguay S.A.
By: /s/ Robert Hunsberger By: /s/ Mario Zanotti
----------------------------- ----------------------------
Name: Robert Hunsberger Name: /s/ Mario Zanotti
-------------------------- --------------------------
Title: President & CEO Title: General Manager
-------------------------- -------------------------
EXHIBITS ATTACHED:
A Product and Services Pricing
B Performance Specifications
C Acceptance Test Procedure
D Software License
E Performance Criteria
F Nondisclosure Agreement
G Product Maintenance Program
<PAGE>
EXHIBIT A: PRODUCTS AND SERVICES PRICING
TO THE PURCHASE AGREEMENT
BETWEEN
("SELLER")
AND
("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1997, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction................................................... 3
2. SpotLight Pricing.............................................. 3
3. Services Pricing............................................... 4
4. Software Licensing Fee......................................... 4
5. Software Maintenance Fee....................................... 4
6. Initial Order.................................................. 5
7. Pricing Assumptions For All Orders............................. 6
</TABLE>
<PAGE>
PRODUCTS AND SERVICES PRICING
For the purposes of uniformity, references to Agreement or to an Exhibit shall
refer to the Purchase Agreement to which this document is Exhibit A and to the
other Exhibits to that Agreement. All definitions set forth in the Agreement
shall apply hereto unless otherwise expressly defined herein.
1. Introduction
This Exhibit A lists the Products and Services pricing as of the Effective Date
of the Agreement. All payments for the Products and Services shall be in US
dollars and in accordance with the payment terms set forth in the Agreement. The
Product configurations set forth herein or in a Purchase Order are subject to
change following the completion of a Site survey by Seller. A change to such
configurations may result in a change in the Purchase Price of the Products and
Services and a change in the delivery dates. Any such change shall be agreed to
in a written Change Order executed by both parties.
2. SpotLight Pricing
SPOTLIGHT TX/RX PRICING
[***]
<TABLE>
<CAPTION>
- -------------------------------------------
NO. OF CHANNELS PRICE
- -------------------------------------------
<S> <C>
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
[***] $[***]
- -------------------------------------------
</TABLE>
Note: [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SPOTlIGHT RECOMMENDED SPARES KIT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Part Number DESCRIPTION QTY. PRICE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
[***] Tx Driver [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
TOTALS: [***]
- -----------------------------------------------------------------------------
</TABLE>
Note: The SpotLight Recommended Spares Kit list is for SpotLight configurations
supporting up to 90 channels.
3. Services Pricing
ENGINEERING SERVICES PRICING FOR FOLLOW-ON ORDERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
DESCRIPTION OF SERVICES PRICE
- ----------------------------------------------------------------------------
<S> <C>
[***] [***]
- ----------------------------------------------------------------------------
</TABLE>
Notes:
[***]
4. [***]
5. [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Initial Order
PRODUCTS AND SERVICES PRICING FOR INITIAL ORDER (USD)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION [***] NO. OF EXTENDED PRICE
UNITS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[***] [***] [***] [***]
[***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
Total Product Purchase Price for Initial Order [***]
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
SERVICES/PERSONNEL DESCRIPTION UNIT PRICE NO. OF EXTENDED PRICE
SITES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[***] [***] [***] [***]
- ------------------------------------------------------------------------------------------------
[***] [***]
- ------------------------------------------------------------------------------------------------
Total Services Purchase Price for Initial Order [***]
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total Purchase Price for Initial Order [***]
- ------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1. [***]
2. [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Pricing Assumptions For All Orders:
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT B: PERFORMANCE SPECIFICATIONS
TO THE PURCHASE AGREEMENT
SPOTLIGHT MULTIBEAM ANTENNA PLATFORM 2.0 TRANSMIT/RECIEVE
(for use with Motorola HDII Base Station Equipment)
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
1997, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
</TABLE>
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
2. System Description
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
3. Regulatory Requirements
This section specifies requirements which are set primarily by local and/or
national governing bodies, consortiums and standards committees.
3.1 US
The SpotLight system complies with appropriate US FCC regulations
(includes both RF and EMI). Specifically, the SMAP shall comply with the
regulations defined in CFR 47 part 22 and part 15.
The SpotLight system complies with the UL Certification process. Final UL
approval is expected by the end of 1997.
<PAGE>
EXHIBIT C: ACCEPTANCE TEST PROCEDURE (ATP)
TO THE PURCHASE AGREEMENT
SPOTLIGHT MULTIBEAM ANTENNA PLATFORM
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
________________________________________________________________________________
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by
Metawave under an agreement of nondisclosure to the Customer for internal
evaluation purposes only and is protected by applicable copyright and trade
secret law. This document may only be disclosed or disseminated to those
employees of the Customer who have a need to use it for evaluation
purposes; no other use or disclosure can be made by Customer without
Metawave's consent.
(C) 1997, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction............................................ 3
2. Acceptance Tests........................................ 3
2.1. LampLighter Installation Test.................... 4
2.2. System Configuration Test........................ 5
2.3. Transmit Effective Radiated Power (Tx ERP) Test.. 6
2.4. Receive Sensitivity Test......................... 8
2.5. Alarm Functionality Test......................... 9
2.6. Call Processing Test............................. 11
</TABLE>
<PAGE>
SPOTLIGHT ACCEPTANCE TEST PROCEDURE
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT D: SOFTWARE LICENSE
TO THE PURCHASE AGREEMENT
BETWEEN
("SELLER")
AND
("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1997, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Scope.................................................. 3
2. Licensing Grant........................................ 3
3. Limitations On Use Of Software......................... 3
4. Right To Copy, Protection And Security................. 4
5. Remedies............................................... 4
6. Term................................................... 5
7. Termination............................................ 5
8. Right Of The Parties................................... 5
9. Limitations On Software................................ 6
10. Entire Understanding......................................
</TABLE>
SOFTWARE LICENSE
For purposes of uniformity and brevity, references to Agreement or to an Exhibit
shall refer to the Purchase Agreement to which this document is Exhibit D and to
the other Exhibits to that Agreement. All definitions set forth in the
Agreement shall apply hereto.
1. Scope
Pursuant to the above-identified Agreement, Software will be delivered by
Seller to Customer for use with the Products according to the terms of the
Agreement and this Exhibit. Customer shall then become a licensee with
respect to such Software.
<PAGE>
2. Licensing Grant
2.1 CONCURRENT WITH EXECUTION OF THE AGREEMENT, SELLER GRANTS TO CUSTOMER
A REVOCABLE, NON-EXCLUSIVE AND NON-TRANSFERABLE LICENSE UNDER SELLER'S
APPLICABLE PROPRIETARY RIGHTS TO USE SOFTWARE DELIVERED TO CUSTOMER
HEREUNDER IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH
HEREIN.
2.2 CUSTOMER AGREES TO PAY THE LICENSING FEES FOR THE RIGHT TO USE THE
SOFTWARE AND FEATURES AND FOR ANY SUPPORT THEREOF AS SET FORTH IN
EXHIBIT A (PRICING) OR IN AN AMENDMENT THERETO. THE LICENSING FEE IS A
ONE TIME FEE WHICH GRANTS THE CUSTOMER THE RIGHT TO USE THE VERSION OF
SOFTWARE LICENSED FOR AS LONG AS THE CUSTOMER OWNS THE PRODUCT.
3. Limitations On Use Of Software
3.1 WITHOUT THE PRIOR WRITTEN CONSENT OF SELLER, CUSTOMER SHALL ONLY USE
THE SOFTWARE IN CONJUNCTION WITH A SINGLE PRODUCT EXISTING WITHIN THE
SITE SPECIFIED IN THE PO ("DESIGNATED PRODUCT").
3.2 CUSTOMER MAY USE THE SOFTWARE TO ROUTINELY OPERATE AND MAINTAIN THE
DESIGNATED PRODUCT. FOR PURPOSES OF THIS SUBSECTION, "MAINTAIN" SHALL
BE CONSTRUED TO MEAN PERFORMING DIAGNOSTIC TESTING CONSISTENT WITH
CUSTOMER'S OBLIGATION TO PROVIDE THE FIRST LEVEL OF MAINTENANCE. UNDER
NO CONDITION SHALL THE SOFTWARE BE USED FOR ANY OTHER PURPOSE,
INCLUDING, BUT NOT LIMITED TO, SUBSTITUTED PRODUCTS, OR PRODUCTS NOT
OWNED BY CUSTOMER, OR PRODUCTS LOCATED AT A LOCATION OTHER THAN THE
SITE SPECIFIED IN THE PO.
3.3 THE LICENSE GRANTED TO CUSTOMER IN SECTION 2 IS PERSONAL AND MAY NOT
BE TRANSFERRED TO ANOTHER PRODUCT OR SITE WITHOUT THE WRITTEN CONSENT
OF SELLER.
3.4 TO THE EXTENT SPECIFIED IN EXHIBIT A OR AN AMENDMENT THERETO AND
PROVIDED CUSTOMER HAS PAID ANY APPLICABLE LICENSING FEES, CUSTOMER
SHALL HAVE THE RIGHT TO USE FEATURES IN ACCORDANCE WITH THE TERMS OF
THIS EXHIBIT. CUSTOMER ACKNOWLEDGES THAT THE SOFTWARE MAY CONTAIN
THEREIN SEVERAL ADDITIONAL FEATURES WHICH ARE EACH COVERED BY SEPARATE
LICENSING FEES. CUSTOMER AGREES NOT TO USE, AND THE LICENSE
SPECIFICALLY DOES NOT EXTEND TO, SUCH ADDITIONAL FEATURES UNLESS THEY
ARE SPECIFIED IN EXHIBIT A OR AN AMENDMENT THERETO AND PROVIDED
CUSTOMER HAS PAID THE APPLICABLE LICENSING FEES FOR SUCH ADDITIONAL
FEATURES.
3.5 THE SOFTWARE IS SUBJECT TO LAWS PROTECTING TRADE SECRETS, KNOW-HOW,
CONFIDENTIALITY AND COPYRIGHT.
<PAGE>
3.6 CUSTOMER SHALL NOT TRANSLATE, MODIFY, ADAPT, DECOMPILE, DISASSEMBLE,
OR REVERSE ENGINEER THE SOFTWARE OR ANY PORTION THEREOF.
3.7 UNLESS OTHERWISE EXPRESSLY AGREED BY SELLER, CUSTOMER SHALL NOT PERMIT
ITS DIRECTORS, OFFICERS, EMPLOYEES OR ANY OTHER PERSON UNDER ITS
DIRECT OR INDIRECT CONTROL, TO WRITE, DEVELOP, PRODUCE, SELL, OR
LICENSE ANY SOFTWARE THAT PERFORMS THE SAME FUNCTIONS AS THE SOFTWARE
BY MEANS DIRECTLY ATTRIBUTABLE TO ACCESS TO THE SOFTWARE (E.G. REVERSE
ENGINEERING OR COPYING).
3.8 CUSTOMER SHALL NOT EXPORT THE SOFTWARE FROM THE UNITED STATES WITHOUT
THE WRITTEN PERMISSION OF SELLER. IF WRITTEN PERMISSION IS GRANTED FOR
EXPORT OF THE SOFTWARE, THEN CUSTOMER SHALL COMPLY WITH ALL U.S. LAWS
AND REGULATIONS FOR SUCH EXPORTS AND SHALL HOLD SELLER HARMLESS,
INCLUDING LEGAL FEES AND EXPENSES FOR ANY VIOLATION OR ATTEMPTED
VIOLATION OF THE U.S. EXPORT LAWS.
4. Right To Copy, Protection And Security
4.1 SOFTWARE PROVIDED HEREUNDER MAY BE COPIED (FOR BACK-UP PURPOSES ONLY)
IN WHOLE OR IN PART, IN PRINTED OR MACHINE-READABLE FORM FOR
CUSTOMER'S INTERNAL USE ONLY, PROVIDED, HOWEVER, THAT NO MORE THAN TWO
(2) PRINTED COPIES AND TWO (2) MACHINE-READABLE COPIES SHALL BE IN
EXISTENCE AT ANY ONE TIME WITHOUT THE PRIOR WRITTEN CONSENT OF SELLER,
OTHER THAN COPIES RESIDENT IN THE PRODUCTS.
4.2 WITH REFERENCE TO ANY COPYRIGHT NOTICE OF SELLER ASSOCIATED WITH
SOFTWARE, CUSTOMER AGREES TO INCLUDE THE SAME ON ALL COPIES IT MAKES
IN WHOLE OR IN PART. SELLER'S COPYRIGHT NOTICE MAY APPEAR IN ANY OF
SEVERAL FORMS, INCLUDING MACHINE-READABLE FORM. USE OF A COPYRIGHT
NOTICE ON THE SOFTWARE DOES NOT IMPLY THAT SUCH HAS BEEN PUBLISHED OR
OTHERWISE MADE GENERALLY AVAILABLE TO THE PUBLIC.
4.3 CUSTOMER AGREES TO KEEP CONFIDENTIAL, IN ACCORDANCE WITH THE TERMS OF
THE AGREEMENT, AND NOT PROVIDE OR OTHERWISE MAKE AVAILABLE IN ANY FORM
ANY SOFTWARE OR ITS CONTENTS, OR ANY PORTION THEREOF, OR ANY
DOCUMENTATION PERTAINING TO THE SOFTWARE, TO ANY PERSON OTHER THAN
EMPLOYEES OF CUSTOMER OR SELLER.
4.4 SOFTWARE, INCLUDING FEATURES IS THE SOLE AND EXCLUSIVE PROPERTY OF
SELLER AND NO TITLE OR OWNERSHIP RIGHTS TO THE SOFTWARE OR ANY OF ITS
PARTS, INCLUDING DOCUMENTATION, IS TRANSFERRED TO CUSTOMER.
4.5 CUSTOMER ACKNOWLEDGES THAT IT IS THE RESPONSIBILITY OF CUSTOMER TO
TAKE ALL REASONABLE MEASURES TO SAFEGUARD SOFTWARE AND TO PREVENT ITS
UNAUTHORIZED USE OR DUPLICATION.
5. Remedies
Customer acknowledges that violation of the terms of this Exhibit or the
Agreement shall cause Seller irreparable harm for which monetary damages
may be inadequate, and Customer agrees that Seller may seek temporary or
permanent injunctive relief without the need to prove actual harm in order
to protect Seller's interests.
6. Term
Unless otherwise terminated pursuant to Section 7 herein, the term of the
license granted pursuant to Section 2 herein shall be co-extensive with the
term of any licensing and/or maintenance fees paid by Customer to Seller
pursuant to Exhibit A or an Amendment thereto.
7. Termination
7.1 THE LICENSE GRANTED HEREUNDER MAY BE TERMINATED BY CUSTOMER UPON ONE
(1) MONTH'S PRIOR WRITTEN NOTICE.
7.2 SELLER MAY TERMINATE THE LICENSE GRANTED HEREUNDER IF CUSTOMER IS IN
DEFAULT OF ANY OF THE TERMS AND CONDITIONS OF THE AGREEMENT OR
EXHIBITS, AND SUCH TERMINATION SHALL BE EFFECTIVE IF CUSTOMER FAILS TO
CORRECT SUCH DEFAULT WITHIN TEN (10) DAYS AFTER WRITTEN NOTICE THEREOF
BY SELLER. THE PROVISIONS OF SECTIONS 4 AND 5 HEREIN SHALL SURVIVE
TERMINATION OF ANY SUCH LICENSE.
7.3 WITHIN ONE (1) MONTH AFTER TERMINATION OF THE LICENSE GRANTED
HEREUNDER, CUSTOMER SHALL FURNISH TO SELLER A DOCUMENT CERTIFYING THAT
THROUGH ITS BEST EFFORTS AND TO THE BEST OF ITS KNOWLEDGE, THE
ORIGINAL AND ALL COPIES IN WHOLE OR IN PART OF ALL SOFTWARE, IN ANY
FORM, INCLUDING ANY COPY IN AN UPDATED WORK, HAVE BEEN RETURNED TO
SELLER OR DESTROYED. WITH PRIOR WRITTEN CONSENT FROM SELLER, CUSTOMER
MAY RETAIN ONE (1) COPY FOR ARCHIVAL PURPOSES ONLY.
8. Rights Of The Parties
8.1 NOTHING CONTAINED HEREIN SHALL BE DEEMED TO GRANT, EITHER DIRECTLY OR
BY IMPLICATION, ESTOPPEL, OR OTHERWISE, ANY LICENSE UNDER ANY PATENTS
OR PATENT APPLICATIONS OF SELLER; EXCEPT THAT CUSTOMER SHALL HAVE A
NON-EXCLUSIVE, LICENSE UNDER SELLER'S PATENTS AND PATENT APPLICATIONS
TO USE, IN SELLER-SUPPLIED
<PAGE>
8.2 EQUIPMENT ONLY, SOFTWARE SUPPLIED HEREUNDER, WHEN SUCH LICENSE IS
IMPLIED OR OTHERWISE ARISES BY OPERATION OF LAW BY VIRTUE OF THE
PURCHASE OF SUCH COPIES FROM SELLER.
8.3 RIGHTS IN PROGRAMS OR OPERATING SYSTEMS OF THIRD PARTIES, IF ANY, ARE
FURTHER LIMITED BY THEIR LICENSE AGREEMENTS WITH SUCH THIRD PARTIES,
WHICH AGREEMENTS ARE HEREBY INCORPORATED BY REFERENCE THERETO AND MADE
A PART HEREOF AS IF FULLY SET FORTH HEREIN. CUSTOMER AGREES TO ABIDE
THEREBY.
8.4 DURING THE TERM OF THE LICENSE GRANTED PURSUANT TO SECTION 2 HEREIN
AND FOR A PERIOD OF ONE (1) YEAR AFTER EXPIRATION OR TERMINATION,
SELLER, AND WHERE APPLICABLE, ITS LICENSOR(S), OR THEIR
REPRESENTATIVES MAY, UPON PRIOR NOTICE TO CUSTOMER, A) INSPECT THE
FILES, COMPUTER PROCESSORS, EQUIPMENT, FACILITIES AND PREMISES OF
CUSTOMER DURING NORMAL WORKING HOURS TO VERIFY CUSTOMER'S COMPLIANCE
WITH THIS AGREEMENT, AND B) WHILE CONDUCTING SUCH INSPECTION, COPY OR
RETAIN ALL SOFTWARE, INCLUDING THE MEDIUM ON WHICH IT IS STORED AND
ALL DOCUMENTATION THAT CUSTOMER MAY POSSESS IN VIOLATION OF THE
LICENSE OR THE AGREEMENT.
8.5 CUSTOMER ACKNOWLEDGES THAT THE PROVISIONS OF THIS EXHIBIT D ARE
INTENDED TO INURE TO THE BENEFIT OF SELLER AND ITS LICENSORS AND THEIR
RESPECTIVE SUCCESSORS IN INTEREST. CUSTOMER ACKNOWLEDGES THAT SELLER
OR ITS LICENSORS HAVE THE RIGHT TO ENFORCE THESE PROVISIONS AGAINST
CUSTOMER, WHETHER IN SELLER'S OR ITS LICESNSOR'S NAME.
9. Limitations On Software
Customer understands that errors occur in Software and Seller makes no
warranty that the Software will perform without error. Customer agrees that
it is Customer's responsibility to select and test the Software to be sure
it meets Customer's needs. Customer agrees to accept Software in its
current condition. Seller agrees to repair any service effecting Software
defect promptly per the warranty terms during the Warranty Period.
10. Entire Understanding
Notwithstanding anything to the contrary in other agreements, purchase
orders or order acknowledgments; the Agreement and this Exhibit D set forth
the entire understanding and obligations regarding use of Software, implied
or expressed.
<PAGE>
EXHIBIT E: PERFORMANCE CRITERIA
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
TELEFONICA CELULAR DEL PARAGUAY ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1998, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
PERFORMANCE CRITERIA
For the purposes of uniformity, references to Agreement or to an Exhibit shall
refer to the Purchase Agreement to which this document is Exhibit E and to the
other Exhibits to that Agreement. All definitions set forth in the Agreement
shall apply hereto unless otherwise expressly defined herein. The Performance
Evaluation Period(s) definition set forth herein shall take the place of the
Performance Evaluation Period set forth in the Definitions section of the
Agreement.
1. Introduction
This Exhibit E lists the Performance Criteria required for Performance
Acceptance of the Products in the Initial Order. The purpose of the Performance
Evaluation is to demonstrate that the Products of the Initial Order meet or
exceed the Performance Criteria required for Performance Acceptance.
2. Performance Criteria
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
[LOGO OF METAWAVE COMMUNICATIONS CORPORATION]
NON-DISCLOSURE AGREEMENT
------------------------
This Non-Disclosure Agreement ("Agreement"), effective October 16, 1997
("Effective Date"), is by and between Telefonica Celular del Paraguay, S.A.
("Recipient") having a place of business at F.R. Moreno 509, 6to. Piso,
Asuncion, Paraguay, and Metawave Communications Corporation ("Metawave") having
a place of business at 8700 148th Ave. NE, Redmond, WA 98052 U.S.A.
1. The purpose of this Agreement is to allow each party to obtain from the
other certain technical and business information related to wireless
systems under terms that will protect the confidential and proprietary
nature of such information.
2. As used in this Agreement, "Confidential Information" shall mean any and
all technical or business information furnished, in whatever form or
medium, or disclosed by one party to the other including, but not limited
to, product/service specifications, prototypes, computer programs, models,
drawings, marketing plans, financial data, and personnel statistics, which
are marked as confidential or proprietary by the disclosing party, or, for
information which is orally disclosed, the disclosing party indicates to
the other at the time of disclosure the confidential or proprietary nature
of the information and confirms in writing to the receiving party within
thirty (30) days after such disclosure that such information is
confidential. Any technical or business information of a third person
furnished or disclosed by one party to the other shall be deemed
"Confidential Information" of the disclosing party unless otherwise
specifically indicated in writing to the contrary.
3. Each party agrees to hold such Confidential Information in confidence for a
period of three (3) years from the date of receipt of same unless otherwise
agreed to in writing by the disclosing party, and that during such period
each party will use such information solely for the purposes of this
Agreement unless otherwise allowed in this Agreement or by written
permission of the disclosing party. Each party agrees not to copy such
Confidential Information of the other unless specifically authorized. Each
party agrees that it shall not make disclosure of any such Confidential
Information to anyone (including subcontractors) except employees of such
party to whom disclosure is necessary for the purposes set forth above.
Each party shall appropriately notify such employee that the disclosure is
made in confidence and shall be kept in confidence in accordance to this
Agreement. Each party also agrees that it will make requests for
Confidential Information of the other only if necessary to accomplish the
purposes set forth in this Agreement. The receiving party agrees that
Confidential Information shall be handled with the same degree of care
which the receiving party applies to its own Confidential Information but
in no event less than reasonable care.
4. Each party agrees that in the event permission is granted by the other to
copy such Confidential Information, each such copy shall contain and state
the same confidential or proprietary notices or legends, if any, which
appear on the original. Nothing herein shall be construed as granting to
either party any right or license under any copyrights, inventions, or
patents now or hereafter owned or controlled by the other party.
<PAGE>
5. Upon termination of this Agreement for any reason or upon request of the
disclosing party, all Confidential Information, together with copies of
same as may be authorized herein, shall be returned to the disclosing party
or certified destroyed by the receiving party upon the request of the
disclosing party. The requirements of use and confidentiality set forth
herein shall survive the termination of this Agreement.
6. The obligations imposed in this Agreement shall not apply to any
information that:
(a) is already in the possession of or is independently developed by the
receiving party; or
(b) is or becomes publicly available through no fault of the receiving
party; or
(c) is obtained by the receiving party from a third person who is under no
obligation of confidence to the party whose Confidential Information is
disclosed; or
(d) is disclosed without restriction by the disclosing party.
7. Except for the obligations of use and confidentiality imposed in this
Agreement no obligation of any kind is assumed or implied against either
party by virtue of the party's meetings or conversations with respect to
whatever Confidential Information is exchanged. Each party further
acknowledges that this Agreement and any meetings and communications of the
parties relating to the same subject matter shall not:
(a) constitute an offer, request, or contract with the other to engage in
any research, development or other work;
(b) constitute an offer, request or contract involving a buyer-seller
relationship, venture, teaming or partnership relationship between the
parties; and
(c) impair or restrict the parties' right to make, procure or market any
products or services, now or in the future, which may be competitive with
those offered by the disclosing party, or which are the subject matter of
this Agreement.
The parties expressly agree that any money, expenses or losses expended or
incurred by each party in preparation for, or as a result of this Agreement
or the parties meetings and communications, is at each party's sole cost
and expense provided, however, that notwithstanding anything to the
contrary in the Agreement, neither party's rights shall be limited in law
or equity to enforce the confidentiality and use obligations imposed under
this Agreement.
8. Without prior consent of the other party, neither party shall disclose to
any third person the existence or purpose of this Agreement, the terms or
conditions hereof, the fact that discussions are taking place or that
Confidential Information is being shared, except as may be required by law
and then only after first notifying the other party of such required
disclosure. The parties also agree that neither party shall use any trade
name, service mark, or trademark of the other or refer to the other party
in any promotional activity or material without first obtaining the prior
written consent of the other party.
<PAGE>
9. Neither this Agreement nor any rights hereunder in whole or in part shall
be assignable or otherwise transferable by either party and the obligations
contained in this Agreement shall survive and continue after termination of
this Agreement, provided, that either party may assign or transfer this
Agreement and rights hereunder to any current or future affiliates or
successor company if such assignee agrees in writing to the terms and
conditions herein.
10. The foregoing shall apply to any subsequent meetings or any communications
between the parties relating to the same subject matter unless this
Agreement is modified in writing and such writing is signed by each party.
11. This Agreement shall be governed and construed by the laws of the State of
Delaware.
12. Each party shall comply with all applicable U.S. and foreign export control
laws and regulations and shall not export or re-export any technical data
or products except in compliance with the applicable export control laws
and regulations of the U.S. and any foreign country.
13. Any notice to be given under this Agreement by either party to the other,
shall be in writing and shall be deemed given when sent by Certified mail.
If either party changes its address during the term of this Agreement, it
shall so advise the other party in writing as provided in this Agreement
and any notice thereafter required to be given shall be sent by Certified
mail to such new addresses.
14. In the event that this Agreement is translated into any other language, the
English version hereof shall take precedence and govern.
15. This Agreement, together with any and all exhibits incorporated herein,
constitutes the entire Agreement between the parties with respect to the
subject matter of this Agreement. No provision of this Agreement shall be
deemed waived, amended, or modified by either party, unless such waiver,
amendment or modification is made in writing and signed by both parties.
This Agreement supersedes all previous Agreements between Metawave and
Recipient relating to the subject matter in this Agreement.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to sign this Agreement as of the Effective Date.
METAWAVE COMMUNICATIONS CORP. TELEFONICA CELULAR DEL PARAGUAY, S.A.
/s/ Kathryn Surace-Smith /s/ Mario Zenotti
- -------------------------- ---------------------------
(Signature) (Signature)
Kathryn Surace-Smith Mario Zenotti
- -------------------------- ---------------------------
(Print Name) (Print Name)
General Counsel General Manager
- -------------------------- ---------------------------
(Title) (Title)
12/10/97 January 29, 1998
- -------------------------- ---------------------------
(Date) (Date)
<PAGE>
EXHIBIT G: PRODUCT MAINTENANCE PROGRAM
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE
AND
TELECEL DEL PARAGUAY
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by
Metawave under an agreement of nondisclosure to the Customer for internal
evaluation purposes only and is protected by applicable copyright and trade
secret law. This document may only be disclosed or disseminated to those
employees of the Customer who have a need to use it for evaluation
purposes; no other use or disclosure can be made by Customer without Metawave's
consent.
(C)1997, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
PRODUCT MAINTENANCE PROGRAM
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction............................................................ 3
2. Hardware Maintenance Program............................................ 3
3. Software Maintenance Program............................................ 4
ANNEX A
A Metawave Customer Support Center....................................... 7
B Return Material Authorization (RMA).................................... 7
C Return Address......................................................... 7
D Packing Instructions................................................... 7
E Purchase Orders........................................................ 7
F Pricing and Invoicing.................................................. 8
G Emergency Expedite Service............................................. 8
H Loaner and Pre-exchange Orders......................................... 9
I Freight................................................................ 9
J Duties and Taxes....................................................... 9
K Non-compliance......................................................... 9
L Conflicting Terms...................................................... 9
</TABLE>
<PAGE>
EXHIBIT 10.11
METAWAVE COMMUNICATIONS CORPORATION
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of this 4th day of March,
1998 (the "Effective Date") between Metawave Communications Corporation, a
Delaware corporation ("Seller"), and ALLTEL Supply Inc., a Delaware corporation
("Customer").
The parties, in consideration of the mutual covenants, agreements and promises
of the other set forth in this Agreement and intending to be legally bound,
agree as follows:
1. AGREEMENT
Seller agrees to sell to Customer, and Customer agrees to purchase from time to
time by submitting a Purchase Order to Seller, the Products and Services
identified on Exhibit A to this Agreement in accordance with the specifications
and the terms and conditions hereof and at the Purchase Prices set forth in
Exhibit A. Notwithstanding any other provision of this Agreement or any other
contract between the parties to the contrary, the provisions of this Agreement
shall apply to all Purchase Orders for the Products and Services during the term
of this Agreement unless the parties expressly agree by written modification to
this Agreement that the provisions of this Agreement shall not apply. Any
additional or different terms in any acknowledgment, confirmation, invoice,
Purchase Order or other communication from one party to the other shall be
deemed objected to without need of further notice of objection and shall be of
no effect and not in any circumstance binding upon either party unless expressly
accepted by both parties in writing.
2. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth
below:
"Acceptance Test Procedure" or "ATP" shall mean the testing procedures and
protocols described and administered for each Product as set forth in Exhibit C
and Exhibit E.
"Affiliate" shall mean any partnership, corporation or other entity (i) in which
Customer, directly or indirectly, owns more than fifty percent (50%) of the
voting shares, or (ii) which owns more than fifty percent (50%) of the voting
shares of Customer.
"Certificate of Conditional Acceptance" shall mean Customer's certification of
Seller's completion of the Acceptance Test Procedure in the form set forth in
Exhibit C.
"Certificate of Final Acceptance" shall mean , for the [***],Customer's
certification of the Products' satisfaction of the Performance Criteria set
forth in Exhibit E.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
"Change Order" shall mean any subsequent change to a Purchase Order initiated by
either Seller or Customer, including but not limited to, changes in Site
configuration and Products and Services needed for the Site project, which is
mutually agreed to by both parties.
[***]
"Final Acceptance" shall mean (i) for Products in the [***], the date on which
Customer has executed a Certificate of Final Acceptance for the Products, and
all Punchlist items have been resolved and (ii) for Products in Follow-on
Orders, the date on which all Punchlist items for a Product have been resolved.
[***]
"Initial Spectrum Clearing Order" shall mean Customer's initial purchase of a
number of Products (and any associated Services)for widespread deployment in a
single market which shall be ordered together on one Purchase Order pursuant to
the terms and conditions of this Agreement.
[***]
[***]
"Product" shall mean the Spotlight(TM) antenna system described in Exhibit B
hereto or any additional products set forth in Exhibit B or any amendments
thereto as may be subsequently agreed to from time to time by Seller and
Customer.
"Punchlist" shall mean the list provided by Customer to Seller at Conditional
Acceptance which sets forth those mutually agreed items relating to a Product,
if any, to be resolved by Seller within ten (10) working days of Conditional
Acceptance of such Product.
"Purchase Order" shall mean any purchase order Customer may deliver to Seller
for the purchase of the Products and Services which incorporates the terms and
conditions of this Agreement and which has been accepted by Seller.
"Purchase Price" shall mean the price of the Products and the price of the
Services shown on Exhibit A or any other amount set forth in any amendments to
Exhibit A as may be subsequently agreed to from time to time by Seller and
Customer.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
"Services" shall mean the engineering services set forth in Exhibit A or any
additional services set forth in any amendments to Exhibit A as may be
subsequently agreed to from time to time by Seller and Customer.
"Site" shall mean each of the Customer cell site locations at which a Product is
installed.
"Software" shall mean the (i) object-code computer programs embedded in the
Product which control and monitor the operation of the Product ("Embedded
Software"), and (ii) the Lamplighter PC-based graphical user interface computer
program for the Product, and all Features, Major Releases, Point Releases, and
Software Patches (as such terms are defined in Exhibit H), other updates and
modifications to such Software (the "Software Updates") and any documentation in
support thereof.
"Software License" shall mean the software license for the Software and Software
Updates to be delivered to Customer for use with the Products as set forth in
Exhibit D.
"Specifications" shall mean the specifications for the Products set forth in
Exhibit B and incorporated herein.
3. PURCHASE ORDERS; PRICING; CANCELLATIONS
a. Customer shall order Products and Services pursuant to this
Agreement by submitting a Purchase Order to Seller at least ninety
(90) days prior to date of delivery for such Products and Services.
b. Upon receipt of the Purchase Order, Seller shall have [***]
to confirm or reject its acceptance of the Purchase Order in writing
to the Customer, subject to completion of Site survey for each Product
to be completed no later than [***] prior to the date of delivery
specified on the Purchase Order. If Seller fails to reject acceptance
within [***] after receipt of the Purchase Order, the Purchase Order
will be deemed accepted.
c. If the Site Survey reveals that the Products configurations
set forth in the Purchase Order must be changed in order to implement
and install the Products, Seller shall notify Customer immediately
with a written proposal for changes. In no event shall Seller's
notification and submission of a written proposal for changes exceed
[***] from the date of completion of Site survey.
d. Customer shall have [***] to accept the written proposal for
changes upon receipt of the proposal. If accepted, Seller and Customer
shall execute a written Change Order at which time such Change Order
shall become binding on Seller and Customer subject to Section 3(e)
below. If rejected, Customer may either inform the Seller in writing
to proceed with the original Purchase Order or cancel the Purchase
Order subject to section 3(e) below.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
e. Customer may cancel delivery of a Product prior to Seller's
shipment of the Product provided that if Customer directs such
cancellation with less than [***] written notice from the delivery
date specified in Purchase Order, Customer shall pay to Seller any
nonrecurring losses associated with such cancellation and which are
documented in writing by Seller, provided, however, that any such
losses shall not exceed [***] of the Purchase Price of each Product
included in such cancellation.
f. Within thirty days following Customer's completion of its
seminannual budget, Customer shall give Seller, for planning purposes,
a non-binding forecast of its estimated requirements for the Products
and Services for the forthcoming [***].
4. SHIPPING; TITLE; RISK OF LOSS
a. Unless otherwise instructed by Customer, and subject to section 3,
Seller shall ship all Products to the destination designated in a
Purchase Order on or before the delivery date(s) specified in a
Purchase Order and render invoices in accordance with Section 6 below.
Customer is responsible for the payment of all reasonable shipping
charges, except as noted in Section 4(b) below, and any exceptional
shipping charges required to fulfill a Purchase Order shall be agreed
to in advance with Customer.
b. Products shall be packed by Seller, at no additional charge to
Customer, in containers adequate to prevent damage during shipping,
handling and storage.
c. Unless otherwise specified herein, title to Products sold by Seller to
Customer shall vest in Customer on shipment of Product to Customer
(except title to Software shall remain with Seller pursuant to the
terms of the Software License attached as Exhibit D hereto).
d. Risk of loss or damage to any Product supplied hereunder shall pass to
Customer upon Conditional Acceptance, except for Products installed by
Customer, in which case risk of loss or damage shall pass to Customer
on shipment of Product to Customer.
5. WARRANTY
a. Seller warrants for a period [***] (the "Warranty Period") that (i)
all Products furnished hereunder will be free from defects in
materials, workmanship and title, (ii) all Products will conform in
all material respects to the documentation and specifications provided
by the Seller herein, (iii) the media on which the Software is
contained will be free from defects in material and workmanship under
normal use, and (iv) the Software will conform in all material
respects to the documentation provided by Seller. The warranties in
this Agreement are given in
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
lieu of all other warranties express or implied which are specifically
excluded, including, without limitation, implied warranties of
merchantibility and fitness for a particular purpose.
b. If Customer believes that there is a claim under the warranty set
forth herein, Customer shall follow the procedures set forth in
Exhibit H hereto (Product Maintenance). If Seller is unable to repair
or replace the Product so that it conforms to Specifications, Customer
shall receive a refund of the prorated undepreciated portion of the
Purchase Price actually paid by Customer to Seller for the returned
portion of the Products. The Purchase Price shall be depreciated over
a five (5) year period for Software and a ten (10) year period for
non-Software Products. The actions taken by Seller under the Product
Maintenance Program procedures set forth in Exhibit H shall be the
full extent of Seller's liability and Customer's exclusive remedy with
respect to a claim under this section 5.
c. This warranty does not apply to any claim which arises out of any one
of the following: (i) the Product is used in other than its normal and
customary manner; (ii) the Product has been subject to misuse,
accident, neglect or damage by Customer; (iii) the Product has been
installed, optimized or moved from its original installation site by
any person other than Seller or a person who has been certified by
Seller through completion of a Seller-sponsored training course to
provide such services; (iv) unauthorized alterations or repairs have
been made to the Product, or parts have been used in the Product which
are not approved by Seller, such approval not to be unreasonably
withheld (a current list of approved parts is set forth in Exhibit A);
(v) the Product is not maintained pursuant to Seller maintenance
programs or under the supervision of a person who has been certified
by Seller to provide such maintenance service through completion of a
Seller-sponsored training course described in Exhibit G; (vi) an event
of Force Majeure has occurred; (vii) the failure of third party
antennas, lines or interconnection facilities at the Site; and (viii)
damage which occurs during shipment of equipment from Customer to
Seller.
6. INVOICES AND PAYMENT
a. [***]
1. [***].
2. [***].
3. [***].
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
b. [***].
c. All invoices shall be computed on the basis of the prices set forth in
Exhibit A [***] and shall identify and show separately quantities of
Products, type of Services, total amounts for each item, shipping
charges, applicable sales or use taxes and total amount due. Customer
shall promptly pay Seller the amount due within 30 days of the date of
invoice. Customer shall pay a late fee at the rate of one and one-half
percent (1.5%) of the amount due for each month or portion thereof
that the amount remains unpaid.
d. Customer shall be responsible for the payment of all sales, use and
any other taxes applicable to the Products and Services provided by
the Seller pursuant to this Agreement. When Seller is required by law
to collect such taxes, 100% thereof will be added to invoices as
separately stated charges and paid by Customer in accordance with this
section.
e. If Customer disputes any invoices rendered or amount paid, Customer
will so notify Seller, and the parties will use their reasonable
efforts to resolve such dispute expeditiously. [***].
7. OBLIGATIONS OF CUSTOMER
In addition to performing the other obligations set forth in this
Agreement, Customer shall:
a. procure from appropriate regulatory authorities all necessary permits
and station licenses as may be required to install and operate the
system incorporating the Products;
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
b. maintain adequate property insurance for each Site, including coverage
for each Product at a Site during the period of installation and
operation prior to Conditional Acceptance; and
c. comply with its obligations set forth in Exhibit F.
8. INFRINGEMENT INDEMNITY
a. Seller shall indemnify and hold harmless Customer and its Affiliates
against any and all liabilities, losses, costs, damages and expenses,
including reasonable attorney's fees, associated with any claim or
action for actual or alleged infringement by any Product or Software
supplied in accordance with this Agreement of any United States
patent, trademark, copyright, trade secret or other intellectual
property right incurred by Customer and its Affiliates as a result of
Customer's use of such Products or Software in accordance with this
Agreement provided that (i) Customer promptly notifies Seller in
writing of the claim, (ii) Customer gives Seller full opportunity and
authority to assume sole control of the defense and all related
settlement negotiations, and (iii) Customer gives Seller information
and assistance for the defense (Customer will be reimbursed for
reasonable costs and expenses incurred in rendering such assistance,
against receipt of invoices therefor). Subject to the conditions and
limitations of liability stated in this Agreement, Seller shall
indemnify and hold harmless Customer from all payments, which by final
judgments in such claims, may be assessed against Customer on account
of such alleged infringement and shall pay resulting settlements,
costs and damages finally awarded against Customer by a court of law,
arbitration or other adjudication of the claim.
b. Customer agrees that if the Products or Software become, or in
Seller's opinion are likely to become, the subject of such a claim,
Customer will permit Seller, at its option and expense, either to
procure the right for Customer to continue using such Products or
Software or to replace or modify same so that they become non-
infringing as long as they continue to conform in all material
respects to the specifications contained in this Agreement and
Exhibits, and, if neither of the foregoing alternatives is available
on terms which are acceptable to Seller, Customer shall at the written
request of Seller, return the infringing or potentially infringing
Products or Software and all the rights thereto at Seller's expense.
Customer shall receive a refund of the prorated undepreciated portion
of the Purchase Price actually paid by Customer to Seller for the
returned portion of the Products. The Purchase Price shall be
depreciated over a five (5) year period.
c. Seller shall have no obligation to Customer with respect to any claim
of patent or copyright infringement which is based upon (i) adherence
to specifications, designs or instructions furnished by Customer, (ii)
the combination, operation or use of any Products supplied hereunder
with products, software or data not supplied by Seller, (iii) the
alteration of the Products or modification of any
<PAGE>
Software made by any party other than Seller; or (iv) the Customer's
use of a superseded or altered release of some or all of the Software
if infringement would have been avoided by the use of a subsequent
unaltered release of the Software that is provided to the Customer.
9. INDEPENDENT CONTRACTOR
Seller hereby declares and agrees that Seller is engaged in an independent
business and will perform its obligations under this Agreement as an independent
contractor and not as the agent or employee of Customer and has no authority to
represent Customer as to any matters. Seller shall be solely responsible for
payment of compensation to its personnel and for injury to them in the course of
their employment except to the extent that any intentional or negligent act of
Customer is solely and directly responsible for any such injury . Seller is
responsible for payment of all federal, state, or local taxes or contributions
imposed or required under unemployment insurance, social security and income tax
laws for persons employed by Seller to perform Seller's obligations under this
Agreement.
10. INDEMNIFICATION
Seller shall indemnify Customer, its employees and directors, and each of them,
against any loss, damage, claim, or liability, arising out of, as a result of,
or in connection with the use of the Product in accordance with this Agreement
or the acts or omissions, negligent or otherwise, of Seller in the performance
of this Agreement, or a contractor or an agent of Seller or an employee of
anyone of them, except where such loss, damage, claim, or liability arises from
the sole negligence or willful misconduct of Customer, agents or its employees.
Seller shall, at its own expense, defend any suit asserting a claim for any
loss, damage or liability specified above, and Seller shall pay any costs,
expenses and attorneys' fees that may be incurred by Customer in connection
with any such claim or suit or in enforcing the indemnity granted above,
provided that Seller (i) is given prompt notice of any such claim or suit and
(ii) full opportunity to assume control of the defense or settlement. Neither
Seller nor Customer shall not be liable to the other for indirect or
consequential damages, including but not limited to lost profits.
11. TERM AND TERMINATION
The term of this Agreement shall be [***] from the Effective Date. If either
party is in material default of any of its obligations under this Agreement and
such default continues for thirty (30) days after written notice thereof by the
party not in default, the nondefaulting party may cancel this Agreement. In
addition, a party may cancel this Agreement if a petition in bankruptcy or under
any insolvency law is filed by or against the other party and is not dismissed
within sixty (60) days of the commencement thereof.
12. ASSIGNMENT
a. Any assignment by Seller of this Agreement or any other interest
hereunder without Customer's prior written consent, shall be void,
except assignment to
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
a person or entity who acquires all or substantially all of the
assets, business or stock of Seller, whether by sale, merger or
otherwise.
b. Customer reserves the right to assign this Agreement or any portion
hereof to any present or future Affiliate. Notwithstanding the
foregoing, without the prior written consent of Seller, (i) the
Software license granted to Customer in the form of Exhibit D
(Software License), may not be sublicensed, assigned or otherwise
transferred by Customer except to Affiliates; (ii) the Products may
not be transported, relocated, sold or otherwise transferred outside
the United States and (iii) no assignment may be made to an entity
which Seller considers to be a competitor.
c. Subject to the provisions of paragraphs a, and b above, this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns, if any, of the parties hereto.
13. [***]
14. NOTICES
Except as otherwise specified in this Agreement, all notices or other
communications hereunder shall be deemed to have been duly given when made in
writing and delivered in person or deposited in the United States mail, postage
prepaid, certified mail, return receipt requested, or by a reputable overnight
courier service providing proof of delivery, or by confirmed facsimile
transmission and addressed as follows:
To Seller: To Customer:
Metawave Communications Corporation ALLTEL Supply Inc.
8700 148th Avenue NE 6625 The Corners Parkway
Redmond WA 98052 Norcross, GA 30092
Attn: VP, Sales Attn.: H.S. Fisher, Jr.
Copy to: General Counsel Copy to: Mark Kelso
Fax: 425 702 5976 Fax: (770) 368-1449
The address to which notices or communications may be given to either party may
be changed by written notice given by such party to the other pursuant to this
section 14.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
15. COMPLIANCE WITH LAWS
Seller shall comply with all applicable federal, state and local laws,
regulations and codes, including the procurement of permits and licenses when
needed, in the performance of this Agreement.
16. FORCE MAJEURE
Except for payment of moneys due, neither party shall be liable for delays in
delivery or performance or for failure to manufacture, deliver or perform
resulting from acts beyond the reasonable control of the party responsible for
performance. Such acts shall include, but not be limited to (a) acts of God,
acts of a public enemy, acts or failures to act by the other party, acts of
civil or military authority, governmental priorities, strikes or other labor
disturbances, hurricanes, earthquakes, fires, floods, epidemics, embargoes, war,
riots, and loss or damage to goods in transit; or (b) inability to obtain
necessary products, components, services or facilities on account of causes
beyond the reasonable control of the delayed party or its suppliers. In the
event of any such delay, the date(s) of delivery or performance shall be
extended for as many days are reasonably required due to the delay. If such
delay continues for 45 days, either party may terminate the Purchase Order
affected by the event by providing written notice.
17. GOVERNING LAW; DISPUTE RESOLUTION
a. This Agreement and each Purchase Order shall be construed in
accordance with the internal laws of the State of Washington, without
regard to its choice of law provisions.
b. Any and all disputes arising between the parties shall be resolved in
the following order: (i) by good faith negotiation between
representatives of Customer and Seller who have authority to fully and
finally resolve the dispute to commence within ten (10) days of the
request of either party; (ii) in the event that the parties have not
succeeded in negotiating a resolution of the dispute within ten (10)
days after the first meeting, then the dispute will be resolved by
nonbinding mediation to be held in a mutually agreed location in the
United States, using a mutually agreed upon non-affiliated neutral
party having experience with or knowledge in the wireless
communications equipment industry to be chosen within twenty (20) days
after written notice by either party demanding mediation (the costs
therefor to be shared equally); and (iii) if within sixty (60) days of
the initial demand for mediation by the parties, the dispute cannot be
resolved by mediation, then a party may institute litigation in a
court having subject matter jurisdiction, and the parties expressly
consent and submit themselves to the personal jurisdiction of such
court.
<PAGE>
18. DELAY PENALTIES
a. The parties agree that damages for delay are difficult to calculate
accurately, and, therefore, agree that penalties will be paid for late
performance of certain of Seller's obligations under this Agreement.
b. [***]
c. [***].
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
19. GENERAL PROVISIONS
a. All information, data and materials provided by either party under
this Agreement shall be subject to the terms and conditions of the
Non-Disclosure Agreement between the parties dated April 10, 1996.
b. Seller and Customer may issue a joint press release concerning the
execution of this Agreement. Such press release shall be subject to
prior review and written approval by both parties, not to be
unreasonably withheld.
c. Waiver by either party of any obligation or default by the other party
shall not be deemed a waiver by such party of any other obligation or
default.
d. Any rights of cancellation, termination or other remedies prescribed
in this Agreement are cumulative and are not intended to be exclusive
of any other remedies to which the injured party may be entitled at
law or equity (including but not limited to the remedies of specific
performance and cover) in case of any breach or threatened breach by
the other party of any provision of this Agreement, unless such other
remedies which are not prescribed in this Agreement are specifically
limited or excluded by this Agreement. The use of one or more
available remedies shall not bar the use of any other remedy for the
purpose of enforcing the provisions of this Agreement; provided,
however, that a party shall not be entitled to retain the benefit of
inconsistent remedies.
e. If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable the entire Agreement, but rather
the entire Agreement shall be construed as if not containing the
particular invalid or unenforceable provisions, and the rights and
obligations of Seller and Customer shall be construed and enforced
accordingly.
f. This Agreement, including all Exhibits attached to or referenced in
this Agreement, shall constitute the entire agreement between Customer
and Seller with respect to the subject matter hereof.
g. No provision of this Agreement shall be deemed waived, amended or
modified by any party hereto, unless such waiver, amendment or
modification is in writing and signed by a duly authorized
representative of each of the parties.
h. This Agreement applies only to sales of Products and Services in the
United States.
i. Each party shall comply with all applicable U.S. and foreign export
control laws and regulations and shall not export or re-export any
technical data or products except in compliance with the applicable
export control laws and regulations of the U.S. and any foreign
country.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
Metawave Communications Corporation ALLTEL Supply Inc.
By: /s/ Richard Henderson By: /s/ H.S. Fisher, Jr.
----------------------------------- ---------------------------
Name: Richard Henderson Name: H.S. Fisher, Jr.
----------------- ----------------
Title: Vice President of Sales and Marketing Title: Senior Vice President,
------------------------------------- ----------------------
Operations
----------
EXHIBITS ATTACHED:
A Product and Services Pricing
B Performance Specifications
C Site Acceptance Test Procedure (ATP)
D Software License
E System Acceptance Test Procedure (ATP)
F Installation and Optimization
G Training
H Product Maintenance Program
<PAGE>
EXHIBIT A: PRODUCTS AND SERVICES PRICING
TO THE AGREEMENT BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ALLTEL SUPPLY, INC. ("CUSTOMER")
Metawave Communications Corporation
8700 148/th/ Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- -------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C) 1998, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
CONFIDENTIAL AND PROPRIETARY FINAL
<PAGE>
Products and Services Pricing
================================================================================
PRODUCTS AND SERVICES PRICING
For the purposes of uniformity and brevity, references to Agreement or to an
Exhibit shall refer to the Purchase Agreement to which this document is Exhibit
A and to the other Exhibits to that Agreement. All definitions set forth in the
Agreement shall apply hereto unless otherwise expressly defined herein.
1. Introduction
This Exhibit A lists the Products and Services pricing and the Product quantity
discounts as of the Effective Date of the Agreement and throughout the term of
this Agreement. All payments for the Products and Services shall be made
according to the terms set forth in the Agreement. The prices included herein
are for products installed and services performed in the U.S.A.
2. SpotLight Pricing
<TABLE>
<CAPTION>
[***]
- --------------------------------------------------------------------------------
SPOTLIGHT UNITS
(BY NO. OF CHANNELS) [***] [***]
- --------------------------------------------------------------------------------
<S> <C> <C>
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LPA CONFIGURATION PRICING
- --------------------------------------------------------------------------------
Configuration [***] [***]
- --------------------------------------------------------------------------------
<S> <C> <C>
4 LPA Module Assy. [***] [***]
- --------------------------------------------------------------------------------
16 LPA Module Assy. [***] [***]
- --------------------------------------------------------------------------------
</TABLE>
* SpotLight Tx/Rx includes all of the hardware and software as described in
Section 2 of Exhibit B except those items identified as optional or supplied by
Customer.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Products and Services Pricing
================================================================================
[***]
<TABLE>
<CAPTION>
4. SpotLight Spares Pricing
SPOTLIGHT RECOMMENDED SPARES KIT
- --------------------------------------------------------------------------------
PART NUMBER DESCRIPTION [***] [***] [***]
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
250-0035-XX Tx Driver [***] [***] [***]
- --------------------------------------------------------------------------------
250-0042-XX Voice LNA [***] [***] [***]
- --------------------------------------------------------------------------------
250-0044-XX LNA Alarm [***] [***] [***]
- --------------------------------------------------------------------------------
250-0082-XX LNA Power [***] [***] [***]
- --------------------------------------------------------------------------------
250-0083-XX External I/O card [***] [***] [***]
- --------------------------------------------------------------------------------
270-0002-XX RX SMU Assy. [***] [***] [***]
- --------------------------------------------------------------------------------
270-0026-XX TX SMU Assy. [***] [***] [***]
- --------------------------------------------------------------------------------
LPA module [***] [***] [***]
- --------------------------------------------------------------------------------
TOTALS:
- --------------------------------------------------------------------------------
</TABLE>
Notes:
1. The SpotLight Recommended Spares Kit list is for SpotLight configurations
supporting up to 90 channels.
2. Metawave recommends to maintain an inventory of one spares kit for every
four SpotLight systems installed.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Products and Services Pricing
================================================================================
<TABLE>
<CAPTION>
5. CDMA Product Feature Packages
- --------------------------------------------------------------------------------
INITIAL RELEASE DESCRIPTION [***]
- --------------------------------------------------------------------------------
<S> <C> <C>
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
</TABLE>
Notes:
1. [***]
2. [***]
<TABLE>
<CAPTION>
6. Engineering Services Pricing
ENGINEERING SERVICES
- --------------------------------------------------------------------------------
DESCRIPTION [***]
- --------------------------------------------------------------------------------
<S> <C>
[***] [***]
- --------------------------------------------------------------------------
[***] [***]
- --------------------------------------------------------------------------
</TABLE>
Notes:
1. [***]
2. [***]
3. [***]
4. [***]
7. Software Licensing Fee
The Software licensing fees for the most current versions of LampLighter and
SpotLight embedded system Software (available at the time of purchase of
SpotLight) are included in the Purchase Price of each SpotLight unit purchased.
Software Updates are available under the SMP described in Exhibit H or for
additional licensing fees.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Products and Services Pricing
================================================================================
Maintenance Fees
Software Maintenance Program (SMP) Fees
The SMP annual fee for LampLighter software and the SpotLight embedded system
software is [***] per each RF analog channel supported by SpotLight not to
exceed [***] per "Host System" per year where a Host System is defined herein as
that group of SpotLight units serving cellular RF infrastructure equipment
connected to a common Mobile Switching Center.
Hardware Maintenance Program (HMP) Fees
Seller and Customer agree to negotiate in good faith the HMP fee prior to the
end of the Warranty Period.
9. General Conditions For Order:
1. Customer shall provide the local air-time for all drive testing at no
charge to Seller.
2. If Seller's Services are delayed for reasons beyond the control of
Seller or if additional Services are required by Customer, the
Services shown herein shall be adjusted accordingly, as mutually
agreed upon by both parties.
3. Towers and transmission lines to the towers and antennas, or any costs
associated with the preparation of towers and the site, not covered in
Exhibit F, including the installation of antennas and adequate
electrical power, are not included in the prices shown herein and are
the responsibility of Customer.
4. Performance of the Services set forth herein is dependent upon
Customer and or Seller obtaining any and all necessary licenses,
permits and governmental approvals required to perform the Services
set forth herein. Seller shall not be held liable for any non-
performance due to delays by Customer in obtaining any of the above
documentation and or approvals.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Products and Services Pricing
================================================================================
<TABLE>
<CAPTION>
SPOTLIGHT 2.0 FIELD REPLACEABLE UNIT (FRU) PRICE LIST
- --------------------------------------------------------------------------------
PART NUMBER PART DESCRIPTION PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
</TABLE>
Products and Services Pricing
================================================================================
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
[***] [***] [***]
- --------------------------------------------------------------------------------
</TABLE>
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT B: PERFORMANCE SPECIFICATIONS
TO THE PURCHASE AGREEMENT
SPOTLIGHT MULTIBEAM ANTENNA PLATFORM 2.0
TRANSMIT/RECEIVE
(for use with Motorola HDII Base Station Equipment)
Metawave Communications Corporation
8700 148/th/ Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1998, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
FINAL
<PAGE>
SpotLight Multibeam Antenna Platform Performance Specifications
================================================================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction....................................................... 3
2. System Description................................................. 3
2.1. Introduction................................................ 4
2.2. General System Overview..................................... 4
2.2.1. Operational Overview................................. 5
2.2.2. SIG/SCAN............................................. 6
2.2.3. Remote Access........................................ 6
2.2.4. Antennas............................................. 6
2.2.5. Lightning Arrestor................................... 7
2.2.6.Rack Mounted Components......................................... 7
2.2.7. Interfaces........................................... 8
2.3. SpotLight Specifications.................................... 9
2.3.1. RF Performance....................................... 9
2.3.2. Electrical Specifications............................ 9
2.3.3. Environmental Specifications......................... 10
2.3.4. Physical Specifications.............................. 10
2.3.5. Alarming............................................. 10
2.3.6. Reset................................................ 10
2.3.7. SMAP Frequency Reference............................. 10
2.4. RF Performance.............................................. 10
2.4.1. Angular Diversity.................................... 10
2.4.2. Transmit Output Power................................ 11
2.4.3. Transmit Spurious Emissions.......................... 11
2.5. System Software............................................. 12
2.5.1. LampLighter Software................................. 12
2.5.2. Embedded System Software............................. 12
2.6. Software Performance........................................ 12
2.6.1. Program Upgrades..................................... 12
2.6.2. Programming and Development Standards................ 12
2.6.3. Built-In-Self-Test................................... 13
2.6.4. Response Times....................................... 13
3. Regulatory Requirements............................................ 13
3.1 US............................................................. 13
4. Optional SpotLight Platform CDMA Features.......................... 13
4.1 CDMA/AMPS/NAMPS Integration Feature............................... 13
4.2 RF Sector Synthesis Feature....................................... 13
4.3 CDMA Base Stations Supported...................................... 14
</TABLE>
<PAGE>
SpotLight Multibeam Antenna Platform Performance Specifications
================================================================================
PERFORMANCE SPECIFICATIONS
For purposes of uniformity and brevity, references to Agreement or to an Exhibit
shall refer to the Products and Services Purchase Agreement to which this
document is Exhibit B and to the other Exhibits to that Agreement. All
definitions set forth in the Agreement shall apply hereto.
Introduction
The purpose of this document is to describe and specify Metawave's
SpotLight(TM) 2.0 Multibeam Antenna Platform including:
. System operation
. Hardware and elements of the SpotLight equipment
. Interconnect between SpotLight equipment and the base station equipment
While the specifications contained in this document are based on the most
current information available, such information is based on cell site specific
data and may not apply to all cell sites contained within a system. Metawave
reserves the right to make changes to any design, specification, manufacturing
techniques and/or product testing procedures provided those new specifications
meet the minimum requirements contained in this Exhibit, Exhibit G and Exhibit
H. The new specifications shall be provided to Customer at least 60 days
prior to the date of general availability of the Products.
ACRONYMS AND TERMS DEFINITION
-----------------------------
C/I Carrier to Interference Ratio
FRU Field Replaceable Unit
LNA Low Noise Amplifier
LPA Linear Power Amplifier
RCU Radio Channel Unit (P/O Motorola Cell Equipment)
RF Radio Frequency
Rx Receive
SMAP Spotlight Multibeam Antenna Platform
SMU Spectrum Management Unit
Tx Transmit
TxCD Transmit Combiner Driver
<PAGE>
SpotLight Multibeam Antenna Platform Performance Specifications
================================================================================
2. System Description
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
3. Regulatory Requirements
This section specifies requirements which are set primarily by local
and/or national governing bodies, consortiums and standards
committees.
The SpotLight system complies with appropriate US FCC regulations
(includes both RF and EMI). Specifically, the SMAP shall comply with
the resolutions defined in CFR47 part 22 and part 15.
The SpotLight system is UL listed.
4. [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT C: SITE ACCEPTANCE TEST PROCEDURE (ATP)
TO THE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ALLTEL SUPPLY INC. ("CUSTOMER")
Metawave Communications Corporation
8700 148/th/ Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1998, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
FINAL
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction............................................................ 3
2. Acceptance Tests........................................................ 3
2.1. LampLighter Installation Test.................................... 4
2.2. System Configuration Test........................................ 5
2.3. Transmit Effective Radiated Power (Tx ERP) Test.................. 6
2.4. Receive Sensitivity Test......................................... 8
2.5. Alarm Functionality Test......................................... 9
2.6. Call Processing Test............................................. 11
</TABLE>
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
SITE ACCEPTANCE TEST PROCEDURE
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SOFTWARE LICENSE AGREEMENT
--------------------------
EXHIBIT D
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORPORATION ("SELLER")
AND
ALLTEL SUPPLY, INC. ("CUSTOMER")
1. DEFINITIONS
"Agreement" shall mean the Purchase Agreement between Seller and Customer
executed concurrently herewith, and the Exhibits attached thereto, including
this Exhibit E (Software License).
"Software" shall mean the (i) object-code computer programs embedded in the
Spotlight Unit which control and monitor the operation of the Spotlight Unit
("Embedded Software"), and (ii) the Lamplighter(TM) PC-based graphical user
interface computer program for the Spotlight Unit, and all Features, Major
Releases, Point Releases, Software Patches, SP Software (as such terms are
defined in Exhibit H), other updates and modifications ("Software Updates")
and any documentation in support thereof .
"Spotlight Unit" shall mean the Spotlight(TM) antenna system described in
Exhibit B.
Any terms not defined herein shall have the same meanings as in the
Agreement and the Exhibits thereto.
2. SCOPE
Pursuant to the Agreement, Software will be delivered by Seller to Customer
for use with a Spotlight Unit according to the terms of the Agreement and
this Exhibit. Customer shall then become a licensee with respect to such
Software.
3. LICENSING GRANT
3.1 Concurrent with execution of the Agreement, and subject to the terms
and conditions set forth herein, Seller grants to Customer a revocable,
non-exclusive and non-transferable license under Seller's applicable
proprietary rights to use Software delivered to Customer hereunder.
Such use shall apply only to operate a Spotlight Unit delivered under
the Agreement.
3.2 The licensing fees for the current versions of the Embedded Software
and of Lamplighter(TM) Software are included in the Purchase Price for
the Spotlight Unit. Software Updates are available under the Software
Maintenance Program described in Exhibit H or for additional licensing
fees.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
4. LIMITATIONS ON USE OF SOFTWARE
4.1 Without the prior written consent of Seller, Customer shall only use
the Software in conjunction with a single Spotlight Unit existing
within the site specified in the Purchase Order ("Designated Spotlight
Unit").
4.2 Customer may use the Software to perform the activities listed in
section 2.5 of Exhibit B and those activities available in future
enhancements or features. Under no condition shall the Software be
used for any other purpose, including, but not limited to, substituted
Spotlight Units, or Spotlight Units not owned by Customer, or Spotlight
Units located at a location other than the site specified in the
Purchase Order.
4.3 The License granted to Customer in Section 2 is personal and may not be
transferred to another Spotlight or site or another entity without the
written consent of Seller.
4.4 The Software is subject to laws protecting patents, trade secrets,
know-how, confidentiality and copyright.
4.5 Customer shall not translate, modify, adapt, decompile, disassemble, or
reverse engineer the Software or any portion thereof.
4.6 Unless otherwise expressly agreed by Seller, Customer shall not permit
its directors, officers, employees or any other person under its direct
or indirect control, to write, develop, produce, sell, or license any
software that performs the same functions as the Software by means
directly attributable to access to the Software (e.g. reverse
engineering or copying).
4.7 Customer shall not export the Software from the United States without
the written permission of Seller. If written permission is granted for
export of the Software, then Customer shall comply with all U.S. laws
and regulations for such exports and shall hold Seller harmless,
including legal fees and expenses for any violation or attempted
violation of the U.S. export laws.
4.8 Customer acknowledges that Seller owns the Software and that any rights
therein not specifically granted in this License are the exclusive
property of Seller.
5. RIGHT TO COPY, PROTECTION AND SECURITY
5.1 Software provided hereunder may be copied (for back-up purposes only)
in whole or in part, in printed or machine-readable form for Customer's
internal use only, provided, however, that no more than two (2) printed
copies and two (2) machine-readable copies shall be in existence at any
one time without the prior written consent of Seller, other than copies
electronically resident in the Spotlights.
5.2 With reference to any copyright notice of Seller associated with
Software, Customer agrees to include the same on all copies it makes in
whole or in part. Seller's copyright notice may appear in any of
several forms, including machine-readable form. Use of a copyright
notice on the Software does not imply that such has been published or
otherwise made generally available to the public.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
5.3 Customer agrees to keep confidential, in accordance with the terms of
the Agreement or a non disclosure agreement signed by the parties, and
not provide or otherwise make available in any form any Software or its
contents, or any portion thereof, or any documentation pertaining to
the Software, to any person other than employees of Customer or Seller.
5.4 Software is the sole and exclusive property of Seller and no title or
ownership rights to the Software or any of its parts, including
documentation, is transferred to Customer.
5.5 Customer acknowledges that it is the responsibility of Customer to take
all reasonable measures to safeguard Software and to prevent its
unauthorized use or duplication.
6. REMEDIES
Customer acknowledges that violation of the terms of this Exhibit or the
Agreement shall cause Seller irreparable harm for which monetary damages may
be inadequate, and Customer agrees that Seller may, in addition to any other
legal or equitable remedy it may have, seek temporary or permanent injunctive
relief without the need to prove actual harm in order to protect Seller's
interests.
7. TERM
Unless otherwise terminated pursuant to Section 8 hereof, or in the event
that Customer is required to return the Software pursuant to section 8(b) of
the Purchase Agreement, the term of the license granted pursuant to Section 2
herein shall be perpetual.
8. TERMINATION
8.1 The license granted hereunder may be terminated by Customer upon one
(1) month's prior written notice.
8.2 Seller may terminate the license granted hereunder if Customer is in
material default of any of the terms and conditions of this Exhibit D
(Software License Agreement) , and such termination shall be effective
if Customer fails to correct such default within thirty (30) days
after written notice thereof by Seller. The provisions of Sections 4
and 5 herein shall survive termination of any such license.
8.3 Within one (1) month after termination of the license granted
hereunder, Customer shall furnish to Seller a document certifying that
through its best efforts and to the best of its knowledge, the
original and all copies in whole or in part of all Software, in any
form, including any copy in an updated work, have been returned to
Seller or destroyed. With prior written consent from Seller, Customer
may retain one (1) copy for archival purposes only.
9. RIGHTS OF THE PARTIES
9.1 Nothing contained herein shall be deemed to grant, either directly or
by implication, estoppel, or otherwise, any license under any patents,
patent applications or copyrights of Seller except as expressly
granted herein.
9.2 Rights in programs or operating systems of third parties, if any, are
further limited by their license agreements with such third parties,
which agreements are hereby
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
incorporated by reference thereto and made a part hereof as if fully
set forth herein. Customer agrees to abide thereby.
9.3 During the term of the license granted pursuant to Section 2 herein
and for a period of one (1) year after expiration or termination,
Seller, and where applicable, its licensor(s), or their
representatives may, upon prior notice to Customer, a) inspect the
files, computer processors, equipment, facilities and premises of
Customer during normal working hours to verify Customer's compliance
with this Agreement, and b) while conducting such inspection, copy
and/or retain all Software, including the medium on which it is stored
and all documentation that Customer may possess in violation of the
license or the Agreement.
9.4 Customer acknowledges that the provisions of this Exhibit E are
intended to inure to the benefit of Seller and its licensors and their
respective successors in interest. Customer acknowledges that Seller
or its licensors have the right to enforce these provisions against
Customer, whether in Seller's or its licensor's name.
10. LIMITATIONS ON SOFTWARE
Customer understands that errors occur in Software and Seller makes no
warranty that the Software will perform without error. Customer agrees that
it is Customer's responsibility to select and test the Software to
determine that is meets Customer's needs. Customer accepts the Software "as
is" subject to the warranty set forth in Section 5 of the Purchase
Agreement.
11. [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
12. ENTIRE UNDERSTANDING
12.1 This Exhibit D (Software License) is a part of, and is to be read
together with, the Agreement which contains additional terms and
conditions, warranties and indemnities applicable to the Software.
12.2 Notwithstanding anything to the contrary in other agreements,
purchase orders or order acknowledgments, the Agreement, the Software
specifications set forth in Exhibit B and this Exhibit D set forth
the entire understanding and obligations regarding use of Software,
implied or expressed.
<PAGE>
EXHIBIT E: SYSTEM ACCEPTANCE TEST PROCEDURE (ATP)
TO THE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ALLTEL SUPPLY, INC. ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
CONFIDENTIAL PROPRIETARY FINAL
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(c)1998, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
1. Introduction ERROR! BOOKMARK NOT DEFINED.
2. System (ATP)......................................................................................... 3
2.1. Network Planning Phase..................................................................... 3
2.2. Baseline Performance Collection Phase...................................................... 5
2.3. SpotLight Installation and Site ATP Phase.................................................. 7
2.4. SpotLight Network Optimization Phase....................................................... 7
2.5 SpotLight Performance Collection, Evaluation and Sign-off Phase................................. 8
</TABLE>
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
SPECTRUM CLEARING SYSTEM ATP
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT F: SPOTLIGHT IMPLEMENTATION, INSTALLATION AND SITE COMMISSIONING
TO THE PURCHASE AGREEMENT
BETWEEN
("SELLER")
AND
("CUSTOMER")
Metawave Communications Corporation
8700 148/th/ Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(c)1997, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
FINAL
<PAGE>
Implementation, Installation and Commissioning
============================================================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Scope........................................................... 3
2. Commencement of Work............................................ 3
3. Schedule A: Implementation Engineering.......................... 3
4. Schedule B: Cell Site Installation.............................. 4
5. Schedule C: Site Commissioning.................................. 5
6. Acceptance Test Procedure (ATP)................................. 5
7. Customer Responsibilities....................................... 5
8. Invoices & Payment.............................................. 6
9. Right to Subcontract............................................ 6
10. Supervision..................................................... 6
11. Extra Work...................................................... 7
12. Special Transportation.......................................... 7
</TABLE>
<PAGE>
Implementation, Installation and Commissioning
================================================================================
SPOTLIGHT IMPLEMENTATION, INSTALLATION AND SITE
COMMISSIONING
For purposes of uniformity and brevity, references to Agreement or to an Exhibit
shall refer to the Products and Services Purchase Agreement to which this
document is Exhibit F and to the other Exhibits to that Agreement. All
definitions set forth in the Agreement shall apply hereto.
1. SCOPE
1.1 THIS EXHIBIT INCLUDES A DESCRIPTION OF THE ENGINEERING SERVICES
REQUIRED TO PLACE A SPOTLIGHT PLATFORM INTO COMMERCIAL SERVICE:
. Schedule A: Implementation
. Schedule B: Installation
. Schedule C: Site Commissioning
1.2 CUSTOMER AGREES TO ACCEPT SCHEDULES A, B AND C ACCORDING TO THE TERMS
AND CONDITIONS OF THIS EXHIBIT AND TO PAY TO METAWAVE THE PRICES SET
FORTH IN EXHIBIT A FOR SUCH SERVICES.
2. COMMENCEMENT OF WORK
2.1 IMPLEMENTATION ENGINEERING SHALL COMMENCE IN ACCORDANCE WITH THE
PROJECT SCHEDULE AS SET FORTH IN A PURCHASE ORDER.
2.2 INSTALLATION AND COMMISSIONING SHALL COMMENCE WITHIN A REASONABLE TIME
AFTER ARRIVAL OF THE PRODUCTS AT THE SITE AND IN ACCORDANCE WITH THE
PROJECT SCHEDULE AS SET FORTH IN A PURCHASE ORDER.
3. SCHEDULE A: IMPLEMENTATION ENGINEERING
3.1 SITE APPRAISAL AND INSTALLATION ANALYSIS
In accordance with the project schedule as set forth in a Purchase
Order, Metawave and Customer shall conduct a site walk to appraise
the Site and perform an installation analysis. The information
gathered at the site walk will be used to develop a Scope of Work.
The following information is examined and recorded during a Site
walk:
. dimensions of cell site and available space,
. primary power availability and distribution,
. Customer supplied equipment,
. number of channels,
<PAGE>
Implementation, Installation and Commissioning
================================================================================
. current antenna configuration,
. current system traffic statistics.
3.2 SCOPE OF WORK
Seller shall prepare a Scope of Work (SOW) document from the
information collected during the Site walk. The SOW, shall be
mutually agreed upon by both Seller and Customer. The SOW document
will contain the materials and resources required from Seller and
Customer to perform the installation and shall contain the Network
Plan required to complete the commissioning of each cell site.
4. SCHEDULE B: CELL SITE INSTALLATION
4.1 ALL INSTALLATION WILL BE PERFORMED IN ACCORDANCE WITH THE INSTRUCTIONS
AND TECHNIQUES AS DESCRIBED IN THE SERVICE MANUALS SUPPLIED WITH THE
EQUIPMENT.
4.2 UPON THE COMPLETION OF THE CELL SITE INSTALLATION(S), METAWAVE WILL
PROVIDE THE FOLLOWING DOCUMENTATION FOR EACH CELL SITE:
. Site Walk with documentation,
. Scope of Work (SOW),
. Floor plan,
. SpotLight-to-HDII Channel Mapping documentation,
. LampLighter Settings document,
. Antenna Sweep records,
. Installation Verification Test Data sheets,
. Configuration and Integration Test Data sheets,
. Link Budget spread sheet/Tx Path Attenuator Calculations,
. Sig/Scan Installation diagram.
4.3 INSTALLATION TEST SCHEDULE (REFER TO SPOTLIGHT SYSTEMS MANUAL,
CHAPTERS 7 AND 8)
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Implementation, Installation and Commissioning
================================================================================
5. SCHEDULE C: Site Commissioning
UPON COMPLETION OF THE SPOTLIGHT INSTALLATION, METAWAVE WILL INFORM
CUSTOMER THAT SPOTLIGHT IS READY FOR COMMISSIONING (BASED ON THE
NETWORK PLAN IN THE SOW). COMMISSIONING INCLUDES THE FOLLOWING
ACTIVITIES:
[***]
6. ACCEPTANCE TEST PROCEDURE (ATP)
Within 24 hours after Seller has advised Customer that installation and
commissioning are complete, Customer shall furnish representative to witness the
Acceptance Test Procedure (ATP) as set forth in Exhibit C (Acceptance Test
Procedure). The representatives shall then be available on a continuous basis
to witness the ATP.
7. CUSTOMER RESPONSIBILITIES
7.1 ANY CHANGES TO THE SOW MUST BE MUTUALLY AGREED UPON BY BOTH SELLER AND
CUSTOMER, IN WRITING, AND SHALL BECOME AN ATTACHMENT TO THE PURCHASE
AGREEMENT.
7.2 CUSTOMER IS RESPONSIBLE FOR OBTAINING ANY REQUIRED OPERATING AUTHORITY
AND ALL REQUIRED APPROVALS AND PERMITS TO INSTALL AND OPERATE THE
WIRELESS NETWORK.
7.3 INFORMATION, DOCUMENTATION, FACILITIES AND SERVICES UNDER CUSTOMER'S
CONTROL OR REASONABLY OBTAINABLE BY CUSTOMER SHALL BE FURNISHED BY
CUSTOMER IN A TIMELY MANNER IN ORDER TO FACILITATE THE ORDERLY
PROGRESS OF THE WORK. INCLUDED, WITHOUT IMPLIED LIMITATION, SHALL BE:
ACCESS AND RIGHT OF ENTRY TO ALL SITES; REGULATORY FILING
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Implementation, Installation and Commissioning
================================================================================
INFORMATION; FLOOR PLANS; AND ANY SUPPORTING DOCUMENTS WHICH MAY
AFFECT SITE ENGINEERING OR INSTALLATION ANALYSIS.
7.4 IN THE EVENT THAT CUSTOMER HAS NOT MADE PERMANENT SITES AVAILABLE TO
RECEIVE THE EQUIPMENT BY THE SITE AVAILABILITY DATE AS SET FORTH IN
THE SOW, METAWAVE, AT ITS OPTION, MAY SHIP THE EQUIPMENT TO A
WAREHOUSE IN OR NEAR THE SITE, AND CUSTOMER SHALL BEAR THE COSTS OF
INSURANCE, WAREHOUSING, RELOADING, TRANSPORTING, OFF-LOADING AND
MOVING THE EQUIPMENT ONTO THE PERMANENT SITE WHEN SUCH SITE BECOMES
AVAILABLE AS WELL AS BEAR THE RESPONSIBILITY FOR SAFEKEEPING AND
WAREHOUSING OF THE EQUIPMENT IN ENVIRONMENTAL CONDITIONS AS SET OUT IN
THE SPECIFICATIONS.
7.5 CUSTOMER SHALL MAKE EACH SITE AVAILABLE TO SELLER FOR WORK 24 HOURS
PER DAY, SEVEN DAYS PER WEEK. SITE ACCESS INCLUDES PROVIDING METAWAVE
WITH KEYS, PASS CODES, SECURITY CLEARANCES, ESCORT, ETC., NECESSARY TO
GAIN ENTRANCE TO AND EXIT FROM THE WORK AREA. WAIVER OF LIABILITY OR
OTHER RESTRICTIONS SHALL NOT BE IMPOSED AS A SITE ACCESS REQUIREMENT.
7.6 CUSTOMER IS AT ALL TIMES RESPONSIBLE FOR MAINTAINING PROPER
ENVIRONMENTAL CONDITIONS AT EACH SITE. TEMPERATURE, HUMIDITY, DUST,
ETC., SHALL BE MONITORED AND CONTROLLED WITHIN THE RECOMMENDED RANGES
SET FORTH IN THE EQUIPMENT SPECIFICATIONS.
7.7 CUSTOMER IS RESPONSIBLE FOR TOWER SPECIFICATIONS FOR THE LOADING OF
THE SPOTLIGHT ANTENNAS AND TRANSMISSION LINES.
7.8 ALL CUSTOMER-PROVIDED CABLES AND WIRING SHALL BE RUN TO THE IMMEDIATE
AREA OF THE METAWAVE-SUPPLIED EQUIPMENT.
7.9 CUSTOMER SHALL GROUND SELLER EQUIPMENT AND PROVIDE LIGHTING PROTECTION
FOR THE RF SYSTEM.
7.10 CUSTOMER SHALL PROVIDE SELLER WITH THE HARDWARE REVISION AND SOFTWARE
LOAD OF EACH BASE STATION THAT SELLER'S PRODUCTS ARE TO BE INTERFACED
TO.
7.11 CUSTOMER SHALL PROVIDE, AT SELLER'S REQUEST AND IN A TIMELY FASHION,
DATABASE INFORMATION, INCLUDING BUT NOT LIMITED TO, NETWORK STATISTICS
AND FREQUENCY INFORMATION BEFORE AND AFTER THE INSTALLATION OF
SELLER'S PRODUCTS.
8. INVOICES & PAYMENT
Invoices and payment for implementation, installation and commissioning shall be
made in accordance with the Agreement.
9. RIGHT TO SUBCONTRACT
Seller shall have the right to subcontract the implementation, installation
and commissioning work in whole or in part.
<PAGE>
Implementation, Installation and Commissioning
================================================================================
10. SUPERVISION
Seller shall appoint a Program Manager to supervise the implementation,
installation and commissioning of the Products. Customer shall appoint a
Program Manager who shall have authority to make changes that may be
required during the performance of such services.
11. EXTRA WORK
Extra work to be performed by Seller not specified in this Exhibit but
required to complete installation or commissioning shall be authorized in
writing by Customer prior to the commencement of such work. If mutually
agreed-upon, such work shall be performed by Seller at its then prevailing
rates.
12. SPECIAL TRANSPORTATION
Special transportation required to gain access to a Site shall be supplied
by Customer. Seller shall, if directed in writing, furnish the special
transportation and invoice Customer for such services.
<PAGE>
EXHIBIT G
TO THE PURCHASE AGREEMENT
BETWEEN
SELLER
AND
CUSTOMER
TRAINING
--------
For purposes of uniformity and brevity, references to Purchase Agreement
("Agreement") or to an Exhibit shall refer to that Agreement to which this
document is Exhibit G and to the other Exhibits to that Agreement. All
definitions set forth in the Agreement shall apply hereto.
1. OVERVIEW
Seller's sponsored courses include the SpotLight System Maintenance and
Operations course as described below. The SpotLight System Maintenance and
Operation course is offered at Seller's offices in Redmond, WA [***]. Upon
Customer's request, Seller will provide the SpotLight System Maintenance
and Operation course at a location chosen by Customer. In the event that
Seller provides the training at a Customer chosen location, Customer will
pay the instructor's airfare, per diem expenses and any and all equipment
shipping charges to provide the class at Customer's chosen location.
Metawave training courses are copyrighted by Metawave Communications
Corporation. No reproduction rights for these training courses will be
granted. Metawave reserves the right to change courses without notifying
Customer beforehand.
2. SPOTLIGHT SYSTEM MAINTENANCE AND OPERATION COURSE OBJECTIVE
SpotLight System Maintenance and Operation is a one day course designed for
Cellular Technicians, and assumes no prior background with Smart Antenna
systems. At the successful completion of this course, technicians will be
certified by Seller to maintain, troubleshoot, and replace Field
Replaceable Units (FRU) as needed to sustain site operation. The technician
will also become familiar with the LampLighter user interface, and be able
to configure and monitor SMUs (Spectrum Management Units) either on-site or
remotely, view system performance statistics, and perform SpotLight system
verification. Upon completion of the course, all students will receive a
SpotLight System Manual, a LampLighter User Guide, copies of the
presentation materials as site reference material and a course certificate
of completion.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT H: PRODUCT MAINTENANCE PROGRAM
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ALLTEL SUPPLY, INC. ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by
Metawave under an agreement of nondisclosure to the Customer for internal
evaluation purposes only and is protected by applicable copyright and trade
secret law. This document may only be disclosed or disseminated to those
employees of the Customer who have a need to use it for evaluation
purposes; no other use or disclosure can be made by Customer without
Metawave's consent.
1998, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
PRODUCT MAINTENANCE PROGRAM
1. Introduction
Seller's product maintenance program includes both a Hardware Maintenance
Program (HMP) and a Software Maintenance Program (SMP). This document
describes each of the two programs.
2. Hardware Maintenance Program (HMP)
Seller repairs its Product(s) down to the Field Replaceable Unit (FRU)
(refer to Exhibit A for the most current list of FRUs). In this Exhibit H,
the term hardware refers to the non-Software components making up a FRU.
The following describes Seller's Hardware Maintenance Program ("HMP"):
2.1 Term
2.1.1 SELLER'S HMP IS INCLUDED IN THE PURCHASE PRICE OF EACH PRODUCT
PURCHASED BY CUSTOMER AND SHALL EXTEND THROUGHOUT THE DURATION
OF THE WARRANTY PERIOD, AS SET FORTH IN THE WARRANTY SECTION OF
THE AGREEMENT (THE "INITIAL HMP"). HARDWARE REPAIR SERVICES
ARE MADE AVAILABLE TO CUSTOMER FOR A PERIOD OF [***] FROM THE
DATE PRODUCT IS SHIPPED FROM SELLER'S FACTORY TO CUSTOMER.
FOLLOWING THE EXPIRATION OF THE INITIAL HMP, CUSTOMER HAS A
CHOICE OF (I) SUBSCRIBING TO SELLER'S HMP ON AN ANNUAL BASIS
PURSUANT TO THE TERMS HEREIN AND AT THE HMP FEES SET FORTH IN
EXHIBIT A ("EXTENDED HMP") FOR THE DURATION OF THE TERM OF THE
AGREEMENT AND THEREAFTER AT SELLER'S THEN CURRENT HMP FEES, OR
(II) HAVING THE PRODUCT REPAIRED ON A TIME-AND-MATERIALS BASIS
AT THE REPAIR RATES LISTED IN ANNEX A, SECTION F FOR THE
DURATION OF THE TERM OF THE AGREEMENT AND THEREAFTER AT
SELLER'S THEN CURRENT REPAIR RATE.
2.2 Seller shall:
2.2.1 IN THE EVENT A DEFECT OCCURS, EITHER (I) REPAIR THE DEFECTIVE
FRU OR (II) REPLACE SAID FRU WITH A NEW OR REFURBISHED FRU. ANY
ITEM REPLACED WILL BE DEEMED TO BE ON AN EXCHANGE BASIS, AND
ANY ITEM RETAINED BY SELLER THROUGH REPLACEMENT WILL BECOME THE
PROPERTY OF SELLER.
2.2.2 FRUs THAT HAVE BEEN REPAIRED OR REPLACED WILL BE WARRANTED FOR
A PERIOD OF TIME WHICH IS THE LONGER OF (I) [***] FROM THE DATE
OF SHIPMENT OF FRU TO CUSTOMER OR (II) [***].
2.2.3 [***] OF RECEIPT OF A DEFECTIVE FRU FROM CUSTOMER, SHIP A
REPAIRED OR REPLACEMENT FRU TO CUSTOMER. EQUIPMENT NOT
MANUFACTURED BY SELLER WILL BE REPAIRED OR REPLACED AS PROMPTLY
AS ARRANGEMENTS WITH THE MANUFACTURERS OR VENDORS THEREOF
PERMIT.
2.2.4 ISSUE A RETURN MATERIAL AUTHORIZATION ("RMA") NUMBER TO
CUSTOMER PRIOR TO CUSTOMER'S RETURN OF THE DEFECTIVE FRU.
2.2.5 PAY ALL TRANSPORTATION CHARGES FOR THE RETURN OF THE REPAIRED
OR REPLACEMENT FRU TO CUSTOMER.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
2.2.6 PROVIDE TELEPHONE TECHNICAL SUPPORT 24 HOURS A DAY, 7 DAYS A
WEEK WITH A TELEPHONE CALL-BACK RESPONSE TIME TO CUSTOMER NOT
TO EXCEED ONE HOUR FROM CUSTOMER'S CALL TO CUSTOMER SUPPORT.
2.3 Customer shall:
2.3.1 CONTACT SELLER VIA TELEPHONE, E-MAIL OR FAX TO OBTAIN AN RMA
PRIOR TO RETURNING A DEFECTIVE FRU.
2.3.2 PACKAGE FRU IN A MANNER TO PREVENT DAMAGE DURING SHIPMENT AND
CLEARLY IDENTIFY RMA NUMBER ON OUTSIDE OF PACKAGE.
2.3.3 SHIP THE DEFECTIVE FRU TO THE ADDRESS SHOWN IN ANNEX A TO THIS
EXHIBIT.
2.3.4 PAY ALL COSTS OF TRANSPORTATION FOR SENDING THE DEFECTIVE FRU
TO SELLER.
2.3.5 IF SELLER HAS SHIPPED A REPLACEMENT FRU IN ADVANCE OF CUSTOMER
RETURNING A DEFECTIVE FRU TO SELLER, CUSTOMER AGREES TO INSURE
AND PROVIDE CONFIRMATION OF SHIPMENT OF SUCH DEFECTIVE FRU,
FREIGHT PREPAID, TO SELLER (AT ADDRESS SHOWN IN ANNEX A TO THIS
EXHIBIT) WITHIN 5 DAYS OF SELLER'S SHIPMENT OF REPLACEMENT FRU.
CUSTOMER AGREES TO PROMPTLY PAY SELLER'S INVOICE FOR THE
REPLACEMENT FRU (BILLED AT THE THEN CURRENT FRU PRICE) SHIPPED
TO CUSTOMER IF THE DEFECTIVE FRU IS NOT RETURNED TO SELLER
WITHIN THE SPECIFIED 5 DAY PERIOD.
2.3.6 BE RESPONSIBLE FOR THE INITIAL IDENTIFICATION OF PRODUCT
PROBLEMS DOWN TO THE FRU LEVEL AND FOR THE REMOVAL, SHIPMENT
AND RE-INSTALLATION OF THE MALFUNCTIONING FRU.
2.4 On-Site Repair
On-Site Repair can be performed at an additional charge. Such
charge will be quoted to Customer and agreed upon in writing before
dispatch of personnel.
2.5 Service Limitations
2.5.1 SELLER SHALL HAVE NO RESPONSIBILITY TO REPAIR OR REPLACE FRUS
WHICH HAVE BEEN REPAIRED IN AN UNAUTHORIZED MANNER OR WHICH
HAVE HAD THE BARCODE, SERIAL NUMBER, OR OTHER IDENTIFYING MARK
MODIFIED, REMOVED OR OBLITERATED THROUGH ACTION OR INACTION OF
CUSTOMER.
2.5.2 IN THE EVENT THAT CUSTOMER SENDS A FRU TO SELLER FOR WHICH NO
DEFECTS OR FAILURES CAN BE FOUND, SELLER MAY INVOICE CUSTOMER
AT THE THEN CURRENT FEE FOR THE SERVICES RENDERED DURING THE
EVALUATION PROCESS.
3. Software Maintenance Program (SMP)
The following describes Seller's SMP:
3.1 Definitions
Terms which are capitalized have the meanings set forth below or,
absent definition herein, as contained in the Agreement.
Feature an innovation or performance improvement to
Software that is made available to all users of
the current Software release. Features are
licensed to Customer individually and may be at
additional cost.
<PAGE>
Major Release indicates a new version of Software that adds new
Features (excluding Optional Features) or major
enhancements to the currently existing release of
Software.
Point Release indicates a modification to Software resulting
from planned revisions to the current release, or
corrections and/or fixes to the current release
of Software.
Software Patch Software that corrects or removes a reproducible
anomaly or "bug" in an existing Major Release.
3.2 Term
3.2.1 SELLER'S SMP IS INCLUDED IN THE PURCHASE PRICE OF EACH PRODUCT
PURCHASED BY CUSTOMER AND SHALL EXTEND THROUGHOUT THE DURATION
OF THE WARRANTY PERIOD, AS SET FORTH IN THE WARRANTY SECTION OF
THE AGREEMENT (THE "INITIAL SMP TERM"). THEREAFTER, SMP IS
PROVIDED BY SELLER TO CUSTOMER PURSUANT TO THE TERMS HEREIN AND
IS INCLUDED IN THE SMP FEES SET FORTH IN EXHIBIT A FOR A PERIOD
OF 12 MONTHS. ANY SOFTWARE PROVIDED TO CUSTOMER DURING THE TERM
OF THE SMP WILL BE PROVIDED PURSUANT TO SELLER'S SOFTWARE
LICENSE AS SET FORTH IN THE SOFTWARE LICENSE EXHIBIT OF THE
PURCHASE AGREEMENT.
3.3 Scope
3.3.1 DURING THE TERM OF SMP, ALL MAJOR RELEASES, POINT RELEASES,
SOFTWARE PATCHES AND STANDARD FEATURES MADE GENERALLY AVAILABLE
BY SELLER SHALL BE AVAILABLE TO CUSTOMER AT NO ADDITIONAL
CHARGE. CUSTOMER SHALL INSTALL SUCH SOFTWARE PROMPTLY UPON
RECEIPT.
3.3.2 OPTIONAL FEATURES AND CERTAIN SIGNIFICANT ENHANCEMENTS SHALL BE
MADE AVAILABLE TO CUSTOMER AT AN ADDITIONAL CHARGE. [***]
3.3.3 CERTAIN OPTIONAL FEATURES SHALL BE SOLD ON A PER-UNIT BASIS AND
MAY HAVE PRICE LEVELS THAT REFLECT UNIT CAPACITY.
3.3.4 CUSTOMER WILL BE RESPONSIBLE FOR PROBLEM IDENTIFICATION OF
REPRODUCIBLE SOFTWARE MALFUNCTIONS. IN THE EVENT OF ANY SUCH
SOFTWARE MALFUNCTION, CUSTOMER SHALL NOTIFY SELLER PROMPTLY OF
THE FAILURE
3.3.5 SELLER SHALL PROVIDE, AT A SELLER AUTHORIZED REPAIR DEPOT, SUCH
THROUGH CALLING SELLER'S CUSTOMER SUPPORT.
SERVICE AS IS NECESSARY TO CORRECT SOFTWARE DEFECTS IN
ACCORDANCE WITH THE APPLICABLE DOCUMENTATION. SUCH SERVICE WILL
BE PROVIDED BY SELLER SEVERITY OF THE PROBLEM.
3.3.6 AS SOON AS IS POSSIBLE AND ON A PRIORITY BASIS ACCORDING TO THE
SELLER SHALL PROVIDE TELEPHONE TECHNICAL SUPPORT 24-HOUR A DAY,
7 DAYS A WEEK WITH A TELEPHONE CALL-BACK RESPONSE TIME TO
CUSTOMER NOT TO EXCEED ONE HOUR FROM CUSTOMER'S CALL TO
CUSTOMER SUPPORT. ADDITIONALLY, SELLER SHALL PROVIDE TELEPHONE
ASSISTANCE AND GUIDANCE DURING THE INSTALLATION OF NEW
SOFTWARE.
3.3.7 SELLER SHALL SUPPORT THE CURRENT MAJOR RELEASE AND ASSOCIATED
POINT RELEASES AND FEATURES AS WELL AS THE IMMEDIATELY
PRECEDING MAJOR RELEASE AND ASSOCIATED POINT RELEASES AND
FEATURES.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
3.3.8 SELLER SHALL HAVE NO OBLIGATION TO SUPPORT ANY SOFTWARE WHICH
IS OLDER THAN THE IMMEDIATELY PRECEDING MAJOR RELEASE. HOWEVER,
ANY SUPPORT PROVIDED BY SELLER FOR SOFTWARE OLDER THAN THE
IMMEDIATELY PRECEDING MAJOR RELEASE AND ASSOCIATED POINT
RELEASES AND FEATURES SHALL BE ON A TIME AND MATERIAL BASIS. AN
OPEN PURCHASE ORDER WILL BE REQUIRED BEFORE ANY SUCH SERVICES
ARE RENDERED.
3.3.9 SELLER SHALL PERFORM ITS SERVICES HEREUNDER IN A GOOD
WORKMANLIKE MANNER AND IN ACCORDANCE WITH INDUSTRY STANDARDS
WHERE APPLICABLE.
<PAGE>
ANNEX A: PROCEDURES FOR METAWAVE'S HARDWARE
MAINTENANCE PROGRAM
A. METAWAVE'S CUSTOMER SUPPORT
Customer Support can be reached by call the following numbers:
Domestic phone: 888-642-2455
International phone: 425-702-6550
B. RETURN MATERIAL AUTHORIZATION (RMA):
Customer must contact Customer Support via telephone, e-mail or fax to
obtain a Return Material Authorization (RMA) number. Seller may return
shipments without a RMA number to the Customer unrepaired and at
Customer's cost.
The RMA number must be clearly written on the outside of the package.
A RMA number will not be issued until a purchase order is provided for
the repair price for those items not covered under warranty.
C. RETURN ADDRESS:
All Field Replaceable Units (FRUs) must be shipped to:
Metawave Communications Corporation
8700 148th Avenue N.E.
Redmond, WA 98052 USA
D. PACKING INSTRUCTIONS:
Customer must pack all returned equipment in a manner no less
protective to such equipment than the manner in which Seller packages
similar equipment.
E. REPAIR PURCHASE ORDERS:
Repair purchase orders are required in the following instances:
1. When Customer requests Emergency Expedite Service.
2. When Customer returns our of warranty FRUs for repair.
3. When Seller sends pre-exchange FRU to Customer prior to the
defective FRU being received by Seller.
Under these circumstances, a facsimile copy of the purchase order may
be transmitted to be followed up by a confirming hard copy in the
mail. The terms and conditions of the Agreement between Seller and
the Customer shall prevail notwithstanding any variance with the terms
and conditions of any purchase orders submitted by Customer.
<PAGE>
F. PRICING AND INVOICING:
Emergency Expedite Request (Under Initial HMP or Extended HMP):
---------------------------------------------------------------
Seller does not charge an Emergency Expedite Fee for FRUs covered
under the Initial HMP or Extended HMP..
Emergency Expedite Request (Under Time-and -Materials):
------------------------------------------------------
Seller charges an Emergency Expedite Fee of $300 per FRU (plus the
standard time-and-materials repair rates shown below) plus freight for
emergency service for FRUs not covered under the Initial HMP or
Extended HMP.
Repair and Return Shipment of FRUs (Under Initial HMP or Extended
----------------- -----------------------------------------------
HMP):
---
Seller does not charge for the repair or return shipment of FRUs
covered under the Initial or Extended HMP.
Time-and-Material Repair Services (not covered under Initial HMP or
-------------------------------------------------------------------
Extended HMP):
-------------
All repairs not covered under either the Initial HMP or Extended HMP
will be calculated on a time-and-materials basis at $100 for the first
hour and $50 per hour for each additional hour thereafter. If the
estimated cost to repair the defective FRU exceeds 50% of the price of
a new FRU, Seller will call Customer to inform them prior to repairing
defective FRU.
Loaner Fees:
-----------
Seller charges a loaner fee, not to exceed $200 per FRU, when Customer
requests a loaner FRU in support of FRUs not covered under either
Initial HMP or Extended HMP.
Invoices:
--------
Invoices are payable in accordance with the terms of the Agreement
between Seller and Customer.
G. EMERGENCY EXPEDITE SERVICE:
Within 24 hours of notification from Customer of an Emergency, Seller
will ship a replacement FRU. Customer must either provide Seller with
a new repair purchase order (a facsimile copy of the purchase order
may be transmitted to be followed up by a confirming hard copy in the
mail) or have already provided Seller with a blanket purchase order if
an out of warranty item (s).
H FREIGHT:
Initial HMP or Extended HMP:
----------------------------
Customer shall ship the FRU to Seller on a prepaid basis and Seller
will return the FRU to Customer on a prepaid basis, not billing
Customer for return freight.
Repair Services on a Time-and-Material basis:
--------------------------------------------
Customer shall ship the FRU to Seller on a prepaid basis and Seller
will prepay and invoice Customer for return freight.
I. DUTIES AND TAXES:
All duties, customs clearance fees and any and all taxes will be the
responsibility of the Customer.
<PAGE>
J. NON-COMPLIANCE:
Failure to comply with any of the procedures may result in delay or
non-delivery of the FRUs.
K. CONFLICTING TERMS:
In the event that the terms contained herein conflict with the terms
of the Agreement between Seller and Customer, the terms of the
Agreement shall govern.
<PAGE>
EXHIBIT 10.12
METAWAVE COMMUNICATIONS CORPORATION
PRODUCT PURCHASE AGREEMENT
THIS PRODUCT PURCHASE AGREEMENT (this "Agreement") is made as of this 5th day of
March, 1998 (the "Effective Date") between Metawave Communications Corporation,
a Delaware corporation ("Seller"), and OJSC St. Petersburg Telecom with offices
at Nevsky Prospect 54 - 10, St. Petersburg 191011 Russia, a Russian corporation
("Customer"), a subsidiary of Millicom International Cellular S.A., a Luxembourg
corporation ("Millicom").
The parties, in consideration of the mutual covenants, agreements and promises
of the other set forth in this Agreement and intending to be legally bound,
agree as follows:
1. AGREEMENT TO PURCHASE
Seller agrees to sell to Customer, and Customer agrees to purchase, the Products
identified in Section 4 of Exhibit A to this Agreement in accordance with the
specifications and the terms and conditions hereof at the price (net of VAT) set
forth in Section 4 of Exhibit A ("Purchase Commitment"). Notwithstanding any
other provision of this Agreement or any other contract between the parties to
the contrary, the provisions of this Agreement shall apply to the Purchase
Commitment during the term of this Agreement unless the parties expressly agree
by written modification to this Agreement that the provisions of this Agreement
shall not apply. Any additional or different terms in any acknowledgment,
invoice, Change Order, or other communication from one party to the other shall
be deemed objected to without need of further notice of objection and shall be
of no effect and not in any circumstance binding upon either party unless
expressly accepted by both parties in writing.
2. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth
below:
"Acceptance Date" shall mean the date, following the installation of the
Products at the Sites in Russia, that the Certification of Conditional
Acceptance of the Products occurs.
"Acceptance Test Procedure" or "ATP" shall mean the testing procedures and
protocols set forth in Exhibit F.
"Affiliate" shall mean any partnership, corporation or other entity (i) in which
Customer, directly or indirectly, owns a controlling interest or (ii) which owns
a controlling interest in Customer.
[***]
"Certification of Final Acceptance" shall mean, Customer's certification of the
resolution of all Punchlist items, which shall not be unreasonably withheld.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
"Change Order" shall mean any subsequent change to the Purchase Commitment
initiated by either Seller or Customer, including but not limited to, changes in
Site configuration, pricing and delivery date, which is mutually agreed to by
both parties.
[***]
"Equipment Authorizations" shall mean all telecommunication equipment
certifications required for the installation and operation of the Products in
Russia by the Russian Ministry of Posts and Telecommunications, the City of
Saint Petersburg and other authorities (including any temporary waivers needed
to operate the Products prior to the receipt of such certifications).
[***]
"Products" shall mean the products listed in Exhibit A hereto or any additional
products set forth in any amendments to Exhibit A as may be subsequently agreed
to from time to time by Seller and Customer.
"Punchlist" shall mean the list provided by Customer to Seller upon Conditional
Acceptance of a Product which sets forth those mutually agreed items relating to
a Product, if any, to be resolved by Seller using best efforts within ten (10)
working days of such Conditional Acceptance of a Product.
"Site" shall mean each of the Customer cell site locations at which a Product is
installed.
"Software" shall mean the object-code computer programs, including firmware
object code, licensed by Seller for use solely with the Products which enables
the Products to perform its functions and processes.
"Software License" shall mean the software license for the software to be
delivered to Customer for use with the Products as set forth in Exhibit C.
"Specifications" shall mean the specifications for the Products set forth in
Exhibit B and incorporated herein.
3. SHIPPING AND PURCHASE COMMITMENT
a. The Products identified in the Purchase Commitment shall be shipped on
or before [***] or on a later date mutually agreed upon by the parties
in a Change Order which shall not be later than [***]. At its sole
option, Seller may decline to fulfill the Purchase Commitment if
Seller determines that (i) the costs associated with the sale of the
Products for the Sites are prohibitive or the conditions at such Sites
are unacceptable; (ii) the sale and delivery of the
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Products would contravene Section 17(h) of this Agreement; or (iii)
Seller's personnel may be exposed to unsafe conditions.
b. The Product configurations set forth in Exhibit A hereto are subject
to change following the completion of a Site walk by Seller. A change
to such configurations may result in a change in the Purchase
Commitment or in the delivery date. Any such change shall be agreed to
in a written Change Order executed by both parties.
c. Promptly following execution of this Agreement, Customer shall give
Seller, for planning purposes, a non-binding forecast of its estimated
requirements for the Products for the forthcoming [***] and such
forecast shall be updated on a quarterly basis.
d. Customer may, by written notice, no less than 30 days prior to
Seller's shipment of a Product, make a change to a Site destination
provided the new Site destination is in Russia. Customer shall provide
the address of the new Site destination to Seller in a written Change
Order.
e. Customer may, by written notice no less than 45 days prior to delivery
date agreed upon by the parties pursuant to Section 3(a) hereof, delay
the delivery schedule, provided that such delay does not extend beyond
June 30th 1998.
f. Customer may, by written notice no later than 30 days prior to
Seller's shipment of a Product, cancel delivery of a Product.
g. In the case of non-delivery of the Products to the Delivery
Destination by June 30, 1998, Seller shall return to Customer all
funds received from Customer as prepayment for such Products within
not more than one hundred and eighty (180) calendar days from the date
when the prepayment was made.
h. Seller shall pay to Customer (or credit against amounts owed to Seller
by Customer) a charge, for every [***] of delay in the Acceptance
Date, equal to the rate of [***] of the Purchase Commitment (or that
portion thereof) which has been delayed, provided, however, that such
charge shall not apply to any delay caused by an act set forth in
Section 15 hereof or for failure of Customer to perform the
obligations set forth in Section 7 hereof or the conditions and
obligations of the sale are not met as set forth in Exhibit A or
Exhibit G. Such charges shall not exceed [***] of the Purchase
Commitment.
4. SHIPPING; TITLE; RISK OF LOSS
a. Subject to Section 3(a) hereof and this Section 4, Seller shall ship
all Products CIP (INCOTERMS 1990) to the delivery destination
specified in subsection (f) hereof (the "Delivery Destination") and
render invoices in accordance with Section 6 (Invoices and Payments).
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
b. Products shall be packed by Seller, at no additional charge to
Customer, in containers adequate to prevent damage during normal
international shipping, handling and storage. Seller shall adequately
insure Products during shipment from Seller's facility to Delivery
Destination.
c. In connection with the delivery of the Products to the Delivery
Destination, Seller shall arrange (for the account of Customer) the
following items: freight, insurance transportation documentation and
export licenses, if any. Customer shall reimburse Seller at cost for
such items, including all shipping costs, insurance costs, customs
clearance charges, duties, levies and any other charges that may be
incurred by Seller in connection with the sale of the Products and
their delivery to the Delivery Destination. Seller shall separately
invoice Customer for such charges in accordance with Section 6 hereof.
Customer shall directly pay for all freight, customs clearance
charges, duties, levies, storage fees and any other charges that may
be incurred at and from the Delivery Destination to the Site.
d. Unless otherwise specified herein, risk of loss or damage to any
Product supplied hereunder shall pass to Customer upon delivery of the
Product to the Delivery Destination.
e. Title to the Products supplied hereunder shall pass to Customer upon
delivery to a carrier at Metawave's factory in Redmond WA, USA (except
title to Software shall remain with Seller pursuant to the terms of
the Software License attached as Exhibit C hereto).
f. "Delivery Destination" of the Products in Russia:
Pulkova Customs
Pulkovskaya Tamozhnya
SVA Avia Terminal Service
LIC 057/10
Pilotov St. 9
Office 20,
St. Petersburg, Russia 196210
5. WARRANTY
a. Seller warrants that for a period of [***] from the date of
Certification of Final Acceptance for each Product (the "Warranty
Period"), (i) all Products furnished hereunder will conform in all
material respects with the requirements of this Agreement and the
Specifications, (ii) all Products are free from defects in materials,
workmanship and title, (iii) the media on which the Software is
contained will be free from defects in material and workmanship under
normal use and (iv) the Software will substantially conform to the
documentation provided by Seller. The warranties in this Agreement are
given in lieu of all other warranties express or implied which are
specifically excluded, including, without limitation, implied
warranties of merchantibility and fitness for
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
a particular purpose. Such warranty may be extended by increments of
ninety (90) days at the mutual agreement of both parties.
b. If Customer believes that there is a breach of any warranty set forth
herein, Customer shall follow the procedures set forth in Exhibit E
hereto (Product Maintenance). The actions taken by Seller under the
Product Maintenance Program procedures set forth in Exhibit E shall be
the full extent of Seller's liability and Customer's exclusive remedy
hereunder.
c. This warranty does not apply to any claim which arises out of any one
of the following: (i) the Product is used in other than its normal and
customary manner; (ii) the Product has been subject to misuse,
accident, neglect or damage; (iii) the Product has been installed,
optimized or moved from its original installation site by any person
other than Seller or a person who has been certified by Seller through
completion of a Seller-sponsored training course to provide such
services; (iv) unauthorized alterations or repairs have been made to
the Product, or unapproved parts have been used in or with the
Product; (v) the Product is not maintained pursuant to Seller
maintenance programs or under the supervision of a person who has been
certified by Seller through completion of a Seller-sponsored training
course to provide such maintenance service; (vi) an event of Force
Majeure has occurred; (vii) the failure of third party antennas, lines
or interconnection facilities at the Site; and (viii) damage which
occurs during shipment of equipment from Customer to Seller. The above
limitations include, without limitation, the modification, removal or
obliteration of the bar code, serial number or other identifying mark
of the equipment through the action or inaction of the Customer.
d. If the returned equipment falls outside of the warranty set forth
above, Seller may elect to return the equipment unrepaired, repair the
equipment at the then current flat rate repair charge or repair the
equipment on a time and materials basis.
6. INVOICES AND PAYMENT
a. [***]
b. [***]
c. All invoices sent by Seller to Customer shall be computed on the basis
of the prices (which are net of VAT) set forth in Exhibit A and
Exhibit E and any Change Orders or amendments and shall identify and
show separately quantities
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
of Products, total amounts for each item, shipping charges, other
charges, applicable sales or use taxes and total amount due. For
invoices rendered pursuant to subsection (b) hereof, Section 4(c) and
Exhibit E (Product Maintenance Program), Customer shall promptly pay
Seller by wire transfer (to Seller's bank account designated in
subsection (g) hereof) in U.S. Dollars the amount due within forty-
five (45) days of the date of the invoice. Customer shall pay a late
fee at the rate of one and one-half percent (1.5%) of the amount due
for each month or portion thereof that the amount is late.
d. Customer shall be responsible for the payment of all sales, use, VAT
and any other taxes applicable to the Purchase Commitment outside the
United States provided by the Seller pursuant to this Agreement. When
Seller is required by law to collect such taxes, 100% thereof will be
added to invoices as separately stated charges and paid by Customer in
accordance with this Section 6.
e. If Customer disputes any invoices rendered or amount paid, Customer
will so notify Seller, and the parties will use their reasonable
efforts to resolve such dispute expeditiously. Provided that Customer
so notifies Seller of a disputed invoice and there is a good faith
basis for such dispute, the time for paying the portion of the invoice
in dispute shall be extended by a period of time equal to the time
between Seller's receipt of such notice from Customer and the
resolution of such dispute.
f. If financing to fund Customer's purchase of Products pursuant to this
Agreement has been arranged, Customer may utilize such financing in
making payments in accordance with the terms of this Agreement and as
required under this subsection. The parties agree that the foregoing
does not constitute an offer by Seller to make available such
financing, or to arrange such financing for Customer and any such
financing is subject to agreement of the parties and the negotiation
and execution of separate documentation.
g. Except as otherwise specified in this Agreement, all payments from one
party to the other shall be made by wire transfer into the following
accounts:
TO SELLER:
Metawave Communications Corporation
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
TO CUSTOMER:
St. Petersburg Telecom
[***]
The bank account designated above may be changed by written notice
given by such party to the other pursuant to Section 13 (Notices).
7. OBLIGATIONS OF THE PARTIES
In addition to performing the other obligations set forth in this Agreement:
a. Customer shall procure from appropriate regulatory authorities and
other persons all necessary permits and station licenses as may be
required to install and operate the cellular network system
incorporating the Products; and
b. Customer shall assist Seller in obtaining any required type
acceptances, permits and licenses (including all Equipment
Authorizations) which shall include providing to Seller the assistance
of Customer's employees or agents in Russia for such purpose.
8. INFRINGEMENT INDEMNITY
a. Seller shall defend Customer against (or, at its option, settle) a
claim that the Products supplied hereunder infringe a United States
patent or copyright provided that (i) Customer promptly notifies
Seller in writing of the claim, (ii) Customer gives Seller full
opportunity and authority to assume sole control of the defense and
all related settlement negotiations, and (iii) Customer gives Seller
information and assistance for the defense (Customer will be
reimbursed for reasonable costs and expenses incurred in rendering
such assistance, against receipt of invoices therefor). Subject to the
conditions and limitations of liability stated in this Agreement,
Seller shall indemnify and hold harmless Customer from all payments,
which by final judgments in such suits, may be assessed against
Customer on account of such alleged infringement and shall pay
resulting settlements, costs and damages finally awarded against
Customer by a court of law.
b. Customer agrees that if the Products become, or in Seller's opinion
are likely to become, the subject of such a claim, Customer will
permit Seller, at its option and expense, either to procure the right
for Customer to continue using such Products
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
or to replace or modify same so that they become non-infringing, and,
if neither of the foregoing alternatives is available on terms which
are acceptable to Seller, Customer shall at the written request of
Seller, return the infringing or potentially infringing Products.
Customer shall receive a refund of the prorated undepreciated portion
of the price actually paid by Customer to Seller for the returned
portion of the Products. The price shall be depreciated over a seven
(7) year period.
c. Seller shall have no obligation to Customer with respect to any claim
of patent or copyright infringement which is based upon or related to
(i) adherence to customized specifications, designs or instructions
furnished by Customer, (ii) the interconnection or interface of any
Products supplied hereunder with base station products or software not
approved by Seller (such products approved by Seller are set forth in
Exhibit B, Section 2.2.7.), (iii) the alteration of the Products or
modification of any Software made by any party other than Seller, or
(iv) the Customer's use of a superseded or altered release of some or
all of the Software if infringement would have been avoided by the use
of a subsequently altered release of the Software that is provided to
Customer.
9. INDEPENDENT CONTRACTOR
Seller hereby declares and agrees that Seller is engaged in an independent
business and will perform its obligations under this Agreement as an independent
contractor and not as the agent or employee of Customer.
10. INDEMNIFICATION
Seller shall indemnify Customer, its employees and directors, and each of them,
against any loss, cost, damage, claim, expense or liability, including but not
limited to liability as a result of injury to or death of any person or damage
to or loss or destruction of any property arising out of, as a result of, or in
connection with the performance of this Agreement and directly caused, in whole
or in part, by the acts or omissions, negligent or otherwise, of Seller or a
contractor or an agent of Seller or an employee of anyone of them, except where
such loss, cost, damage, claim, expense or liability arises from the sole
negligence or willful misconduct of Customer or its employees. Seller shall, at
its own expense, defend any suit asserting a claim for any loss, damage or
liability specified above, and Seller shall pay any costs and attorneys' fees
that may be incurred by Customer in connection with any such claim or suit or in
enforcing the indemnity granted above, provided that Seller (i) is given prompt
notice of any such claim or suit and (ii) full opportunity to assume control of
the defense or settlement. Seller shall not be liable to Customer for indirect
or consequential damages, including but not limited to lost profits.
11. TERM AND TERMINATION
The term of this Agreement shall be [***]. If either party is in material
default of any of its obligations under this Agreement
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
and such default continues for thirty (30) days after written notice thereof by
the party not in default, the nondefaulting party may cancel this Agreement. In
addition, a party may cancel this Agreement if a petition in bankruptcy or under
any insolvency law is filed by or against the other party and is not dismissed
within sixty (60) days of the commencement thereof. Any agreements between the
parties pursuant to the terms and conditions of Exhibit E hereto (Product
Maintenance Program) and the rights and obligations of the parties under
Sections 5, 6, 7, 8, 10, 12, 13, 15, 16, and 17 shall survive the termination of
this Agreement.
12. ASSIGNMENT
a. Any assignment by either party of this Agreement or any other interest
hereunder without the other party's prior written consent, shall be
void, except assignment to an Affiliate.
b. The Software license granted to Customer in the form of Exhibit C
(Software License), may not be sublicensed, assigned or otherwise
transferred by Customer without the prior consent of Seller, except to
an Affiliate.
c. Subject to the provisions of paragraphs a and b above, this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns, if any, of the parties hereto.
13. NOTICES
Except as otherwise specified in this Agreement, all notices or other
communications hereunder shall be deemed to have been duly given when made in
writing and delivered in person or sent by a reputable overnight courier service
providing proof of delivery, or by confirmed facsimile transmission and
addressed as follows:
TO SELLER: TO CUSTOMER:
Metawave Communications Corporation OJSC St. Petersburg Telecom
8700 148th Avenue NE 12 Kantemirovskaya St.
Redmond WA 98052 St. Petersburg, 197042, Russia
Attn.: VP, Sales Attn.: Technical Director
Copy to: General Counsel Copy to:
Fax: 425 702 5976 Fax: 7-812-119-5802
The address to which notices or communications may be given to either party may
be changed by written notice given by such party to the other pursuant to this
Section 13 (Notices).
14. COMPLIANCE WITH LAWS
Subject to Sections 3(a)(ii) and 7(b), Seller shall comply with all applicable
laws, regulations and codes, including the procurement of required type
acceptance, permits and licenses for the Products, [***].
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
15. FORCE MAJEURE
Except for obligations of confidentiality agreed to by the parties, neither
party shall be liable for delays in delivery or performance or for failure to
manufacture, deliver or perform resulting from acts beyond the reasonable
control of the party responsible for performance. Such acts shall include, but
not be limited to(a) acts of God, acts of a public enemy, acts or failures to
act by the other party, acts of civil or military authority, governmental
priorities, strikes or other labor disturbances, natural disaster, embargoes,
war, riots, and loss or damage to goods in transit; (b) inability to obtain
necessary products, components, services or facilities on account of causes
beyond the reasonable control of the delayed party or its suppliers or (c) a
delay in obtaining or the failure to obtain the necessary customs clearances,
Equipment Authorizations, licenses, permits, governmental approvals and any
other documentation required for the delivery, installation and operation of the
Products at the Sites (including visas and work permits for Seller personnel)
except that Customer shall not be liable for delays in the payment of, or
failure to pay, moneys due to Seller for Products only as a result of an act set
forth in subsection (a). In the event of any such delay, the date(s) of delivery
or performance shall be extended for as many days are reasonably required due to
the delay.
16. Governing Law; dispute resolution
a. This Agreement and the Purchase Commitment shall be construed in
accordance with the internal laws of the State of New York, without
regard to its choice of law provisions.
b. Any and all disputes arising between the parties shall be resolved in
the following order: (i) by good faith negotiation between
representatives of Customer and Seller who have authority to fully and
finally resolve the dispute to commence within ten (10) days of the
request of either party; (ii) in the event that the parties have not
succeeded in negotiating a resolution of the dispute within ten (10)
days after the first meeting, then the dispute will be resolved by
nonbinding mediation in a mutually agreed location and to be conducted
in English by a mutually agreed upon non-affiliated neutral party
having experience with or knowledge in the wireless communications
equipment industry to be chosen within twenty (20) days after written
notice by either party demanding mediation(the costs therefor to be
shared equally); and (iii) if within sixty (60) days of the initial
demand for mediation by one of the parties, the dispute cannot be
resolved by mediation, then the dispute shall be submitted by the
parties to final and binding arbitration under the then current
arbitration rules of the International Chamber of Commerce to be
conducted in English by three (3) arbitrators having experience with
or knowledge in the wireless telecommunications industry to be held in
a mutually agreeable location (the costs therefor to be shared
equally).
<PAGE>
17. GENERAL PROVISIONS
a. All information, data and materials provided by either party under
this Agreement or prior to the Effective Date of this Agreement shall
be subject to the terms and conditions of the Non-Disclosure Agreement
to be executed by the parties concurrently with this Agreement and
attached hereto as Exhibit D. The parties shall not disclose the
financial value of this Agreement to third parties unless the parties
mutually agree to disclose such information or such disclosure is
required by law.
b. Seller and Customer may issue a joint press release concerning the
execution of this Agreement. Such press release shall be subject to
prior review and written approval by both parties, not to be
unreasonably withheld.
c. Waiver by either party of any obligation or default by the other party
shall not be deemed a waiver by such party of any other obligation or
default.
d. Any rights of cancellation, termination or other remedies prescribed
in this Agreement are cumulative and are not intended to be exclusive
of any other remedies to which the injured party may be entitled at
law or equity (including but not limited to the remedies of specific
performance and cover) in case of any breach or threatened breach by
the other party of any provision of this Agreement, unless such other
remedies which are not prescribed in this Agreement are specifically
limited or excluded by this Agreement. The use of one or more
available remedies shall not bar the use of any other remedy for the
purpose of enforcing the provisions of this Agreement; provided,
however, that a party shall not be entitled to retain the benefit of
inconsistent remedies.
e. If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable the entire Agreement, but rather
the entire Agreement shall be construed as if not containing the
particular invalid or unenforceable provisions, and the rights and
obligations or Seller and Customer shall be construed and enforced
accordingly.
f. This Agreement, including all Exhibits attached thereto and the Non-
Disclosure Agreement shall constitute the entire agreement between
Customer and Seller with respect to the subject matter hereof and
supersedes all prior discussions, agreements and representations,
whether oral or written.
g. No provision of this Agreement shall be deemed waived, amended or
modified by any party hereto, unless such waiver, amendment or
modification is in writing and signed by a duly authorized
representative of each of the parties.
h. Each party shall comply with all applicable U.S. and foreign export
control laws and regulations and shall not export or re-export any
technical data or Products except in compliance with the applicable
export control laws and regulations of the U.S. and any foreign
country.
<PAGE>
i In the event that this Agreement is translated into any other
language, the English version hereof shall take precedence and govern.
j. All costs incurred for translating this Agreement, including all
Exhibits attached hereto and any other documents produced in
connection with the execution and performance of this Agreement, into
another language shall be borne by Customer.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
METAWAVE COMMUNICATIONS CORPORATION OJSC ST. PETERSBURG TELECOM
By: /s/ Richard Henderson By: /s/ Michael Koeho
------------------------- --------------------------
Name: Richard Henderson Name: Michael Koeho
-------------------------
Title: Vice President of Sales and Marketing Title: General Director
-------------------------
EXHIBITS ATTACHED:
A Product Pricing
B Performance Specifications
C Software License
D Nondisclosure Agreement
E Product Maintenance Program
F Acceptance Test Procedure
G Responsibility Matrix
H Project Schedule
<PAGE>
EXHIBIT A: PRODUCT PRICING
TO THE PRODUCT PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ST. PETERSBURG TELECOM ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1998, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
CONFIDENTIAL AND PROPRIETARY 2/10/98
<PAGE>
Product Pricing
================================================================================
PRODUCT PRICING
For the purposes of uniformity, references to Agreement or to an Exhibit shall
refer to the Product Purchase Agreement to which this document is Exhibit A and
to the other Exhibits to that Agreement. All definitions set forth in the
Agreement shall apply hereto unless otherwise expressly defined herein.
1. INTRODUCTION
This Exhibit A lists the Product pricing as of the Effective Date of the
Agreement. All payments for the Products shall be in U.S. dollars and in
accordance with the payment terms set forth in the Agreement.
SPOTLIGHT RECOMMENDED SPARES KIT
<TABLE>
<CAPTION>
Part Number DESCRIPTION QTY. PRICE PRICE
(30W LPA) (50W LPA)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
250-0035-XX Tx Driver [***] [***] [***]
- ------------------------------------------------------------------------------------------
250-0042-XX Voice LNA [***] [***] [***]
- ------------------------------------------------------------------------------------------
250-0044-XX LNA Alarm [***] [***] [***]
- ------------------------------------------------------------------------------------------
250-0082-XX LNA Power [***] [***] [***]
- ------------------------------------------------------------------------------------------
250-0083-XX External I/O card [***] [***] [***]
- ------------------------------------------------------------------------------------------
270-0002-XX RX SMU Assy. [***] [***] [***]
- ------------------------------------------------------------------------------------------
270-0026-XX TX SMU Assy. [***] [***] [***]
- ------------------------------------------------------------------------------------------
275-0000-XX 30 Watt LPA module [***] [***] [***]
- ------------------------------------------------------------------------------------------
TOTALS: [***] [***]
- ------------------------------------------------------------------------------------------
</TABLE>
Notes:
1. The SpotLight Recommended Spares Kit list is for SpotLight configurations
supporting up to 90 channels.
2. Seller recommends to maintain an inventory of one Recommended Spares Kit
for every SpotLight unit installed.
3. SpotLight Recommended Spares Kits are not discountable.
2. SOFTWARE LICENSING FEE
The software licensing fees for the most current version of LampLighter and
embedded system software (available at the time of purchase of SpotLight) are
included in the purchase price of each SpotLight unit purchased. The software
licensing fees for subsequent upgrades of LampLighter and embedded system
software will depend on the enhancements made to the software and the number and
types of new features available with each new software release.
3. MAINTENANCE FEES
3.1 Software Maintenance Program (SMP) Fees
The SMP annual fee for LampLighter software and the SpotLight embedded system
software is [***] per each RF analog channel support by SpotLight not to exceed
[***] per "Host System" per year where a Host System is defined herein as that
group of SpotLight units serving cellular RF infrastructure equipment connected
to a common Mobile Switching Center.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Product Pricing
================================================================================
3.2 Hardware Maintenance Program (HMP) Fees
The HMP annual fee planning price is [***] per each RF analog channel supported
by a SpotLight system not to exceed [***] of all SpotLight units covered under
the HMP program.
Seller and Customer agree to negotiate in good faith the HMP fee prior to the
end of the Warranty Period.
4. PURCHASE COMMITMENT
PURCHASE COMMITMENT PRICING (USD)
<TABLE>
<CAPTION>
Product Description UNIT PRICE NO. OF EXTENDED LIST
UNITS PRICE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
[***] [***] [***] [***]
- ----------------------------------------------------------------------------------------
[***] [***] [***] [***]
- ----------------------------------------------------------------------------------------
[***] [***] [***] [***]
- ----------------------------------------------------------------------------------------
[***] [***] [***] [***]
- ----------------------------------------------------------------------------------------
PURCHASE COMMITMENT PRICE [***]
- ----------------------------------------------------------------------------------------
</TABLE>
5. GENERAL CONDITIONS FOR THE PURCHASE COMMITMENT:
1. All payments shall be in U.S. dollars.
2. Shipment and delivery of the Products set forth herein is dependent upon
obtaining all necessary licenses, permits, governmental approvals and
customs clearances for the Products. Seller shall not be held liable for
any non-performance due to delays in obtaining any of the above
documentation, approvals and clearances, provided that Seller has made a
reasonable attempt to provide such documentation.
3. Customer shall provide assistance to Seller in obtaining all necessary
licenses, permits, government approvals, customs clearances and any other
required documentation required for the importation of and operation of the
SpotLight systems.
4. Customer shall be responsible for payment of all shipping and delivery
charges, all sales, use, VAT, and any other taxes and all customs and
duties payments applicable to the sale of the Products set forth herein.
5. In the event that Seller is unable to export Seller's test equipment out of
Russia, Customer agrees to purchase such equipment.
6. All prices set forth in the Agreement and any Exhibits to the Agreement are
net of all taxes including but not limited to VAT.
7. Customer shall provide the vehicle, driver, cellular phones and air-time
for all drive testing at no charge to Seller.
8. Performance of Seller's obligations under the Agreement is dependent upon
obtaining all necessary licenses, permits, government approvals, customs
clearances and visas for Seller's Products and or personnel. Seller shall
not be held liable for any non-performance due to delays in obtaining any
of the above documentation, approvals and clearances, provided that Seller
has made a reasonable attempt to provide such documentation.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
<TABLE>
<CAPTION>
SPOTLIGHT 2.0 FIELD REPLACEABLE UNIT (FRU) PRICE LIST
- ------------------------------------------------------------------------------------------
PART NUMBER PART DESCRIPTION PRICE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
[***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------------------
</TABLE>
CONFIDENTIAL AND PROPRITARY 2/10/98
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Product Pricing
===================================================
[***] [***] [***]
- ---------------------------------------------------
[***] [***] [***]
- ---------------------------------------------------
[***] [***] [***]
- ---------------------------------------------------
[***] [***] [***]
- ---------------------------------------------------
[***] [***] [***]
- ---------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***] [***] [***]
- ----------------------------------------------------
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT B: PERFORMANCE SPECIFICATIONS
TO THE PURCHASE AGREEMENT
SPOTLIGHT MULTIBEAM ANTENNA PLATFORM 2.0
TRANSMIT/RECEIVE
(for use with Motorola HDII Base Station Equipment)
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by
Metawave under an agreement of nondisclosure to the Customer for internal
evaluation purposes only and is protected by applicable copyright and trade
secret law. This document may only be disclosed or disseminated to those
employees of the Customer who have a need to use it for evaluation purposes;
no other use or disclosure can be made by Customer without Metawave's consent.
- --------------------------------------------------------------------------------
01/13/98
<PAGE>
SpotLight Multibeam Antenna Platform Performance Specifications
================================================================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
</TABLE>
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SpotLight Multibeam Antenna Platform Performance Specifications
================================================================================
PERFORMANCE SPECIFICATIONS
For purposes of uniformity and brevity, references to Agreement or to an Exhibit
shall refer to the Products and Services Purchase Agreement to which this
document is Exhibit B and to the other Exhibits to that Agreement. All
definitions set forth in the Agreement shall apply hereto.
1. INTRODUCTION
The purpose of this document is to describe and specify Metawave's SpotLight
2.0 Multibeam Antenna Platform including:
. System operation
. Hardware and software elements of the SpotLight equipment
. Interconnect between SpotLight equipment and the base station
equipment
While the specifications contained in this document are based on the most
current information available, such information is based on cell site
specific data and may not apply to all cell sites contained within a system.
The specifications contained in this document may change from cell site to
cell site. Metawave reserves the right to make changes to any design,
specification, manufacturing techniques and/or product testing procedures.
ACRONYMS AND TERMS DEFINITION
-----------------------------
C/I Carrier to Interference Ratio
FRU Field Replaceable Unit
LNA Low Noise Amplifier
LPA Linear Power Amplifier
RCU Radio Channel Unit (P/O Motorola Cell Equipment)
RF Radio Frequency
Rx Receive
SMAP Spotlight Multibeam Antenna Platform
SMU Spectrum Management Unit
Tx Transmit
TxCD Transmit Combiner Driver
<PAGE>
SpotLight Multibeam Antenna Platform Performance Specifications
================================================================================
2. System Description
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
3. REGULATORY REQUIREMENTS
This section specifies requirements which are set primarily by local and/or
national governing bodies, consortiums and standards committees.
3.1 US
The SpotLight system complies with appropriate US FCC regulations
(includes both RF and EMI). Specifically, the SMAP shall comply with the
regulations defined in CFR 47 part 22 and part 15.
The SpotLight system is UL Listed.
<PAGE>
EXHIBIT C: SOFTWARE LICENSE
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ST. PETERSBURG TELECOM ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by
Metawave under an agreement of nondisclosure to the Customer for internal
evaluation purposes only and is protected by applicable copyright and trade
secret law. This document may only be disclosed or disseminated to those
employees of the Customer who have a need to use it for evaluation
purposes; no other use or disclosure can be made by Customer without
Metawave's consent.
1998, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
12/5/97
<PAGE>
Table of Contents
<TABLE>
<S> <C>
1. Scope................................................. 3
2. Licensing Grant....................................... 3
3. Limitations On Use Of Software........................ 3
4. Right To Copy, Protection And Security................ 4
5. Remedies.............................................. 4
6. Term.................................................. 5
7. Termination........................................... 5
8. Right Of The Parties.................................. 5
9. Limitations On Software............................... 6
10. Entire Understanding..................................
</TABLE>
<PAGE>
Software License
================================================================================
SOFTWARE LICENSE
For purposes of uniformity and brevity, references to Agreement or to an Exhibit
shall refer to the Purchase Agreement to which this document is Exhibit C and to
the other Exhibits to that Agreement. All definitions set forth in the
Agreement shall apply hereto.
1. SCOPE
Pursuant to the above-identified Agreement, Software will be delivered by Seller
to Customer for use with the Products according to the terms of the Agreement
and this Exhibit. Customer shall then become a licensee with respect to such
Software.
2. LICENSING GRANT
2.1 CONCURRENT WITH EXECUTION OF THE AGREEMENT, SELLER GRANTS TO CUSTOMER
A REVOCABLE, NON-EXCLUSIVE AND NON-TRANSFERABLE LICENSE UNDER SELLER'S
APPLICABLE PROPRIETARY RIGHTS TO USE SOFTWARE DELIVERED TO CUSTOMER
HEREUNDER IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH
HEREIN.
2.2 CUSTOMER AGREES TO PAY THE LICENSING FEES FOR THE RIGHT TO USE THE
SOFTWARE AND FEATURES AND FOR ANY SUPPORT THEREOF AS SET FORTH IN
EXHIBIT A (PRICING) OR IN AN AMENDMENT THERETO. THE LICENSING FEE IS A
ONE TIME FEE WHICH GRANTS THE CUSTOMER THE RIGHT TO USE THE VERSION OF
SOFTWARE LICENSED FOR AS LONG AS THE CUSTOMER OWNS THE PRODUCT.
3. LIMITATIONS ON USE OF SOFTWARE
3.1 WITHOUT THE PRIOR WRITTEN CONSENT OF SELLER, CUSTOMER SHALL ONLY USE
THE SOFTWARE IN CONJUNCTION WITH A SINGLE PRODUCT EXISTING WITHIN THE
SITE SPECIFIED IN THE PO ("DESIGNATED PRODUCT").
3.2 CUSTOMER MAY USE THE SOFTWARE TO ROUTINELY OPERATE AND MAINTAIN THE
DESIGNATED PRODUCT. FOR PURPOSES OF THIS SUBSECTION, "MAINTAIN" SHALL
BE CONSTRUED TO MEAN PERFORMING DIAGNOSTIC TESTING CONSISTENT WITH
CUSTOMER'S OBLIGATION TO PROVIDE THE FIRST LEVEL OF MAINTENANCE. UNDER
NO CONDITION SHALL THE SOFTWARE BE USED FOR ANY OTHER PURPOSE,
INCLUDING, BUT NOT LIMITED TO, SUBSTITUTED PRODUCTS, OR PRODUCTS NOT
OWNED BY CUSTOMER, OR PRODUCTS LOCATED AT A LOCATION OTHER THAN THE
SITE SPECIFIED IN THE PO.
3.3 THE LICENSE GRANTED TO CUSTOMER IN SECTION 2 IS PERSONAL AND MAY NOT
BE TRANSFERRED TO ANOTHER PRODUCT OR SITE WITHOUT THE WRITTEN CONSENT
OF SELLER.
3.4 TO THE EXTENT SPECIFIED IN EXHIBIT A OR AN AMENDMENT THERETO AND
PROVIDED CUSTOMER HAS PAID ANY APPLICABLE LICENSING FEES, CUSTOMER
SHALL HAVE THE RIGHT TO USE FEATURES IN ACCORDANCE WITH THE TERMS OF
THIS EXHIBIT. CUSTOMER ACKNOWLEDGES THAT THE SOFTWARE MAY CONTAIN
THEREIN SEVERAL ADDITIONAL FEATURES WHICH ARE EACH COVERED BY SEPARATE
LICENSING FEES. CUSTOMER AGREES NOT TO USE, AND THE LICENSE
SPECIFICALLY DOES NOT EXTEND TO, SUCH ADDITIONAL FEATURES UNLESS THEY
ARE SPECIFIED IN EXHIBIT A OR AN AMENDMENT THERETO AND PROVIDED
CUSTOMER HAS PAID THE APPLICABLE LICENSING FEES FOR SUCH ADDITIONAL
FEATURES.
3.5 THE SOFTWARE IS SUBJECT TO LAWS PROTECTING TRADE SECRETS, KNOW-HOW,
CONFIDENTIALITY AND COPYRIGHT.
<PAGE>
3.6 CUSTOMER SHALL NOT TRANSLATE, MODIFY, ADAPT, DECOMPILE, DISASSEMBLE,
OR REVERSE ENGINEER THE SOFTWARE OR ANY PORTION THEREOF.
3.7 UNLESS OTHERWISE EXPRESSLY AGREED BY SELLER, CUSTOMER SHALL NOT PERMIT
ITS DIRECTORS, OFFICERS, EMPLOYEES OR ANY OTHER PERSON UNDER ITS
DIRECT OR INDIRECT CONTROL, TO WRITE, DEVELOP, PRODUCE, SELL, OR
LICENSE ANY SOFTWARE THAT PERFORMS THE SAME FUNCTIONS AS THE SOFTWARE
BY MEANS DIRECTLY ATTRIBUTABLE TO ACCESS TO THE SOFTWARE (E.G. REVERSE
ENGINEERING OR COPYING).
3.8 CUSTOMER SHALL NOT EXPORT THE SOFTWARE FROM THE UNITED STATES WITHOUT
THE WRITTEN PERMISSION OF SELLER. IF WRITTEN PERMISSION IS GRANTED FOR
EXPORT OF THE SOFTWARE, THEN CUSTOMER SHALL COMPLY WITH ALL U.S. LAWS
AND REGULATIONS FOR SUCH EXPORTS AND SHALL HOLD SELLER HARMLESS,
INCLUDING LEGAL FEES AND EXPENSES FOR ANY VIOLATION OR ATTEMPTED
VIOLATION OF THE U.S. EXPORT LAWS.
4. RIGHT TO COPY, PROTECTION AND SECURITY
4.1 SOFTWARE PROVIDED HEREUNDER MAY BE COPIED (FOR BACK-UP PURPOSES ONLY)
IN WHOLE OR IN PART, IN PRINTED OR MACHINE-READABLE FORM FOR
CUSTOMER'S INTERNAL USE ONLY, PROVIDED, HOWEVER, THAT NO MORE THAN TWO
(2) PRINTED COPIES AND TWO (2) MACHINE-READABLE COPIES SHALL BE IN
EXISTENCE AT ANY ONE TIME WITHOUT THE PRIOR WRITTEN CONSENT OF SELLER,
OTHER THAN COPIES RESIDENT IN THE PRODUCTS.
4.2 WITH REFERENCE TO ANY COPYRIGHT NOTICE OF SELLER ASSOCIATED WITH
SOFTWARE, CUSTOMER AGREES TO INCLUDE THE SAME ON ALL COPIES IT MAKES
IN WHOLE OR IN PART. SELLER'S COPYRIGHT NOTICE MAY APPEAR IN ANY OF
SEVERAL FORMS, INCLUDING MACHINE-READABLE FORM. USE OF A COPYRIGHT
NOTICE ON THE SOFTWARE DOES NOT IMPLY THAT SUCH HAS BEEN PUBLISHED OR
OTHERWISE MADE GENERALLY AVAILABLE TO THE PUBLIC.
4.3 CUSTOMER AGREES TO KEEP CONFIDENTIAL, IN ACCORDANCE WITH THE TERMS OF
THE AGREEMENT, AND NOT PROVIDE OR OTHERWISE MAKE AVAILABLE IN ANY FORM
ANY SOFTWARE OR ITS CONTENTS, OR ANY PORTION THEREOF, OR ANY
DOCUMENTATION PERTAINING TO THE SOFTWARE, TO ANY PERSON OTHER THAN
EMPLOYEES OF CUSTOMER OR SELLER.
4.4 SOFTWARE, INCLUDING FEATURES IS THE SOLE AND EXCLUSIVE PROPERTY OF
SELLER AND NO TITLE OR OWNERSHIP RIGHTS TO THE SOFTWARE OR ANY OF ITS
PARTS, INCLUDING DOCUMENTATION, IS TRANSFERRED TO CUSTOMER.
4.5 CUSTOMER ACKNOWLEDGES THAT IT IS THE RESPONSIBILITY OF CUSTOMER TO
TAKE ALL REASONABLE MEASURES TO SAFEGUARD SOFTWARE AND TO PREVENT ITS
UNAUTHORIZED USE OR DUPLICATION.
5. REMEDIES
Customer acknowledges that violation of the terms of this Exhibit or the
Agreement shall cause Seller irreparable harm for which monetary damages may be
inadequate, and Customer agrees that Seller may seek temporary or permanent
injunctive relief without the need to prove actual harm in order to protect
Seller's interests.
<PAGE>
Software License
================================================================================
6. TERM
Unless otherwise terminated pursuant to Section 7 herein, the term of the
license granted pursuant to Section 2 herein shall be co-extensive with the term
of any licensing and/or maintenance fees paid by Customer to Seller pursuant to
Exhibit A or an Amendment thereto.
7. TERMINATION
7.1 THE LICENSE GRANTED HEREUNDER MAY BE TERMINATED BY CUSTOMER UPON ONE
(1) MONTH'S PRIOR WRITTEN NOTICE.
7.2 SELLER MAY TERMINATE THE LICENSE GRANTED HEREUNDER IF CUSTOMER IS IN
DEFAULT OF ANY OF THE TERMS AND CONDITIONS OF THE AGREEMENT OR
EXHIBITS, AND SUCH TERMINATION SHALL BE EFFECTIVE IF CUSTOMER FAILS TO
CORRECT SUCH DEFAULT WITHIN TEN (10) DAYS AFTER WRITTEN NOTICE THEREOF
BY SELLER. THE PROVISIONS OF SECTIONS 4 AND 5 HEREIN SHALL SURVIVE
TERMINATION OF ANY SUCH LICENSE.
7.3 WITHIN ONE (1) MONTH AFTER TERMINATION OF THE LICENSE GRANTED
HEREUNDER, CUSTOMER SHALL FURNISH TO SELLER A DOCUMENT CERTIFYING THAT
THROUGH ITS BEST EFFORTS AND TO THE BEST OF ITS KNOWLEDGE, THE
ORIGINAL AND ALL COPIES IN WHOLE OR IN PART OF ALL SOFTWARE, IN ANY
FORM, INCLUDING ANY COPY IN AN UPDATED WORK, HAVE BEEN RETURNED TO
SELLER OR DESTROYED. WITH PRIOR WRITTEN CONSENT FROM SELLER, CUSTOMER
MAY RETAIN ONE (1) COPY FOR ARCHIVAL PURPOSES ONLY.
8. RIGHTS OF THE PARTIES
8.1 NOTHING CONTAINED HEREIN SHALL BE DEEMED TO GRANT, EITHER DIRECTLY OR
BY IMPLICATION, ESTOPPEL, OR OTHERWISE, ANY LICENSE UNDER ANY PATENTS
OR PATENT APPLICATIONS OF SELLER; EXCEPT THAT CUSTOMER SHALL HAVE A
NON-EXCLUSIVE, LICENSE UNDER SELLER'S PATENTS AND PATENT APPLICATIONS
TO USE, IN SELLER-SUPPLIED EQUIPMENT ONLY, SOFTWARE SUPPLIED
HEREUNDER, WHEN SUCH LICENSE IS IMPLIED OR OTHERWISE ARISES BY
OPERATION OF LAW BY VIRTUE OF THE PURCHASE OF SUCH COPIES FROM SELLER.
8.2 RIGHTS IN PROGRAMS OR OPERATING SYSTEMS OF THIRD PARTIES, IF ANY, ARE
FURTHER LIMITED BY THEIR LICENSE AGREEMENTS WITH SUCH THIRD PARTIES,
WHICH AGREEMENTS ARE HEREBY INCORPORATED BY REFERENCE THERETO AND MADE
A PART HEREOF AS IF FULLY SET FORTH HEREIN. CUSTOMER AGREES TO ABIDE
THEREBY.
8.3 DURING THE TERM OF THE LICENSE GRANTED PURSUANT TO SECTION 2 HEREIN
AND FOR A PERIOD OF ONE (1) YEAR AFTER EXPIRATION OR TERMINATION,
SELLER, AND WHERE APPLICABLE, ITS LICENSOR(S), OR THEIR
REPRESENTATIVES MAY, UPON PRIOR NOTICE TO CUSTOMER, A) INSPECT THE
FILES, COMPUTER PROCESSORS, EQUIPMENT, FACILITIES AND PREMISES OF
CUSTOMER DURING NORMAL WORKING HOURS TO VERIFY CUSTOMER'S COMPLIANCE
WITH THIS AGREEMENT, AND B) WHILE CONDUCTING SUCH INSPECTION, COPY OR
RETAIN ALL SOFTWARE, INCLUDING THE MEDIUM ON WHICH IT IS STORED AND
ALL DOCUMENTATION THAT CUSTOMER MAY POSSESS IN VIOLATION OF THE
LICENSE OR THE AGREEMENT.
8.4 CUSTOMER ACKNOWLEDGES THAT THE PROVISIONS OF THIS EXHIBIT C ARE
INTENDED TO INURE TO THE BENEFIT OF SELLER AND ITS LICENSORS AND THEIR
RESPECTIVE SUCCESSORS IN INTEREST. CUSTOMER ACKNOWLEDGES THAT SELLER
OR ITS LICENSORS HAVE THE RIGHT TO ENFORCE THESE PROVISIONS AGAINST
CUSTOMER, WHETHER IN SELLER'S OR ITS LICESNSOR'S NAME.
<PAGE>
Software License
================================================================================
9. LIMITATIONS ON SOFTWARE
Customer understands that errors occur in Software and Seller makes no warranty
that the Software will perform without error. Customer agrees that it is
Customer's responsibility to select and test the Software to be sure it meets
Customer's needs. Customer agrees to accept Software in its current condition.
Seller agrees to repair any service effecting Software defect promptly per the
warranty terms during the Warranty Period.
10. ENTIRE UNDERSTANDING
Notwithstanding anything to the contrary in other agreements, purchase orders or
order acknowledgments; the Agreement and this Exhibit C set forth the entire
understanding and obligations regarding use of Software, implied or expressed.
<PAGE>
Software License
================================================================================
[LOGO]
NON-DISCLOSURE AGREEMENT
------------------------
This Non-Disclosure Agreement ("NDA"), effective February 4th, 1998
("Effective Date"), is by and between OJSC St. Petersburg Telecom ("Recipient")
having a place of business at Nevsky Prospect 54 - 10, St. Petersburg 191011
Russia, and Metawave Communications Corporation ("Metawave") having a place of
business at 8700 148th Ave. NE, Redmond, WA 98052 U.S.A.
1. The purpose of this NDA is to allow each party to obtain from the other
certain technical and business information related to wireless systems
under terms that will protect the confidential and proprietary nature
of such information.
2. As used in this NDA, "Confidential Information" shall mean any and all
technical or business information furnished, in whatever form or
medium, or disclosed by one party to the other including, but not
limited to, product/service specifications, prototypes, computer
programs, models, drawings, marketing plans, financial data, and
personnel statistics, which are marked as confidential or proprietary
by the disclosing party, or, for information which is orally
disclosed, the disclosing party indicates to the other at the time of
disclosure the confidential or proprietary nature of the information
and confirms in writing to the receiving party within thirty (30) days
after such disclosure that such information is confidential. Any
technical or business information of a third person furnished or
disclosed by one party to the other shall be deemed "Confidential
Information" of the disclosing party unless otherwise specifically
indicated in writing to the contrary.
3. Each party agrees to hold such Confidential Information in confidence for a
period of three (3) years from the date of receipt of same unless
otherwise agreed to in writing by the disclosing party, and that
during such period each party will use such information solely for the
purposes of this NDA unless otherwise allowed in this NDA or by
written permission of the disclosing party. Each party agrees not to
copy such Confidential Information of the other unless specifically
authorized. Each party agrees that it shall not make disclosure of any
such Confidential Information to anyone (including subcontractors)
except employees of such party to whom disclosure is necessary for the
purposes set forth above. Each party shall appropriately notify such
employee that the disclosure is made in confidence and shall be kept
in confidence in accordance to this NDA. Each party also agrees that
it will make requests for Confidential Information of the other only
if necessary to accomplish the purposes set forth in this NDA. The
receiving party agrees that Confidential Information shall be handled
with the same degree of care which the receiving party applies to its
own Confidential Information but in no event less than reasonable
care.
4. Each party agrees that in the event permission is granted by the other to
copy such Confidential Information, each such copy shall contain and
state the same confidential or proprietary notices or legends, if any,
which appear on the original. Nothing herein shall be construed as
granting to either party any right or license under any copyrights,
inventions, or patents now or hereafter owned or controlled by the
other party.
1
<PAGE>
Software License
================================================================================
5. Upon termination of this NDA for any reason or upon request of the
disclosing party, all Confidential Information, together with copies
of same as may be authorized herein, shall be returned to the
disclosing party or certified destroyed by the receiving party upon
the request of the disclosing party. The requirements of use and
confidentiality set forth herein shall survive the termination of this
NDA.
6. The obligations imposed in this NDA shall not apply to any information
that:
(a) is already in the possession of or is independently developed by the
receiving party; or
(b) is or becomes publicly available through no fault of the receiving
party; or
(c) is obtained by the receiving party from a third person who is under no
obligation of confidence to the party whose Confidential Information
is disclosed; or
(d) is disclosed without restriction by the disclosing party.
7. Except for the obligations of use and confidentiality imposed in this NDA
no obligation of any kind is assumed or implied against either party
by virtue of the party's meetings or conversations with respect to
whatever Confidential Information is exchanged. Each party further
acknowledges that this NDA and any meetings and communications of the
parties relating to the same subject matter shall not :
(a) constitute an offer, request, or research, development or other
contract with the other to work; engage in any
(b) constitute an offer, request or contract involving a buyer-seller
relationship, venture, teaming or partnership relationship between the
parties; and
(c) impair or restrict the parties' products or services, now or those
offered by the NDA. right to make, procure or market in the future,
which may be disclosing party, or which any competitive with are the
subject matter of this
The parties expressly agree that any money, expenses or losses expended or
incurred by each party in preparation for, or as a result of this NDA
or the parties meetings and communications, is at each party's sole
cost and expense provided, however, that notwithstanding anything to
the contrary in the NDA, neither party's rights shall be limited in
law or equity to enforce the confidentiality and use obligations
imposed under this NDA.
8. Without prior consent of the other party, neither party shall disclose to
any third person the existence or purpose of this NDA, the terms or
conditions hereof, the fact that discussions are taking place or that
Confidential Information is being shared, except as may be required by
law and then only after first notifying the other party of such
required disclosure. The parties also agree that neither party shall
use any trade name, service mark, or trademark of the other or refer
to the other party in any promotional activity or material without
first obtaining the prior written consent of the other party.
9. Neither this NDA nor any rights hereunder in whole or in part shall be
assignable or otherwise transferable by either party and the
obligations contained in this NDA
<PAGE>
Software License
================================================================================
shall survive and continue after termination of this NDA, provided,
that either party may assign or transfer this NDA and rights hereunder
to any current or future affiliates or successor company if such
assignee agrees in writing to the terms and conditions herein.
10. The foregoing shall apply to any subsequent meetings or any communications
between the parties relating to the same subject matter unless this
NDA is modified in writing and such writing is signed by each party.
11. This NDA shall be governed and construed by the laws of the State of
Delaware.
12. Each party shall comply with all applicable U.S. and foreign export control
laws and regulations and shall not export or re-export any technical
data or products except in compliance with the applicable export
control laws and regulations of the U.S. and any foreign country.
13. Any notice to be given under this NDA by either party to the other, shall
be in writing and shall be deemed given when sent by Certified mail.
If either party changes its address during the term of this NDA, it
shall so advise the other party in writing as provided in this NDA and
any notice thereafter required to be given shall be sent by Certified
mail to such new addresses.
14. In the event that this NDA is translated into any other language, the
English version hereof shall take precedence and govern.
15. This NDA, together with any and all exhibits incorporated herein,
constitutes the entire NDA between the parties with respect to the
subject matter of this NDA. No provision of this NDA shall be deemed
waived, amended, or modified by either party, unless such waiver,
amendment or modification is made in writing and signed by both
parties. This NDA supersedes all previous NDAs between Metawave and
Recipient relating to the subject matter in this NDA.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to sign this NDA as of the Effective Date.
METAWAVE COMMUNICATIONS CORP. OJSC ST. PETERSBURG TELECOM
Signature: _______________________ Signature: ________________________
Print Name: Kathy Surace-Smith Print Name: _______________________
Title: General Counsel Title: ____________________________
<PAGE>
EXHIBIT E: PRODUCT MAINTENANCE PROGRAM
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ST. PETERSBURG TELECOM ("CUSTOMER")
Metawave Communications Corporation
8700 148/th/ Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by
Metawave under an agreement of nondisclosure to the Customer for internal
evaluation purposes only and is protected by applicable copyright and trade
secret law. This document may only be disclosed or disseminated to those
employees of the Customer who have a need to use it for evaluation purposes;
no other use or disclosure can be made by Customer without Metawave's consent.
(C)1998, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
Product Maintenance Program
================================================================================
Product Maintenance Program
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction......................................................... 3
2. Hardware Maintenance Program......................................... 3
3. Software Maintenance Program......................................... 4
</TABLE>
ANNEX A
<TABLE>
<S> <C>
A. Metawave Customer Support Center................................... 7
B. Return Material Authorization (RMA)................................ 7
C. Return Address..................................................... 7
D. Packing Instructions............................................... 7
E. Purchase Orders.................................................... 7
F. Pricing and Invoicing.............................................. 8
G. Emergency Expedite Service......................................... 8
H. Loaner and Pre-exchange Orders..................................... 9
I. Freight............................................................ 9
J. Duties and Taxes................................................... 9
K. Non-compliance..................................................... 9
L. Conflicting Terms.................................................. 9
</TABLE>
<PAGE>
Product Maintenance Program
================================================================================
METAWAVE COMMUNICATIONS CORPORATION
PRODUCT MAINTENANCE PROGRAM
1. INTRODUCTION
Seller's product maintenance program includes both a Hardware Maintenance
Program (HMP) and a Software Maintenance Program (SMP). This document describes
each of the two programs.
2. HARDWARE MAINTENANCE PROGRAM
The following details Seller's Hardware Maintenance Program ("HMP"). For each
Product purchased, the HMP is included at no charge during the initial period
described in Section 2.1.1.
2.1 Term
2.1.1 DURING THE WARRANTY PERIOD (AS DEFINED IN SECTION 5 OF THE
AGREEMENT) THE HMP IS INCLUDED IN THE PURCHASE PRICE OF EACH
SPOTLIGHT UNIT PURCHASED. THEREAFTER, HARDWARE REPAIR SERVICES
WILL BE PROVIDED BY SELLER TO CUSTOMER ON A TIME AND MATERIAL
BASIS FOR A PERIOD OF [***] FROM THE DATE OF PRODUCT PURCHASE,
UNLESS CUSTOMER ELECTS TO PURCHASE AN HMP AT THE FEES SET FORTH
IN EXHIBIT A. SUCH HMP CAN ONLY BE PURCHASED DURING THE TERM OF
THIS AGREEMENT.
2.2 Seller shall:
2.2.1 IN THE EVENT A DEFECT OCCURS, EITHER (I) REPAIR THE DEFECTIVE
HARDWARE OR (II) REPLACE SAID HARDWARE WITH NEW OR REFURBISHED
PRODUCT. ANY ITEM REPLACED WILL BE DEEMED TO BE ON AN EXCHANGE
BASIS, AND ANY ITEM RETAINED BY SELLER THROUGH REPLACEMENT WILL
2.2.2 [***] OF RECEIPT OF A DEFECTIVE FIELD REPLACEABLE UNIT (FRU)
FROM CUSTOMER, SHIP THE REPLACEMENT FRU TO CUSTOMER, OR WITHIN
[***] OF RECEIPT OF A DEFECTIVE FRU FROM CUSTOMER, SHIP A
REPAIRED FRU TO CUSTOMER. EQUIPMENT NOT MANUFACTURED BY SELLER
WILL BE REPAIRED OR REPLACED AS PROMPTLY AS ARRANGEMENTS WITH
THE MANUFACTURERS OR VENDORS THEREOF PERMIT.
2.2.3 ISSUE A RETURN MATERIAL AUTHORIZATION ("RMA") NUMBER TO CUSTOMER
PRIOR TO CUSTOMER'S RETURN OF THE DEFECTIVE BOARD.
2.2.4 PAY ALL TRANSPORTATION CHARGES FOR THE RETURN OF THE REPAIRED OR
REPLACEMENT FRU TO CUSTOMER.
2.2.5 PROVIDE TECHNICAL SUPPORT DURING BUSINESS HOURS, 8:00 A.M. TO
5:00 P.M. PACIFIC STANDARD TIME, MONDAY THROUGH FRIDAY AND
PROVIDE PAGER SERVICE AFTER HOURS, WEEKENDS AND HOLIDAYS WITH A
RESPONSE TIME OF WITHIN ONE HOUR.
2.3 Customer shall:
2.3.1 CONTACT SELLER VIA TELEPHONE, EMAIL OR FAX TO OBTAIN AN RMA
PRIOR TO RETURNING A DEFECTIVE FRU.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Product Maintenance Program
================================================================================
2.3.2 PACKAGE FIELD REPLACEABLE UNIT IN A MANNER TO PREVENT DAMAGE
DURING SHIPMENT. IDENTIFY RMA NUMBER ON OUTSIDE OF PACKAGE.
2.3.3 PACKAGE THE EQUIPMENT BEING RETURNED IN A MANNER NO LESS
PROTECTIVE TO SUCH EQUIPMENT THAN THE MANNER IN WHICH EQUIPMENT
IS PACKAGED BY SELLER.
2.3.4 SHIP THE DEFECTIVE FRU TO AN AUTHORIZED SELLER SERVICE CENTER
DESIGNATED BY SELLER.
2.3.5 PAY ALL COSTS OF TRANSPORTATION FOR SENDING THE DEFECTIVE FRU TO
SELLER.
2.3.6 IF SELLER HAS SHIPPED A FRU IN ADVANCE OF THE CUSTOMER RETURNING
THE DEFECTIVE FRU TO SELLER, CUSTOMER AGREES TO INSURE AND
PROVIDE CONFIRMATION OF SHIPMENT OF SUCH DEFECTIVE FRU, FREIGHT
PREPAID, TO SELLER AT THE AFOREMENTIONED ADDRESS WITHIN 5 DAYS
OF SHIPMENT FROM SELLER OF THE FRU. CUSTOMER AGREES TO PROMPTLY
PAY SELLER'S INVOICE FOR THE THEN CURRENT PRICE OF THE FRU
SHIPPED TO CUSTOMER IF THE DEFECTIVE FRU IS NOT RETURNED WITHIN
THE SPECIFIED 5 DAY PERIOD.
2.3.7 BE RESPONSIBLE FOR THE INITIAL IDENTIFICATION OF PRODUCT
PROBLEMS DOWN TO THE FRU LEVEL AND FOR THE REMOVAL, REPLACEMENT
AND SHIPMENT OF THE MALFUNCTIONING FRU, PACKED IN A MANNER TO
PREVENT DAMAGE TO FRU.
2.4 On-Site Repair
On-Site Repair can be performed at an additional charge. Such charge
will be quoted to Customer and agreed upon in writing before dispatch of
personnel.
2.5 Service Limitations
2.5.1 SELLER SHALL HAVE NO RESPONSIBILITY TO REPAIR OR REPLACE BOARDS
WHICH HAVE BEEN REPAIRED IN AN UNAUTHORIZED MANNER OR WHICH HAVE
HAD THE BARCODE, SERIAL NUMBER, OR OTHER IDENTIFYING MARK
MODIFIED, REMOVED OR OBLITERATED THROUGH ACTION OR INACTION OF
CUSTOMER.
2.5.2 IN THE EVENT THAT CUSTOMER SENDS A FRU TO SELLER WHICH HAVE NO
DEFECTS OR FAILURES, SELLER MAY INVOICE CUSTOMER AT THE THEN
CURRENT FEE FOR THE SERVICES RENDERED DURING THE EVALUATION
PROCESS PROVIDED THAT SELLER'S TECHNICAL SUPPORT HAS NOT
INSTRUCTED CUSTOMER IN WRITING THAT THE FRU BE REPLACED.
3. SOFTWARE MAINTENANCE PROGRAM
The following details Seller's Software Maintenance Program ("SMP"). Annual SMP
fees are shown on Exhibit A or an Amendment thereto. SMP is included in the
Purchase Price of each SpotLight unit purchased for the Initial Term (Section
3.2.1 describes the Initial Term).
3.1 Definitions
Terms which are capitalized have the meanings set forth below or, absent
definition herein, as contained in the Purchase Agreement.
Certification the approval by Seller that Customer's current Software
is in acceptable condition for coverage under SMP.
Feature an innovation or performance improvement to Software
that is made available to all users of the current
Software release. Features are licensed to
Customer individually and may be at additional
cost.
<PAGE>
Product Maintenance Program
================================================================================
Firmware Software in object-code form that is implanted/imbedded
in hardware.
Major Release indicates a new version of Software that adds new
Features (excluding Optional Features) or major
enhancements to the currently existing release of
Software.
Point Release indicates a modification to Software resulting from
planned revisions to the current release, or
corrections and/or fixes to the current release of
Software.
Rehosting the integration of Special Project (SP) Software into
Customer's current release of Software.
Software the object-code computer programs, licensed by Seller
for use solely in conjunction with Seller's
Products, which enables a Seller Product to
perform its functions in accordance with the
specifications set forth in Exhibit B (Performance
Specifications). Software includes Major Releases,
Point Releases and, if applicable, Features made
available to Customer under SMP.
Software Patch Software that corrects or removes a reproducible
anomaly or "bug" in an existing Major Release.
SP Software a Software Feature developed by Seller pursuant to a
specific Customer request or Customer funding of
accelerated development of a planned Software
Feature.
3.2 Term
3.2.1 THE INITIAL TERM OF SMP IS [***] FROM THE DATE OF EXECUTION OF
THE CERTIFICATE OF FINAL ACCEPTANCE FOR EACH PRODUCT ("INITIAL
TERM"). THEREAFTER, SMP IS PROVIDED BY SELLER TO CUSTOMER
PURSUANT TO THE TERMS HEREIN AND IS INCLUDED IN THE SMP ANNUAL
FEE SET FORTH IN EXHIBIT A FOR A PERIOD OF [***]. ANY SOFTWARE
PROVIDED TO CUSTOMER DURING THE TERM OF THE SMP WILL BE PROVIDED
PURSUANT TO SELLER'S SOFTWARE LICENSE AS SET FORTH IN THE
SOFTWARE LICENSE EXHIBIT OF THE PURCHASE AGREEMENT.
3.3 Scope
3.3.1 DURING THE TERM OF SMP, ALL MAJOR RELEASES, POINT RELEASES,
SOFTWARE PATCHES AND STANDARD FEATURES MADE GENERALLY AVAILABLE
BY SELLER SHALL BE AVAILABLE TO CUSTOMER AT NO ADDITIONAL
CHARGE. CUSTOMER SHALL INSTALL SUCH SOFTWARE PROMPTLY UPON
RECEIPT.
3.3.2 OPTIONAL FEATURES AND CERTAIN SIGNIFICANT ENHANCEMENTS SHALL BE
AVAILABLE AT AN ADDITIONAL CHARGE. OPTIONAL FEATURES SHALL BE
CARRIED FORWARD FROM RELEASE TO RELEASE AND NEW RELEASES MAY
INCLUDE FIXES AND ENHANCEMENTS TO OPTIONAL FEATURES.
3.3.3 CERTAIN OPTIONAL FEATURES SHALL BE SOLD ON A PER-PLATFORM BASIS
AND MAY HAVE PRICE LEVELS THAT REFLECT PLATFORM CAPACITY.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Product Maintenance Program
================================================================================
3.3.4 SELLER SHALL ALSO, AT SELLER'S THEN CURRENT PRICE, REHOST
CUSTOMER'S SP SOFTWARE INTO CUSTOMER'S CURRENT RELEASE OF
SOFTWARE. SUCH REHOSTED SP SOFTWARE IS THEREAFTER PART OF
CUSTOMER'S SOFTWARE FOR THAT RELEASE.
3.3.5 CUSTOMER WILL BE RESPONSIBLE FOR THE FIRST LEVEL OF MAINTENANCE,
INCLUDING BUT NOT LIMITED TO PROBLEM IDENTIFICATION OF
REPRODUCIBLE SOFTWARE MALFUNCTIONS. IN THE EVENT OF ANY SUCH
SOFTWARE MALFUNCTION, CUSTOMER SHALL NOTIFY SELLER PROMPTLY OF
THE FAILURE THROUGH CALLING SELLER'S CUSTOMER SUPPORT.
3.3.6 SELLER SHALL PROVIDE, AT A SELLER AUTHORIZED REPAIR DEPOT, SUCH
SERVICE AS IS NECESSARY TO CORRECT SOFTWARE DEFECTS IN ACCORDANCE
WITH THE APPLICABLE DOCUMENTATION PROVIDED BY SELLER AS SOON AS
IS POSSIBLE AND ON A PRIORITY BASIS ACCORDING TO THE SEVERITY OF
THE PROBLEM.
3.3.7 SELLER SHALL PROVIDE TECHNICAL SUPPORT 24-HOUR A DAY, 7 DAYS A
WEEK. ADDITIONALLY, SELLER SHALL PROVIDE TELEPHONE ASSISTANCE AND
GUIDANCE DURING THE INSTALLATION OF NEW SOFTWARE.
3.3.8 SELLER SHALL SUPPORT THE CURRENT MAJOR RELEASE AS WELL AS THE TWO
IMMEDIATELY PRECEDING MAJOR RELEASES.
3.3.9 SELLER SHALL HAVE NO OBLIGATION TO SUPPORT ANY SOFTWARE WHICH IS
OLDER THAN THE TWO IMMEDIATELY PRECEDING MAJOR RELEASES. HOWEVER,
ANY SUPPORT PROVIDED BY SELLER FOR SOFTWARE OLDER THAN THE
IMMEDIATELY PRECEDING MAJOR RELEASE SHALL BE ON A TIME AND
MATERIAL BASIS. AN OPEN PURCHASE ORDER WILL BE REQUIRED BEFORE
ANY SUCH SERVICES ARE RENDERED.
<PAGE>
Product Maintenance Program
================================================================================
ANNEX A: PROCEDURES FOR METAWAVE'S HARDWARE
MAINTENANCE PROGRAM
A. METAWAVE'S CUSTOMER SUPPORT CENTER
Services Center: ( 8:00 a.m.- 5:00 p.m. PST, Monday through
Friday) after hours, weekends, and holidays via pager. Customer
Support is available 365 days per year.
Domestic phone: 888-642-2455
International phone: 425-702-6550
B. RETURN MATERIAL AUTHORIZATION (RMA):
The Customer must contact the Customer Support Center via
telephone, e-mail or fax to obtain a Return Material
Authorization (RMA) number. Seller may return shipments without a
RMA number to the Customer unrepaired and at Customer's cost.
The RMA number must be written on the outside of the package.
A RMA number will not be issued until a purchase order is
provided for the repair price for those items not covered under
warranty.
C. Return Address:
All Field Replaceable Units (FRUs) must be shipped to:
Metawave Communications Corporation
8700 148/th/ Avenue NE
Redmond, WA 98052 USA
D. PACKING INSTRUCTIONS:
Customer must pack all returned equipment (including loaners and
pre-exchange equipment) in a manner no less protective to such
equipment than the manner in which Seller packages similar
equipment.
E. Purchase Orders:
Purchase orders are required in the following instances:
1. When the Customer requests Emergency Expedite Service for
out of warranty equipment.
2. When the Customer returns out of warranty equipment for
repair.
3. When Seller sends loaner or pre-exchange equipment to the
Customer prior to the defective board being received at
Seller and the equipment is out of warranty.
Note: The purchase order will only be invoiced against
if the Customer FRU to be exchanged for the loaner or
the pre-exchange equipment is not returned
<PAGE>
Product Maintenance Program
================================================================================
within 5 days (19 days for international Customers) after
the date Seller has shipped the repaired or replacement FRUs
to Customer.
Under these circumstances, a facsimile copy of the purchase order
may be transmitted to be followed up by a confirming hard copy in
the mail. The terms and conditions of the Purchase Agreement
between Seller and the Customer shall prevail notwithstanding any
variance with the terms and conditions of any purchase orders
submitted by Customer.
F. PRICING AND INVOICING:
In Warranty Emergency Expedite Request:
---------------------------------------
Seller does not charge an Emergency Expedite Fee for equipment
covered under original warranty or covered by the Hardware
Maintenance Program.
Out of Warranty Emergency Expedite Request:
------------------------------------------
Seller charges an Emergency Expedite Fee of [***] per FRU (plus
the standard Out of Warranty Repair rates shown below) plus
freight for emergency service for equipment not covered under
HMP.
In Warranty Repair:
------------------
Seller does not charge for the repair or return shipment of
equipment that is covered under original warranty.
Out of Warranty Repair:
----------------------
All out of warranty repairs will be calculated on a time and
materials basis at [***]. If the estimated cost to repair the
defective FRU exceeds 50% of the price of a new unit, Seller will
call Customer to inform them prior to repairing defective unit.
Testing Fees:
------------
Seller charges a testing fee [***] per FRU when the Customer
requests loaner Seller equipment in support of out of warranty
equipment.
Invoices:
--------
Invoices are payable in accordance with the terms of the Purchase
Agreement between Seller and Customer.
G. EMERGENCY EXPEDITE SERVICE:
Within 24 hours of notification from Customer of an Emergency,
Seller will ship a replacement Field Replaceable Unit. Customer
must either provide Seller with a new Purchase order (a facsimile
copy of the purchase order may be transmitted to be followed up
by a confirming hard copy in the mail) or have already provided
Seller with a blanket Purchase Order if an out of warranty item
(s). An "Emergency" will constitute at least one sector losing
more than 50% of its nominal capacity.
Emergency service Monday through Friday 8:00 a.m. to 5:00 p.m.
PST will be handled by the Seller's Customer Support Center who
can be reached at 888-642-2455 domestically or 425-702-6550
internationally.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Product Maintenance Program
================================================================================
After Hours, weekends and holidays via pager with a response-time
of within one hour.
H. LOANER AND PRE-EXCHANGE ORDERS:
Customer may request loaner equipment that may be used while
Customer's equipment is being repaired. Loaners are Supplied at
no cost to the Customer when equipment is covered by warranty.
Seller charges a testing fee when the Customer requests loaner
Seller equipment in Support of out of warranty equipment.
Customer must ship defective equipment within 30 days of the date
of Seller's shipment of loaner equipment to Customer and ship
loaner equipment within 30 days of the date of Seller's shipment
of the repaired equipment to Customer.
I. FREIGHT:
In Warranty:
------------
Customer shall ship the equipment to Seller on a prepaid basis
and Seller will return the equipment to the Customer on a prepaid
basis, not billing Customer for freight.
Out of Warranty:
---------------
Customer shall ship the FRU to Seller for repair on a prepaid
basis and Seller will prepay and invoice the Customer for return
freight.
J. DUTIES AND TAXES:
All duties, customs clearance fees and any and all taxes will be
the responsibility of the Customer.
K. NON-COMPLIANCE:
Failure to comply with any of the procedures may result in delay
or non-delivery of the equipment.
L. CONFLICTING TERMS:
In the event that the terms contained herein conflict with the
terms of the Purchase Agreement between Seller and Customer, the
terms of the Purchase Agreement shall govern.
<PAGE>
EXHIBIT F: ACCEPTANCE TEST PROCEDURE (ATP)
(for the SpotLight Multibeam Antenna Platform)
TO THE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ST. PETERSBURG TELECOM ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C)1998, METAWAVE COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
SpotLight Multibeam Antenna Platform Acceptance Test Procedure
================================================================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction............................................................. 3
2. Acceptance Tests......................................................... 3
2.1. LampLighter Installation Test....................................... 4
2.2. System Configuration Test........................................... 5
2.3. Transmit Effective Radiated Power (Tx ERP) Test..................... 6
2.4. Receive Sensitivity Test............................................ 8
2.5. Alarm Functionality Test............................................ 9
2.6. Call Processing Test................................................ 11
</TABLE>
<PAGE>
SpotLight Multibeam Antenna Platform Acceptance Test Procedure
================================================================================
SPOTLIGHT ACCEPTANCE TEST PROCEDURE
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Spotlight Multibeam Antenna Platform Acceptance Test Procedure
================================================================================
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT G: RESPONSIBILITY MATRIX
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ST. PETERSBURG TELECOM ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
1998, Metawave Communications Corporation
(C) 1998, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
[***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT H: PROJECT SCHEDULE
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ST. PETERSBURG TELECOM ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by
Metawave under an agreement of nondisclosure to the Customer for internal
evaluation purposes only and is protected by applicable copyright and trade
secret law. This document may only be disclosed or disseminated to those
employees of the Customer who have a need to use it for evaluation purposes;
no other use or disclosure can be made by Customer without Metawave's consent.
1997, Metawave Communications Corporation
(C)1997, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
Product Maintenance Program
================================================================================
PROJECT SCHEDULE
METAWAVE SHALL USE REASONABLE EFFORTS TO ACCELERATE THE ATTACHED SCHEDULE.
PERFORMANCE OF THE ATTACHED SCHEDULE IS SUBJECT TO THE TERMS AND CONDITIONS
OF THE AGREEMENT BETWEEN THE PARTIES.
[No Schedule Attached]
<PAGE>
EXHIBIT 10.13
LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of October 14, 1997 (this "Loan
Agreement") between METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation
(herein called "Borrower"), and IMPERIAL BANK (herein called "Bank").
1. COMMITMENT.
A. FACILITY-A COMMITMENT. Subject to all the terms and conditions
of this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Facility-A
Loan") to Borrower, from time to time and in such amounts as Borrower shall
request pursuant to this SECTION 1.A., up to an aggregate principal amount
outstanding under the Facility-A Loan Account (as hereinafter defined) not to
exceed the least of: (a) Eighty percent (80%) of Eligible Accounts (the
"Borrowing Base") or (b) $5,000,000.00 (the "Facility-A Commitment"). If at any
time or for any reason, the outstanding principal amount of the Facility-A Loan
Account is greater than the least of: (x) the Borrowing Base or (y) the
Facility-A Commitment, Borrower shall immediately pay to Bank, in cash, the
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Facility-A Loans shall expire on the Facility-A Maturity
Date (as hereinafter defined), subject to Bank's right to renew said commitment
in its sole and absolute discretion at Borrower's request. Any such renewal of
said commitment shall not be binding upon Bank unless it is in writing and
signed by an officer of Bank. Provided that no Event of Default (as hereinafter
defined) has occurred and is continuing, all or any portion of the Facility-A
Loans advanced by Bank which are repaid by Borrower shall be available for
reborrowing in accordance with the terms hereof. Borrower promises to pay to
Bank the entire outstanding unpaid principal balance (and all accrued unpaid
interest thereon) of the Facility-A Loan Account on October 14, 1999 ("Facility-
A Maturity Date").
(1) FACILITY-A LOANS. The amount of each Facility-A Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-A Commitment (herein called the
"Facility-A Loan Account") and Bank shall credit the Facility-A Loan Account
with all loan repayments in respect thereof made by Borrower. When Borrower
desires to obtain a Facility-A Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with SECTION 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day (as hereinafter defined) before the day on which the
Facility-A Loan is to be made. Facility-A Loans may only be used for working
capital purposes and the issuance of letters of credits.
(a) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to the
availability of the Facility-A Commitment and in reliance on the representations
and warranties of Borrower set forth herein, at any time and from time to time
from the date hereof through the Banking Day immediately prior to the Facility-A
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which request shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $3,000,000.00 and (ii) shall be deemed to constitute
Facility-A Loans for the purpose of calculating availability under the
Facility-A Commitment. Unless Borrower shall have deposited with Bank cash
collateral in an amount sufficient to cover all undrawn amounts under each such
Letter of Credit and Bank shall have agreed in writing, no Letter of Credit
shall have an expiration date that is later than the Facility-A Maturity Date.
All Letters of Credit shall be in form and substance acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's
application and letter of credit agreement, in the form of EXHIBIT B attached
hereto and incorporated herein by this reference. Borrower will pay any standard
issuance and other fees that Bank notifies Borrower will be charged for issuing
and processing Letters of Credit for Borrower.
(2) LIMITATION ON ADVANCE OF ANY FACILITY-A LOAN.
Notwithstanding any of the provisions contained in SECTION 1.A hereof, prior to
any advance of a Facility-A Loan, a representative of Bank shall have conducted
an audit of Borrower's books and records relating to the Collateral and made
extracts therefrom, and arranged for verification of the Accounts, directly with
the account debtors or otherwise, all with results reasonably satisfactory to
Bank, the cost of such audit of which shall be at Borrower's sole expense. Based
on Bank's review of such audit, and prior to the advance of a
<PAGE>
Facility-A Loan in accordance with the terms of SECTION 1.A hereof, Bank may
adjust the Borrowing Base percentage, in its sole and reasonable discretion, as
provided for under SECTION 9.B. hereof.
(3) NON-FORMULA AVAILABILITY. Provided that no Event of Default
has occurred and is continuing, and subject to the availability of the Facility-
A Commitment and in reliance on the representations and warranties of Borrower
set forth herein, at any time from the date hereof through April 30, 1998, Bank
hereby agrees to make Facility-A Loans to Borrower in such amounts as Borrower
shall request pursuant to this SECTION 1.A.(3), in an aggregate principal amount
not to exceed $2,500,000.00 (the "Non-Formula Availability"); provided, however,
that the outstanding amounts under this Non-Formula Availability shall be deemed
to constitute Facility-A Loans for the purpose of calculating availability under
the Facility-A Commitment.
(4) INTEREST PAYMENTS ON FACILITY-A LOANS. Borrower further
promises to pay to Bank from the date of the advance of the initial Facility-A
Loan through the Facility-A Maturity Date, on or before the tenth (10th) day of
each month, interest on the average daily unpaid balance of the Facility-A Loan
Account during the immediately preceding month at a rate of interest equal to
the rate of interest per annum which Bank has announced as its prime lending
rate (the "Prime Rate"), which shall vary concurrently with any change in the
Prime Rate. Interest shall be computed at the above rate on the basis of the
actual number of days during which the principal balance of the Facility-A Loan
Account is outstanding divided by 360, which shall for interest computation
purposes be considered one (1) year.
2. LOAN REQUESTS. Requests for Loans hereunder shall be in writing duly
executed by Borrower in the form of EXHIBIT C attached hereto and incorporated
herein by this reference and shall contain a certification setting forth the
matters referred to in SECTION 1, which shall disclose that Borrower is entitled
to the amount and type of Loan being requested. Bank is hereby authorized to
charge Borrower's deposit account with Bank for all principal and interest due
Bank under this Loan Agreement.
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this SECTION 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the Facility-A Loan Account
following the FacilityA Maturity Date. All payments shall be applied first to
any late charges due hereunder, next to accrued interest then payable and the
remainder, if any, to reduce any unpaid principal due under the Facility-A Loan
Account.
5. DEFAULT INTEREST. From and after the Facility-A Maturity Date, or
such earlier date as all sums owing under the Facility-A Loan Account becomes
due and payable by acceleration or otherwise, or upon the occurrence of an Event
of Default, at the option of Bank all sums owing under the Facility-A Loan
Account shall bear interest until paid in full at a rate equal to the lesser of
(a) five percent (5.0%) per annum in excess of the then applicable interest rate
provided for in SECTION 1.A.(3) hereof or (b) the maximum amount permitted to be
charged by applicable law, until all obligations hereunder are repaid in full or
the Event of Default is waived or cured to the satisfaction of Bank, as
applicable.
6. DEFINITIONS. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on EXHIBIT A attached hereto and incorporated herein by this reference.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected; (b)
Borrower is, and at the time the Collateral becomes
-2-
<PAGE>
subject to Bank's security interest will be, the true and lawful owner of and
has, and at the time the Collateral becomes subject to Bank's security interest
will have, good and clear title to the Collateral, subject only to Bank's rights
therein and to Permitted Liens; (c) Each Account is, and at the time the Account
comes into existence will be, a true and correct statement of a bona fide
indebtedness incurred by the debtor named therein in the amount of the Account
for either merchandise sold or delivered (or being held subject to Borrower's
delivery instructions) to, or services rendered, performed and accepted by, the
account debtor; (d) That there are and will be no defenses, counterclaims, or
setoffs which may be asserted against the Accounts from time to time represented
by Borrower to be Eligible Accounts, except as permitted in the definition
thereof; (e) Any and all financial information, including information relating
to the Collateral, submitted by Borrower to Bank, whether previously or in the
future, is and will be true and correct in all material respects; (f) There is
no material litigation or other proceeding pending or threatened against or
affecting Borrower, and Borrower is not in default with respect to any order,
writ, injunction, decree or demand of any court or other governmental or
regulatory authority; (g) (i) The consolidated balance sheets of Borrower dated
as of September, 1997, and the related consolidated profit and loss statements
for the fiscal year then ended, copies of which have heretofore been delivered
to Bank by Borrower, and all other statements and data submitted in writing by
Borrower to Bank in connection with Borrower's request for credit are true and
correct, and said balance sheet and profit and loss statement accurately present
the financial condition of Borrower as of the date thereof and the results of
the operations of Borrower for the period covered thereby, and have been
prepared in accordance with GAAP, (ii) since such date, there have been no
material adverse changes in the financial condition of Borrower, and (iii)
Borrower has no knowledge of any material liabilities, contingent or otherwise,
which are not reflected in said balance sheet, and Borrower has not entered into
any special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a Material Adverse Effect upon its financial condition,
operations or business as now conducted; (h) Borrower has no material liability
for any delinquent local, state or federal taxes, and, if Borrower has
contracted with any government agency, it has no liability for renegotiation of
profits; and (i) to the best of its knowledge, Borrower, as of the date hereof,
possesses all necessary trademarks, trade names, copyrights, patents, patent
rights, and licenses to conduct its business as now operated, without any known
conflict with valid trademarks, trade names, copyrights, patents, patent rights
and license rights of others.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank,
which will not be unreasonably withheld:
A. Make any substantial change in the character of its business as
now conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in SECTION 7.(G)(I), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank;
D. Sell, dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted, such Collateral
which is disposed in connection with the sale of Network Services Division or
other assets which are obsolete or otherwise considered surplus), or execute any
financing statements covering the Collateral in favor of any secured party or
Person other than Bank;
E. Sell, transfer, assign, mortgage, pledge, license (except in the
ordinary and normal course of its business as it is now conducted), lease, grant
a security interest in, or otherwise encumber any of its Intellectual Property;
F. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower);
-3-
<PAGE>
G. Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or liquidate, dissolve, merge
or consolidate, or commence any proceedings therefore; or, except in the
ordinary and normal course of its business as now conducted, sell (including,
without limitation, the selling of any property or other asset accompanied by
the leasing back of the same) any assets including any fixed assets, any
property, or other assets necessary for the continuance of its business as now
conducted; and
H. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock, except for the repurchase of
Borrower's capital stock from officers, directors, employees or consultants of
Borrower upon termination of their employment with or rendering of services to
Borrower.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Notwithstanding the provisions contained in SECTION 1.A.(2)
hereof, permit representatives of Bank to conduct annual audits of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, provided that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense. Borrower hereby acknowledges
and agrees that upon completion of any such audit, including any such audit
conducted in accordance with the provisions of SECTION 1.A.(2) hereof, Bank
shall have the right to adjust the Borrowing Base percentage based on its review
of the results of such Collateral audit, if in its reasonable discretion the
Accounts have a lower likelihood of collection than Bank previously believed
prior to such Collateral audit;
C. Promptly notify Bank of any attachment or other material legal
process levied against any of the Collateral and any information received by
Borrower relative to the Collateral, including the Accounts, the account debtors
or other Persons obligated in connection therewith, which may in any way affect
the value of the Collateral or the rights and remedies of Bank in respect
thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in collecting any sums
payable by Borrower under the Facility-A Loan Account or any other obligation
secured hereby, enforcing any term or provision of this Loan Agreement or
otherwise or in the checking, handling and collection of the Collateral and the
preparation and enforcement of any agreement relating thereto;
E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon, to the extent necessary to repay any
indebtedness owed to Bank, shall at the option of Bank become the sole property
of Bank, such policies and the proceeds of any other insurance covering or in
any way relating to the Collateral, whether now in existence or hereafter
obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of the Facility-A Loan Account
shall exceed the maximum amount of outstanding loans to which Borrower is
entitled under SECTION 1 hereof, as applicable, Borrower shall immediately pay
to Bank for credit to the Facility-A Loan Account the amount of such excess;
-4-
<PAGE>
H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the State of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s), as
the failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank.
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall
be calculated and monitored on a monthly basis, except as shall be expressly
stated to the contrary. Borrower affirmatively covenants that so long as any
loans, obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth (meaning all
assets, excluding any value for goodwill, trademarks, patents, copyrights,
organization expense and other similar intangible items, less all liabilities,
plus Subordinated Debt) of not less than $6,000,000.00.
B. At all times maintain a Maximum Ratio of Total Liabilities
(meaning all liabilities, excluding Subordinated Debt) to Tangible Net Worth (as
defined in SECTION 10.A. hereof) not to exceed 1.50:1.00;
C. At all times maintain a Minimum Quick Ratio (meaning all cash
plus Accounts divided by current liabilities) of not less than 1.00:1.00;
D. As soon as it is available, but not later than twenty-five (25)
days after and as of the end of each month, deliver to Bank an internally-
prepared financial statement consisting of a balance sheet and profit and loss
statement, in form satisfactory to Bank, and a Compliance Certificate in the
form of EXHIBIT D attached hereto and incorporated herein by this reference,
certified by an officer of Borrower;
-5-
<PAGE>
E. As soon as it is available, but not later than one hundred twenty
(120) days after the end of Borrower's fiscal year, deliver to Bank unqualified
copies of Borrower's consolidated financial statements together with changes in
financial position audited by an independent certified public accountant
selected by Borrower but acceptable to Bank;
F. So long as the Facility-A Commitment shall be outstanding or any
amounts remain outstanding and unpaid under the Facility-A Loan Account, as soon
as it is available, but not later than twenty-five (25) days after and as of the
end of each month, deliver to Bank, in such form and detail as Bank may require,
statements showing aging of the Accounts and Borrower's accounts payable,
together with a Borrowing Base Certificate in the form of EXHIBIT E attached
hereto and incorporated herein by this reference, certified by an officer of
Borrower. Notwithstanding the foregoing, as a condition to any request for a
FacilityA Loan, Borrower shall have delivered to Bank said aging statements as
well as a Borrowing Base Certificate covering the most recent month then ended
prior to the date of Borrower's request for an advance for a FacilityA Loan;
G. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
H. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$150,000.00.
11. LOAN FEE. Borrower has paid, and Bank hereby acknowledges receipt of
a loan fee in the amount of Twenty-five Thousand Dollars ($25,000.00).
12. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document; (b) Except for
any failure to pay as described in clause (a) above, material breach be made in
any warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof,
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under SECTION 8,
SUBSECTIONS 9.A., 9.B., 9.C., 9.F., 9.G. and 9.H., SUBSECTIONS 10.A., 10.B. and
10.C. of this Loan Agreement, and SECTIONS 1 and 2 of the General Security
Agreement and a cure period of five (5) days shall exist for SUBSECTIONS 9.I.,
10.D., 10.E. and 10.F.); (c) Any statement, warranty or representation made by
Borrower at any time proves materially false; (d) Borrower defaults in the
repayment of any principal of or the payment of any interest on any indebtedness
exceeding in the aggregate principal amount $100K or breaches or violates any
term or provision of any promissory note, loan agreement, mortgage, indenture or
other evidence of such indebtedness pursuant to which amounts outstanding in the
aggregate exceed $2.0M if the effect of such breach is to permit the
acceleration of such indebtedness, whether or not waived by the note holder or
obligee, and such failure shall not have been cured to Bank's satisfaction
within fifteen (15) calendar days after Borrower shall become aware thereof,
whether by written notice from Bank or otherwise, or there has in fact been an
acceleration of such indebtedness; (e) Borrower becomes insolvent or makes an
assignment for the benefit of creditors; (f) Any proceeding be commenced by
Borrower under any bankruptcy, reorganization, arrangement, readjustment of debt
or moratorium law or statute or, any such a proceeding is commenced against
Borrower and is not dismissed or stayed within ten (10) days (provided that no
Loans will be made prior to the dismissal of such proceeding); (g) Any money
judgment, writ of attachment, garnishment, execution or other legal process be
entered against Borrower or issued against any material property of Borrower
which is not fully covered by insurance (subject to reasonable deductibles) and
remains unvacated, unbonded, unstayed or unpaid or undischarged for more than
fifteen (15) days (whether or not consecutive) or in any event later than five
(5) days prior to the date of any proposed sale thereunder, or if any assessment
for taxes against Borrower other than against any of its real property, is made
by the Federal or State government or any department thereof; or (h) Any change
in Borrower's financial condition, prospects or operations which has a Material
Adverse Effect. Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its option and without demand first made and without
notice to Borrower, do any one or more of the following: (i) Terminate its
obligation to make loans to Borrower as provided in SECTION 1 hereof; (ii)
Declare all sums secured hereby immediately due and payable; (iii) Immediately
take possession of the Collateral wherever it may be found, using all legally
permissible means to do so, or require Borrower to assemble the Collateral and
make it available to Bank at a place designated by Bank which is reasonably
convenient to Borrower and
-6-
<PAGE>
Bank, and Borrower waives all claims for damages due to or arising from or
connected with any such taking; (iv) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by law, or
provided for herein; (v) Sell, lease or otherwise dispose of the Collateral at
public or private sale, with or without having the Collateral at the place of
sale, and upon terms and in such manner as Bank may determine, and Bank may
purchase same at any such sale; (vi) Retain the Collateral in full satisfaction
of the obligations secured thereby to the extent permitted under the Uniform
Commercial Code; (vii) Exercise any remedies of a secured party under the
Uniform Commercial Code; or (viii) Immediately record the IP Security Agreement
with the United States Patent and Trademark Office, the Register of Copyrights
and/or the UCC Division of the California Secretary of State, to perfect Bank's
security interests created and assignment granted in the Intellectual Property
thereunder. Prior to any such disposition, Bank may, at its option, cause any of
the Collateral to be repaired or reconditioned in such manner and to such extent
as Bank may deem advisable, and any sums expended therefor by Bank shall be
repaid by Borrower and secured hereby. Bank shall have the right to enforce one
or more remedies hereunder successively or concurrently, and any such action
shall not estop or prevent Bank from pursuing any further remedy which it may
have hereunder or by law. If a sufficient sum is not realized from any such
disposition of the Collateral to pay all obligations secured by this Loan
Agreement, Borrower hereby promises and agrees to pay Bank any deficiency.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
14. ATTORNEYS' FEES. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
15. GOVERNING LAW; JUDICIAL REFERENCE.
A. GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa Clara County, if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP (S) 170.6. The referee shall (x) be requested to set the matter
for hearing within sixty (60) days after the date of selection of the referee
and (y) try any and all issues of law or fact and report a statement of decision
upon them, if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and judgement
shall be entered pursuant to CCP (S) 644 in any court in the State of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery
-7-
<PAGE>
permitted by this Loan Agreement shall be completed no later than fifteen (15)
days before the first hearing date established by the referee. The referee may
extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, (S) 1280 through (S) 1294.2
of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
16. MISCELLANEOUS PROVISIONS.
A. Borrower agrees that it will review the products and services
offered by Bank and use its best efforts to establish its primary banking
accounts with Bank, provided, that the products and services offered by Bank are
satisfactory to Borrower.
B. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
C. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
D. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
E. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
F. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such
-8-
<PAGE>
agreement shall become effective upon the execution of a counterpart hereof or
thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
BANK: BORROWER:
IMPERIAL BANK METAWAVE COMMUNICATIONS CORPORATION,
A DELAWARE CORPORATION
By: /s/ James E. Ellison /s/ Vito Palermo
-------------------------------- -------------------------------------
Senior Vice President/Manager Chief Financial Officer and Secretary
LIST OF EXHIBITS AND SCHEDULES
- ------------------------------
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Form of Application and Letter of Credit Agreement
EXHIBIT C: Loan Request Form
EXHIBIT D: Compliance Certificate
EXHIBIT E: Borrowing Base Certificate
-9-
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the Intellectual Property Security Agreement (upon its recordation in
accordance with SECTION 12(VIII) hereof) or otherwise.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), comade or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the nondelivery or nonfurnishing thereof, in any
such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"ELIGIBLE ACCOUNTS" means such of Borrower's Accounts as Bank in its sole
reasonable discretion shall determine are eligible from time to time; provided,
however, that in no event shall Eligible Accounts include the following:
(1) all domestic and pre-approved international (foreign) Accounts
under which payment is not received within the earlier of (a) 90 days from
the applicable invoice date and (b) 60 days from the applicable payment due
date;
(2) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
-10-
<PAGE>
(5) Accounts due from an account debtor if more than twenty-five
percent (25%) of the aggregate amount of Accounts of such account debtor
have at that time remained unpaid for more than the earlier of (a) ninety
(90) days from the applicable invoice date and (b) sixty (60) days from the
applicable payment due date;
(6) Accounts with respect to international (foreign) transactions
unless (a) such Accounts are insured or covered by a letter of credit in a
manner and form acceptable to the Bank, (b) the account debtors of such
Accounts are foreign companies with sales greater than Five Hundred Million
Dollars ($500,000,000) per year, or (c) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds thirty-five percent (35%) of the total accounts receivable
balance;
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 12.
"FACILITY-A MATURITY DATE" has the meaning set forth in SECTION 1.A.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL SECURITY AGREEMENT" means that certain General Security Agreement
(Tangible and Intangible Personal Property) dated of even date herewith, made by
Borrower in favor of Bank.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person, whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien on assets of such Person and which is
nonrecourse to the credit of such Person, but only to the extent of the fair
market value of the assets so subject to the Lien, (g) obligations of such
Person arising under acceptance facilities or under facilities for the discount
of accounts receivable of such Person, (h) any obligation of such Person to
reimburse the issuer of any letter of credit issued for the account of such
Person upon which a draw has been made, and (i) any lease having the effect of
indebtedness, whether or not the same shall be treated as such on the balance
sheet of Borrower under GAAP.
"IP SECURITY AGREEMENT" means that certain Collateral Assignment, Patent
Mortgage and Security Agreement executed in blank by Borrower in favor of Bank
to be filed by Bank in accordance with SECTION 12(VIII) hereof.
"INTELLECTUAL PROPERTY" means collectively, all of Borrower's intellectual
property, including, without limitation, the following:
(1) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret (collectively, the "Copyrights");
11
<PAGE>
(2) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products;
(3) Any and all design rights which may be available to Borrower;
(4) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same (collectively, the "Patents");
(5) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
such trademarks (collectively, the "Trademarks");
(6) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(7) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(8) All amendments, renewals and extensions of any of the Copyrights,
Patents or Trademarks; and
(9) All proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"LIEN" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"LOAN DOCUMENTS" means this Loan Agreement, the General Security Agreement
and that certain Agreement to Provide Insurance (Real or Personal Property)
dated of even date herewith, each as executed by Borrower in favor of Bank,
together with all other documents entered into or delivered pursuant to any of
the foregoing (including, without limitation, the IP Security Agreement upon its
recordation in accordance with SECTION 12(VIII) hereof), in each case as
originally executed or as the same may from time to time be modified, amended,
supplemented or restated.
"LOANS" means the Facility-A Loans advanced pursuant to SECTION 1.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Documents.
"PERMITTED INDEBTEDNESS" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed on
SCHEDULE 1 attached hereto and incorporated herein by this reference;
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Loan Agreement, other than clause (3) immediately above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
12
<PAGE>
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"PERMITTED LIENS" means the following:
(1) liens and security interests existing as of this date and
disclosed in SCHEDULE 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment and in an amount not greater than the purchase price thereof or
(b) existing on such equipment at the time of its acquisition, provided that the
lien and security interest is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business not
interfering in any material respect with the business of Borrower and any
interest or title of a lessor or licensor under any lease or license, as
applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities imposed
without action of such parties;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not interfering in any material respect with the
ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Loans, and has been approved in Bank's sole and absolute discretion and in
writing.
13
<PAGE>
SCHEDULE 1 TO EXHIBIT A
SPECIFIC PERMITTED INDEBTEDNESS
14
<PAGE>
SCHEDULE 2 TO EXHIBIT A
SPECIFIC PERMITTED LIENS
15
<PAGE>
EXHIBIT B
FORM OF APPLICATION AND LETTER OF CREDIT AGREEMENT
[TO BE PROVIDED AND ATTACHED BY BANK]
16
<PAGE>
EXHIBIT C
LOAN REQUEST FORM
[TO BE PROVIDED AND ATTACHED BY BANK]
17
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of __________________________ of
METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation ("Borrower")
attached hereto and submitted to IMPERIAL BANK ("Bank") pursuant to that certain
Loan Agreement dated as of October __, 1997, entered into between Borrower and
Bank (the "Loan Agreement"), are in compliance with all financial covenants
(unless otherwise noted below) as specified in SECTION 10 therein, as follows:
COVENANT: ACTUAL:
A. Minimum Tangible Net Worth of:
-----------------------------
$6,000,000.00
B. Maximum Liabilities to Tangible Net Worth Ratio:
-----------------------------------
1.50 : 1.00 ___________________
C. Minimum Quick Ratio:
-------------------
1.00 : 1.00 ___________________
Exceptions: (if none, so state):
The undersigned authorized officer of Borrower hereby certifies that Borrower is
in complete compliance with the terms and conditions of the Loan Agreement for
the period ending _____________________, ____, and as of the date of this
Compliance Certificate the representations and warranties stated therein are
true, accurate and complete as of the date hereof (except as to those
representations and warranties which specifically reference a particular date
and except as noted above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Loan Agreement) to exist in the
next thirty (30) days. The required support documents for this certification
are attached and prepared in accordance with GAAP consistently applied.
Date:____________________ METAWAVE COMMUNICATIONS CORPORATION,
a Delaware corporation
18
<PAGE>
EXHIBIT E
BORROWING BASE CERTIFICATE
(To be provided and attached by Bank)
19
<PAGE>
EXHIBIT 10.14
AMENDMENT
TO
LOAN AGREEMENT
This Amendment to Loan Agreement (the "Amendment") is entered into as of
May 6, 1998, by and between Imperial Bank ("Bank") and Metawave Communications
Corporation ("Borrower").
RECITALS
Borrower and Bank are parties to that certain Loan Agreement dated as of
October 14, 1997, as amended from time to time (the "Agreement"). The parties
desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. The reference in Section 1.A of the Agreement to "$5,000,000" is
amended to read "$7,500,000". The reference in Section 1.A(3) of the Agreement
to "April 30, 1998" is amended to read "June 30, 1998".
2. The reference in Section 10.C of the Agreement to "1.00:1.00" is
amended to read "1.50 to 1.00", and Section 10.I is added to the Agreement, as
follows: Upon the date (the "Step-Up Date") that is the earlier to occur of
December 31, 1998 or the date that Borrower receives not less than $40,000,000
from the sale of its equity securities pursuant to an offering made under a
registration statement filed in accordance with the Securities Act of 1933, as
amended, Borrower shall maintain, at all times, (i) a Minimum Tangible Net Worth
of at least $25,000,000 and (ii) a Minimum Quick Ratio of not less than 1.00 to
1.00. Bank waives Borrower's obligation to comply with Section 10.A and Section
10.B until the Step-Up-Date. The definition of Minimum Quick Ratio in Section
10.C is amended to exclude from current liabilities the obligations under the
Notes issued pursuant to the Note Agreement dated as of April 29, 1998 (the
"Note Agreement"). The reference in Sections 10(F) and 10(F) to "twenty five
(25) days" are amended to read "thirty (30) days".
3. Notwithstanding the provisions of Clause (8) of the defined term
"Eligible Accounts", the concentration limit for Accounts owing to Borrower by
Alltel, 360 Communications, Millicom, GTE and Airtouch shall be fifty percent
(50%). Bank acknowledges that the terms "Permitted Indebtedness" and "Permitted
Liens" include the indebtedness incurred under, and the security interests
granted in connection with, the Note Agreement and the equipment lease between
Borrower and Insight Investment Corp. The priority of Bank's security interest
in the Collateral is subject to that certain Intercreditor Agreement (the
"Intercreditor Agreement") dated as of April 28, 1998 among Bank and the
Creditors named therein. The IP Security Agreement shall terminate, all
references in the Agreement to the IP Security Agreement shall be deleted, and
Bank shall return the original of the IP Security Agreement to Borrower;
provided that Bank retains a second priority security interest in the Creditor
Collateral, as defined in the Intercreditor Agreement. Borrower and Bank shall
execute an Amendment to Financing Statement in a mutually acceptable form to
clarify that Bank has a first priority security interest in the Imperial
Collateral and a second priority security interest in the Creditor Collateral.
"Collateral" under the General Security Agreement dated as of October 14, 1997
between Borrower and Bank, shall include all of such Imperial Collateral and
Creditor Collateral, subject to the priorities specified in the Intercreditor
Agreement.
4. Unless otherwise defined, all capitalized terms in this Amendment
shall be defined in the Agreement. Except as amended, the Agreement remains in
full force and effect.
5. Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment (except that the financial statements to which such
Representations and Warranties relate shall be those dated as of March 31, 1998,
not September 30, 1997, and except such representations and warranties to be
expressly true as of a specific date), and that no unwaived or uncured Event of
Default has occurred and is continuing.
<PAGE>
6. As a condition to the effectiveness of this Amendment, Borrower shall
pay Bank a fee equal to $9,375, plus the expenses incurred by Bank in preparing
this Amendment. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
METAWAVE COMMUNICATIONS CORPORATION
By: /s/ Vito E. Palermo
---------------------------------------
Chief Financial Officer
IMPERIAL BANK
By: /s/ James E. Ellison
---------------------------------------
Senior Vice President
-2-
<PAGE>
CORPORATE RESOLUTIONS TO BORROW
- --------------------------------------------------------------------------------
BORROWER: Metawave Communications Corporation.
- --------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of Metawave
Communications Corporation (the "Corporation"), HEREBY CERTIFY that the
Corporation is organized and existing under and by virtue of the laws of the
state of its incorporation.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or
by other duly authorized corporate action in lieu of a meeting), duly called and
held, at which a quorum was present and voting, the following resolutions were
adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
- --------------------------------------------------------------------------------
- ----------------------- ------------------- ----------------------------
- ----------------------- ------------------- ----------------------------
- ----------------------- ------------------- ----------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Imperial Bank ("Bank"), on
such terms as may be agreed upon between the officers, employees, or agents and
Bank, such sum or sums of money as in their judgment should be borrowed, without
limitation, including such sums as are specified in the Amendment to Loan
Agreement dated as of May 6, 1998, as amended from time to time by Bank and
Corporation (the "Loan Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Bank's forms, at such rates of interest and on such terms
as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to Bank
one or more renewals, extensions, modifications, refinancing, consolidations, or
substitutions for one or more of the notes, or any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
-3-
<PAGE>
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT. To execute letters of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
FOREIGN EXCHANGE CONTRACTS. To request Bank to enter into foreign exchange
contracts on its behalf.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
I FURTHER CERTIFY that attached hereto are true and correct copies of the
Certificate of Incorporation and Bylaws of the Corporation.
IN WITNESS WHEREOF, I have here unto set my hand as of May ___, 1998, and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X __________________________________________
-4-
<PAGE>
EXHIBIT 10.15
METAWAVE COMMUNICATIONS CORPORATION
NOTE AGREEMENT
Dated as of April 27, 1998
Re:
$29,000,000 13.75% Senior Secured Bridge Notes
due April 28, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. DESCRIPTION OF NOTES; COMMITMENT; WARRANTS 1
Section 1.1. Description of Notes 1
Section 1.2. Commitment, Closing Date 2
Section 1.3. Additional Warrants 2
Section 1.4. Limits on Rate of Return 3
SECTION 2. REDEMPTION OF NOTES 4
Section 2.1. Optional Redemption 4
Section 2.2. Notice of Redemption 4
Section 2.3. Mandatory Redemption 4
Section 2.4. Change of Control 4
SECTION 3. REPRESENTATIONS 5
Section 3.1. Representations of the Company 5
Section 3.2. Representations of the Purchasers 5
SECTION 4. CLOSING CONDITIONS 6
Section 4.1. Closing Certificate 6
Section 4.2. Company's Existence and Authority 6
Section 4.3. Consents 7
Section 4.4. Opinion 7
Section 4.5. Security Interest 7
Section 4.6. No Default; Representations and Warranties 7
Section 4.7. Compliance with this Agreement 7
Section 4.8. No Material Adverse Change 7
Section 4.9. Consents, Permits, Etc. 7
Section 4.10. Purchase Permitted by Applicable Laws 8
Section 4.11. Due Diligence 8
Section 4.12. Financial Statements 8
Section 4.13. Legal Fees 8
Section 4.14. Subsidiary. 8
SECTION 5. COMPANY COVENANTS 8
Section 5.1. Corporate Existence, Etc. 8
Section 5.2. Insurance 9
Section 5.3. Taxes 9
Section 5.4. Maintenance, Etc. 9
Section 5.5. Limitations on Indebtedness 9
Section 5.6. Limitation on Liens 10
Section 5.7. Restricted Payments 10
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.8. Mergers, Consolidations and Sales of Assets 10
Section 5.9. Transactions with Affiliates 11
Section 5.10. Financial Statements, etc. 12
Section 5.11. Board Representation 12
Section 5.12. Indemnification 12
Section 5.13. Subsidiary 12
Section 5.14. Covenants. 13
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR 13
Section 6.1. Events of Default 13
Section 6.2. Notice to Holders 14
Section 6.3. Acceleration of Maturities 15
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS 15
Section 7.1. Consent Required 15
Section 7.2. Solicitation of Noteholders 15
Section 7.3. Effect of Amendment or Waiver 15
SECTION 8. INTERPRETATION OF AGREEMENT, DEFINITIONS 16
Section 8.1. Definitions 16
SECTION 9. MISCELLANEOUS 19
Section 9.1. Note Register 19
Section 9.2. Exchange of Notes 20
Section 9.3. Loss, Theft, Etc. of Notes 20
Section 9.4. Powers and Rights Not Waived; Remedies Cumulative 20
Section 9.5. Notices 20
Section 9.6. Successors and Assigns 21
Section 9.7. Integration and Severability 21
Section 9.8. Like Treatment of Holders 21
Section 9.9. Governing Law 21
Section 9.10. Captions 22
Section 9.11. Brokerage Fees 22
Section 9.12. Intentionally Left Blank 22
Section 9.13. Possible Future Notes 22
</TABLE>
ATTACHMENTS TO NOTE AGREEMENT:
Schedule I Name and Address of Purchasers
Schedule 5.5 Indebtedness of the Company
Schedule 8.1 Stockholders of the Company
<PAGE>
Exhibit A Form of 13.75% Senior Secured Bridge Note Due April [ ], 2000
Exhibit B Form of Warrant
Exhibit C Closing Certificate of the Company
Exhibit D Form of Company Legal Opinion
Exhibit E Form of Security Agreement
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTE AGREEMENT
RE: $29,000,000 13.75% SENIOR SECURED BRIDGE NOTES
DUE APRIL 28, 2000
Dated as of April 27, 1998
To the Purchasers named in Schedule I attached hereto that are signatories to
this Agreement
Ladies and Gentlemen:
The undersigned, Metawave Communications Corporation, a Delaware
corporation (the "Company") agrees with each Purchaser as follows:
SECTION 1. DESCRIPTION OF NOTES; COMMITMENT; WARRANTS.
Section 1.1. Description of Notes. The Company will authorize the issue
and sale of $29,000,000 aggregate original principal amount of its 13.75% Senior
Secured Bridge Notes due April 28, 2000 (the "Notes") to be dated the date of
issue. Interest on the Notes will accrue at the lower of (i) 13.75% per annum
(as adjusted pursuant to the next succeeding sentence, the "Base Interest Rate")
and (ii) the highest rate permitted by law (such lower amount being referred to
as the "Interest Rate"), and will be payable semi-annually on April 28th and
October 28th of each year, commencing on October 28, 1998, and at maturity. On
the twelve-month anniversary of the Closing Date, and at the end of each
subsequent one hundred eighty (180) day period, the Base Interest Rate will
increase by 200 basis points, up to a maximum Base Interest Rate of 18.0%. The
interest shall be payable at the option of the Company (x) in kind by the
issuance to the holders thereof of separate promissory notes (each an "Interest
Note," and, collectively, the "Interest Notes"), in each case having a principal
amount equal to the amount of interest due and payable on such holder's
outstanding Notes on such interest payment date, or (y) in cash; provided that
--------
the Company will only be entitled to pay such interest in cash if it has
irrevocably notified in writing the holders of the Notes of its intention to
make a cash interest payment at least ten (10) Business Days before the relevant
interest payment date, it being agreed that payment in kind via Interest Notes
is the default interest payment method in the absence of such notice. Interest
on Interest Notes shall accrue at the same Interest Rate per annum and shall be
payable in kind by the issuance of additional Interest Notes or in cash as
provided above on the same date as interest is payable in kind or in cash as
provided above on the Notes. The unpaid principal balance of all Notes
(including Interest Notes), together with accrued but unpaid interest thereon,
shall be due and payable in cash on the stated date of maturity of the Notes.
<PAGE>
Notwithstanding different issue dates, unless the context clearly requires
otherwise, all Interest Notes shall be Notes for all purposes of this Agreement.
The Notes will bear interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at the
Interest Rate from the date such payment is due, whether by acceleration or
otherwise, until paid. The Notes (including the Interest Notes) will mature on
April 28, 2000, and will be substantially in the form attached hereto as Exhibit
A. Interest on the Notes shall accrue and be computed semi-annually on the
basis of a 360-day year of twelve 30-day months. The term "Notes" as used
herein shall include each Note (including each Interest Note) delivered at any
time pursuant to this Agreement. The terms that are capitalized herein shall
have the meanings set forth in Section 8.1 hereof unless the context shall
otherwise require or unless they are defined elsewhere herein. The Notes
(including Interest Notes) will be senior secured obligations of the Company,
ranking pari passu in right of payment with all permitted existing and permitted
---- -----
future senior secured Indebtedness of the Company and senior to all unsecured or
subordinated Indebtedness of the Company, all non-permitted senior secured
indebtedness of the Company and all other senior indebtedness of the Company.
Section 1.2. Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth in this Agreement and in Exhibit C hereto, the Company
agrees to issue and sell to each Purchaser, and each Purchaser agrees to
purchase from the Company, the aggregate principal amount of Notes set forth
opposite such Purchaser's name on Schedule I attached hereto by delivery of the
Purchase Price for such Notes as set forth on Schedule I. On the Closing Date
(as defined below), the Company also shall deliver to the Purchasers, pro rata
--- ----
in proportion to the number of Notes they purchase on the Closing Date, Warrants
to purchase an aggregate of 537,500 shares of the Company's Series D Preferred
Stock, par value $.0001 per share (the "Preferred Stock") substantially in the
form of Exhibit B hereto (the "Warrants") and registered in the name of each
Purchaser or its nominee and in such denominations as reasonably requested by
such Purchaser. Delivery of the Notes and Warrants will be made at the offices
of Kleinberg, Kaplan, Wolff & Cohen, P.C. against payment therefor, pursuant to
the wiring instructions set forth on the Company's signature page S-1 to this
Agreement, in immediately available funds in an amount equal to the Purchase
Price at 3 P.M., Eastern time on April 28, 1998 (the "Closing Date"). The Notes
delivered to each Purchaser on the Closing Date will be registered in the name
of such Purchaser or in the name of such nominees and in such denominations as
such Purchaser may specify no later than two Business Days prior to the Closing
Date and in substantially the form attached hereto as Exhibit A.
Section 1.3. Additional Warrants.
(a) In the event that the Company offers or sells certain Stock,
or certain securities convertible into or exchangeable or exercisable for Stock,
whether in a public or private offering, while any Notes or Warrants are
outstanding and such Stock is valued (based on the consideration directly
received by the Company upon such sale, conversion or exchange) at less than
$9.25 per share (as presently constituted), then the Company shall issue
additional Warrants to then holders of the Warrants and adjust the Warrant
exercise price, all as set forth in the Warrants.
<PAGE>
(b) On the twelve month anniversary of the Closing Date, and at
the end of each subsequent ninety (90) day period, until the Company has
completed an Initial Public Offering and redeemed at least one-half of all
issued and outstanding Notes (including Interest Notes, if any), the Company
will issue to then holders of Notes additional Warrants to purchase two hundred
thousand (200,000) shares of Preferred Stock (pro rata in proportion to the
principal amount of the Notes then held by the Note holders).
Section 1.4. Limits on Rate of Return. The Company may redeem and
repurchase from the Purchasers and all subsequent holders of the Notes, the
Warrants and any shares of Preferred Stock issued upon exercise of the Warrants
(the "Preferred Shares") all such Notes, Warrants and Preferred Shares if and
only if, on or before the earlier of (a) the closing of the Company's first
Initial Public Offering, or (b) April 28, 1999, time being of the essence, the
Company shall have completed in all respects the redemption and repurchase of
and payment in full for any and all Notes, Warrants and Preferred Shares for an
aggregate redemption and repurchase price of $40,600,000 in cash (subject to
equitable increase upon the occurrence of any of the adjustment events specified
in Section 5 of the Warrants), such redemption price to be allocated first to
the redemption of the Notes at their face value, then to the redemption of the
Preferred Shares at their liquidation value, and any excess to the redemption of
the Warrants. This right is (a) subject to the Company's obligation to give all
record holders of the Notes, Warrants and Preferred Shares as much notice as is
reasonably possible (but in no event less than 15 Business Days' notice) of its
intention to so redeem and repurchase on or before April 28, 1999; (b) further
subject, if the Company is to use all or part of the proceeds from an Initial
Public Offering for such redemption, to the Company's affirmative obligation to
so inform all such record holders on the first day following the day a
registration statement relating to the Initial Public Offering is first filed
(in preliminary, final, confidential or other form) with the Securities and
Exchange Commission; and (c) further subject to the receipt by the holders of
the Notes, the Warrants and the Preferred Shares of an opinion of outside
counsel to the Company, in form and content satisfactory to such holders, that
such redemption and payment (i) does not violate the charter, by-laws or any
agreement to which the Company is a party or by which its property is bound,
(ii) is not in violation of any law, rule, regulation or statute, and (iii) is
not a void or voidable (or similar) transfer under applicable federal or state
law (and a representation of the Company to that effect is also given to such
holders). To the extent the Company is obligated to give notice under (a) above
after its Initial Public Offering, it may also give notice to the public via a
press release. With respect to any Warrants, Warrant Shares or Common Shares
which have been sold by a Purchaser prior to the completion of the redemption
set forth in this Section 1.4, such Warrants, Warrant Shares and Common Shares
shall be subject to the Company's redemption rights in this Section 1.4.
SECTION 2. REDEMPTION OF NOTES.
Section 2.1. Optional Redemption. The Company may at any time and from
time to time and at its option redeem all or, on a pro-rata basis, less than all
(but not less than one-half of all) the then outstanding Notes (including
Interest Notes) by (a) payment in cash of the aggregate principal amount thereof
plus all accrued and unpaid interest thereon to the date of such
<PAGE>
redemption, plus (b) the issuance of all Warrants required to be issued
hereunder and under the Warrants on or before such redemption date. The Company
may also redeem all or part of the Notes as provided in Sections 5.9(viii) and
5.14.
Section 2.2. Notice of Redemption. The Company will give irrevocable
written notice of any redemption of the Notes pursuant to Section 2.1 to the
holders thereof not less than 30 days nor more than 60 days before the date
fixed for such redemption specifying (a) such date, (b) the aggregate principal
amount of the Notes to be redeemed, (c) accrued and unpaid interest, if any,
payable to the redemption date and (d) Warrants required to be issued pursuant
to Section 2.1(b). Notice of redemption having been so given, the aggregate
principal amount (or portion thereof) specified in such notice, together with
accrued and unpaid interest, if any, shall become due and payable, and such
Warrants shall become issuable, on the redemption date.
Section 2.3. Mandatory Redemption.
(a) Upon the completion of an Initial Public Offering, the
Company shall redeem one-half of the aggregate principal amount of the Notes
(including Interest Notes) outstanding, together with accrued but unpaid
interest thereon, pro rata among the holder of the Notes.
(b) As soon as reasonably practicable, but in no event later
than the date following the date on which the registration statement related to
the Initial Public Offering is first filed with the Securities and Exchange
Commission (in preliminary, final, confidential or other form), the Company
shall give the holders of Notes written notice (containing reasonable detail) of
the Company's intention (subject to the successful completion of the Initial
Public Offering) as to the use of the proceeds of such Initial Public Offering
with respect to the Notes, including as to the optional redemption of any Notes
in excess of the one-half to be mandatorily redeemed pursuant to paragraph
2.3(a).
Section 2.4. Change of Control. Upon the public announcement or other
notification pursuant to this Section 2.4 of a Change of Control transaction, a
holder of Notes will, at any time after such public announcement or
notification, have the right to cause the Company to redeem all or part of such
holder's outstanding Notes by payment by the Company in respect of such redeemed
Notes to such holder in immediately available funds by wire transfer equal to
101% of the principal amount plus accrued but unpaid interest on such Notes.
The Company, upon learning of the impending Change of Control transaction, will
promptly notify the holders of Notes in writing of any impending Change of
Control transaction, specifying in reasonable detail all material terms thereof.
If such notice is given after the Initial Public Offering, the Company may also
inform the public and the markets via a press release. Upon any such request
for redemption by a holder of the Notes under this Section 2.4, the Company
shall so redeem such holder's Notes within three Business Days of that request.
<PAGE>
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in the form of
certificate attached hereto as Exhibit C are true and correct as of the date
hereof, and shall be true and correct on the Closing Date, and agrees that all
such representations and warranties are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchasers. Each Purchaser severally
represents, warrants and agrees for itself only that:
(a) Such Purchaser is acquiring its Notes for the purpose of
investment for the Purchaser's own account and not with a view to the resale or
distribution thereof, and that such Purchaser has no present intention of
selling, negotiating or otherwise disposing of its Notes except in accordance
with applicable securities laws.
(b) No part of the funds to be used by such Purchaser to
purchase the Notes constitutes assets allocated to any "separate account"
maintained by it. As used in this Section 3.2(b), the term "separate account"
shall have the meaning assigned to it in ERISA.
(c) Such Purchaser is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
(d) No approval, consent or withholding of objection on the part
of any regulatory body, state, federal or local, or any other third party is
necessary in connection with the execution by such Purchaser of the Agreement or
its acceptance of its Notes or compliance by such Purchaser with any of the
provisions of the Agreement or the Notes, unless such consent or approval has
already been obtained.
(e) The execution, delivery and performance by such Purchaser of
this Agreement and all other instruments and documents to be executed and
delivered by such Purchaser in connection herewith are not (and will not be or
result) in material conflict with or in material contravention or material
violation of any law (including common law), rule or regulation by which such
Purchaser is bound or to which it is subject or any material agreement to which
it is a party.
(f) The Company has advised the Purchaser that the Notes have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Purchaser's representations as expressed herein, and the Notes
may not be sold, transferred or otherwise disposed of by such Purchaser without
such registration or an exemption therefrom. The Purchaser understands that the
Securities are "restricted securities" under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the
<PAGE>
Purchaser must hold the Securities indefinitely unless they are registered with
the Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
Such Purchaser is either an accredited investor within the meaning of Rule 501
of the Securities Act or a qualified institutional buyer within the meaning of
Rule 144A of the Securities Act.
(i) The Purchaser is aware of the Company's business
affairs and financial condition only to the extent disclosed in writing to the
Purchaser by the Company. Nothing in this Section 3.2(g) shall limit the rights
of any Purchaser or its assignees or successors in interest to rely on the
representations, warranties and covenants of the Company without investigation.
(ii) The Purchaser understands that no public market now
exists for any of the securities issued by the Company, and that the Company has
made no assurances that a public market will ever exist for the Notes.
(iii) The Purchaser understands that the Notes, Warrants and
Preferred Shares, and any securities issued in respect thereof or exchange
therefor, may bear the legends shown on the forms attached hereto as exhibits.
The parties agree that such legend(s) shall be removed at such time as, in the
reasonable judgment of counsel for the Company, or as in the reasonable opinion
delivered to the Company of counsel to such Purchaser or holder, they are no
longer required by law.
SECTION 4. CLOSING CONDITIONS.
Each Purchaser's obligation to purchase the Notes on the Closing Date shall
be subject to the performance by the Company of its agreements hereunder that
are to be performed at or prior to the time of delivery of the Notes, and to the
following further conditions precedent:
Section 4.1. Closing Certificate. Such Purchaser shall have received a
certificate dated such Closing Date, signed by an Officer of the Company
substantially in the form attached hereto as Exhibit C.
Section 4.2. Company's Existence and Authority. Such Purchaser shall
have received, in form and substance satisfactory to it, such documents and
evidence with respect to the Company as such Purchaser may reasonably request in
order to establish the existence and good standing of the Company and the
authorization of the transactions contemplated by this Agreement.
Section 4.3. Consents. Any consents or approvals required to be obtained
by the Company or any of its Subsidiaries that are necessary to permit the
consummation of the transactions contemplated hereby on such Closing Date shall
have been obtained.
Section 4.4. Opinion. Each Purchaser shall have received an opinion
dated the Closing Date from Venture Law Group, counsel for the Company,
substantially in the form of Exhibit D.
<PAGE>
Section 4.5. Security Interest. Each Purchaser shall have a valid and
perfected, first priority security interest in all of the Collateral (except (a)
for accounts receivable and inventory, in which each Purchaser shall have a
valid and perfected second priority security interest in favor of Imperial Bank
to the extent of Imperial Bank's first $7,500,000 in secured interest under the
Liquidity Facility, and the holders of the Notes shall have a first priority,
perfected secured interest in all other accounts receivable and inventory; (b)
for equipment subject to bona-fide purchase money security interests for fair
value, in which each Note holder shall have a valid and perfected second
priority security interest in favor of the seller or lessor of such equipment,
such seller's or lessor's first security interest and rights being limited to
the unpaid amount of such fair value) and shall have received a Security
Agreement and inter-creditor agreement with Imperial Bank in form and content
acceptable to each Purchaser.
Section 4.6. No Default; Representations and Warranties. There will not
exist on the Closing Date an Event of Default or Default. The representations
and warranties contained in paragraph 3.1 hereof shall be true and not false or
misleading on and as of the Closing Date.
Section 4.7. Compliance with this Agreement. The Company shall have
executed and delivered the Notes, the Warrants and the Security Agreement as
contemplated herein, in form and content acceptable to Purchaser; and the
Company shall have performed and complied with all agreements, covenants and
conditions contained herein which are required to be performed or complied with
by it on or before the Closing Date.
Section 4.8. No Material Adverse Change. Between December 31, 1997 and
the Closing Date (a) there shall have been no change constituting a Material
Adverse Effect, (b) the business and affairs of the Company shall have been and
will have been conducted and carried on only in the ordinary course of business
consistent with past practices and (c) the properties and facilities owned or
leased by the Company shall not have suffered in the aggregate any material
destruction or damage, regardless of whether or not any loss suffered was
insured.
Section 4.9. Consents, Permits, Etc. The Company shall have received all
material permits and other authorizations, and made all such material filings
and declarations, as may be required to be obtained or filed prior to the
Closing Date from any Person pursuant to any law, statute, regulation or rule
(federal, state, local and foreign), or pursuant to any agreement, order or
decree to which it is a party or to which it is subject, in connection with, or
in order to effectuate, the transactions related to this Agreement and the
issuance of the Notes and Warrants.
Section 4.10. Purchase Permitted by Applicable Laws. The purchase of and
payment for the Notes and the Warrants to be purchased by the Purchasers or
their designees hereunder on the terms and conditions provided herein shall not
be prohibited by any applicable law, court order or governmental regulation and
shall not subject any Purchaser to any tax (other than possible income and
capital gains tax upon the sale thereof or possible OID), penalty, assessment or
withholding liability under or pursuant to any applicable law or governmental
regulation, and the Purchasers shall have received such certificates or other
evidence as they may reasonably request to establish compliance with this
condition.
<PAGE>
Section 4.11. Due Diligence. The Purchasers, acting on their own or
through their advisers, agents, engineers, environmental consultants, personnel,
counsel, accountants or other representatives designated by them, shall have
been afforded full and complete opportunity to examine the books and records,
titles and leases to properties, and documents and information relating to
patents, loans and other agreements, any pending or threatened litigation, and
other matters pertaining to the legal structure, regulatory compliance
(including, without limitation, environmental (including Phase I and Phase II
reports, if any), health and safety and employee benefit regulatory compliance),
assets, capital and obligations of the Company. A satisfactory conclusion, in
the opinion of the Purchasers and their counsel, of such examination is a
condition precedent to the obligations of the Purchasers under this Agreement.
Section 4.12. Financial Statements. The Purchasers shall have received
copies of the audited financial statements of the Company for the fiscal year
ended December 31, 1997 and the report thereon of Ernst & Young, LLP, in form
and content satisfactory to the Purchasers.
Section 4.13. Legal Fees. The Company shall have paid, by wire transfer
of immediately available funds, the reasonable legal fees and disbursements of
counsel to the Purchasers incurred in connection with the negotiation and
preparation of this Agreement, the Notes, the Warrants, the Security Agreement
and related documentation and services rendered in connection therewith.
Section 4.14. Subsidiary. The Company represents that it has no
Subsidiaries, and covenants that at Closing it shall have no Subsidiaries.
SECTION 5. COMPANY COVENANTS.
From and after the date of this Agreement and continuing so long as any
amount remains unpaid on any Note or any Warrant remains outstanding:
Section 5.1. Corporate Existence, Etc. The Company will preserve and
keep in force and effect its corporate existence, and will cause each
Subsidiary, if any, to preserve and keep in force and effect its corporate,
partnership or other existence in accordance with the respective organizational
documents of each such Subsidiary, and the rights and franchises of the Company
and its Subsidiaries, provided that (a) the Company shall not be required to
preserve any such right or franchise, or the existence, right or franchise of
any of its Subsidiaries, if (i) the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the businesses of the Company and its Subsidiaries and (ii) such lack of
preservation shall not prejudice the rights of any holder of the Notes, the
Warrants or the Preferred Shares and (b) the provisions of this Section 5.1
shall not limit the ability of the Company or any Subsidiary of the Company to
engage in any transaction permitted by Section 5.8 hereof.
Section 5.2. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers in such forms and
<PAGE>
amounts and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties.
Section 5.3. Taxes. The Company will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries or upon the income, profits or property of the Company or of
any such Subsidiary; provided, however, that the Company shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment
or charge whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which adequate provision has been made
in the Company's financial statements.
Section 5.4. Maintenance, Etc. The Company will cause all material
properties owned by or leased to it or any of its Subsidiaries and material to
the business of the Company and its Subsidiaries to be maintained and kept in
normal condition and working order (ordinary wear and tear excepted) and will
from time to time cause to be made all necessary repairs, renewals, and
replacements thereof, all as in the reasonable judgment of the Company may be
necessary, so that the business carried on in connection therewith may be
properly conducted; provided, however, that (a) nothing in this Section 5.4
shall prevent the Company from discontinuing the use, operation or maintenance
of any of such properties, or disposing of any of them, if such discontinuance
or disposal is, in the judgment of its Board of Directors or of the Board of
Directors, board of trustees or managing partners of the Subsidiary concerned,
in the best interests of the Company or any such Subsidiary (provided that any
such disposal is in an arms-length transaction for a fair value after taking
into account all circumstances involved in the decision to dispose of such
property); and (b) the provisions of this Section 5.4 shall not limit the
ability of the Company or any Subsidiary to engage in any transaction permitted
by Section 5.8 hereof.
Section 5.5. Limitations on Indebtedness. Except as approved in writing
by the holders of a majority in principal amount of the Notes outstanding, the
Company will not, and will not permit any Subsidiary to, create, assume or incur
any Indebtedness except:
(a) Indebtedness evidenced by the Notes;
(b) Indebtedness not to exceed $7,500,000 under the Liquidity
Facility;
(c) Indebtedness of the Company outstanding as of the date of this
Agreement and listed on Schedule 5.5 hereto;
(d) Indebtedness relating to insurance premium financing or in
respect of workers' compensation claims, in each case incurred in the ordinary
course of business;
(e) Future Indebtedness between a Subsidiary, if any, and the
Company or between Subsidiaries in amounts not to exceed $100,000 in the
aggregate; and
<PAGE>
(f) Indebtedness up to $2,500,000 (exclusive of equipment leases
disclosed in the Schedules to this Agreement) under equipment leases.
In no event will the Company or any Subsidiary incur or allow to exist
Indebtedness that is in any respect senior to or pari passu with the Notes,
except as expressly and explicitly provided in Section 4.5 of this Agreement.
Section 5.6. Limitation on Liens. Except as otherwise expressly and
explicitly provided in Section 4.5 of this Agreement, the Company will not, and
will not permit any Subsidiary to, create, incur, assume or suffer to exist any
Liens on its Stock or the Collateral. Notwithstanding this provision, the
Company shall be permitted to contest in good faith bona fide disputed tax
amounts (not to exceed $50,000 in the aggregate) with taxing authorities upon
advance written notice to the holders of the Notes, provided that the Company
also so delivers to the holders of the Notes a Certificate, signed by the Chief
Financial Officer of the Company, confirming that such contest is in good faith
and is a bona fide dispute.
---- ----
Section 5.7. Restricted Payments. The Company will not, and will not
permit any Subsidiary, to make any distribution or declare or pay any dividends
(in cash or other property, other than capital Stock) on, or purchase, redeem or
otherwise retire any of the Company's or any of its Subsidiaries' capital Stock,
whether now or hereafter outstanding, except any Subsidiary may declare and pay
dividends or other distributions to, or purchase, redeem or otherwise retire any
capital Stock from, the Company or any Subsidiary; provided, however, that this
-------- -------
restriction shall not apply to the repurchase of shares of Common Stock (in an
aggregate amount not to exceed $500,000 plus the aggregate exercise price
hereafter received by the Company for all options granted under the plans
referred to in (i) and (ii) below which are exercised after the date hereof)
from current or former employees, officers, directors, consultants or other
persons performing services for the Company pursuant to either (i) the Company's
Stock Option Plans or (ii) the 1995 Stock Repurchase Agreements between the
Company and, respectively, Douglas Reudink and Tom Huseby; provided that no such
repurchases may be made while any Event of Default or Default exists under this
Agreement, the Notes or the Security Agreement.
Section 5.8. Mergers, Consolidations and Sales of Assets. Other than in
accordance with Section 2.4, the Company will not, and will not permit any
Subsidiary to (1) consolidate with or be a party to a merger with any other
corporation (except that if no Default or Event of Default exists hereunder,
under the Notes or under the Security Agreement, the Company, subject to the
other provisions of this Agreement, may make acquisitions of businesses for fair
value as determined in good faith by its Board of Directors), (2) sell, lease or
otherwise dispose of all or a material part of the assets of the Company or any
of its Subsidiaries, or (3) issue any securities or any rights or options to
purchase securities for less than fair value as determined in good faith by the
Board of Directors; provided, however, that provided that the rights of the
holders of the Notes, the Warrants and the Preferred Shares are not prejudiced:
(a) any Subsidiary may merge or consolidate with or into the
Company or any other Subsidiary; and
<PAGE>
(b) any Subsidiary may sell, lease or otherwise dispose of its
assets, or issue securities, to the Company or any Subsidiary.
Section 5.9. Transactions with Affiliates. Without the written approval
of the holders of the majority in principal amount of the outstanding Notes, the
Company will not, and will not permit any Subsidiary to, enter into any
transaction (or series of related transactions) (a "Transaction") with any
holder (or any Affiliate of such holder) of 2% or more of any class of capital
Stock of the Company or with any Affiliate of the Company, involving payments by
the Company or any Subsidiary (including, without limitation, any sale,
purchase, lease or loan or any other direct or indirect payment, transfer or
other disposition) in excess of $1,000,000 in the aggregate, other than the
following Transactions:
(a) transactions between or among the Company and its Subsidiaries
or between or among such Subsidiaries;
(b) transactions the terms of which are at least as favorable as
the terms that could be obtained by the Company or such Subsidiary, as the case
may be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties (in each case as determined in good faith by a majority of
the directors of the Company unaffiliated with such holder or Affiliate);
(c) transactions in which the Company or any Subsidiary delivers
to the holders of the Notes a written opinion of an independent nationally
recognized investment banking firm stating that such Transaction is fair to the
Company or such Subsidiary from a financial point of view;
(d) the performance by the Company of its obligations hereunder
and under the Notes, the Warrants and the Security Agreement;
(e) the payment consistent with past practice of reasonable and
customary compensation or fees (including, without limitation, options or
related stock appreciation rights or similar securities issued pursuant to any
Stock Based Plan) to officers, directors, and employees of the Company or any of
its Subsidiaries, in each case as determined by the Company's Board of Directors
in good faith;
(f) purchases (for equal to or less than fair value) or sales (for
equal to or more than fair value) of goods and services made in the ordinary
course of business;
(g) transactions permitted by, and complying with, the provisions
of Section 5.7 hereof;
(i) the sale to stockholders of the Company existing as of
the date of this Agreement of Stock in no respect senior to or having rights
relatively greater or relatively more favorable than the Preferred Shares,
unless all of the proceeds thereof are promptly used to redeem outstanding
Notes.
<PAGE>
Section 5.10. Financial Statements, etc. The Company shall deliver to the
holders of the Notes as soon as available, but in any event within 30 days after
the end of each of the first three quarters during each of the Company's fiscal
years, a company prepared balance sheet, income statement, and statement of cash
flow covering the Company's operations during such period; and (b) as soon as
available, but in any event within 90 days after the end of each of the
Company's fiscal years, financial statements of the Company for each such fiscal
year, audited by independent certified public accountants. Such audited
financial statements shall include a balance sheet, profit and loss statement,
and statement of cash flow and, promptly after receipt and if prepared, such
accountants' letter to management. All such financial statements shall be
consolidated to the extent required by GAAP.
Section 5.11. Board Representation. If an Initial Public Offering shall
not have been completed by the fifteen (15) month anniversary of the Closing
Date, the Company shall cause all things necessary to occur in order to elect to
the Board of Directors of the Company one director nominated by the holders of a
majority of the outstanding Notes for a term to end upon the completion of an
Initial Public Offering.
Section 5.12. Indemnification. The Company shall indemnify the Purchasers
and all subsequent holders of Notes, Warrants or Preferred Shares (the
"Indemnified Parties") for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever, including without limitation reasonable legal
fees and disbursements (collectively, "Damages") which may be imposed on,
incurred by or asserted against the Indemnified Parties in any way relating to
or arising out of this Agreement, the Security Agreement, the Notes, the
Warrants, the Preferred Shares or any other documents contemplated by or
referred to herein or therein or the transactions contemplated hereby and
thereby (including, without limitation, the costs and expenses of counsel for
the Indemnified Parties), except for Damages to the extent solely resulting from
the Purchaser's bad faith or willful misconduct.
Section 5.13. Subsidiary. The Company agrees that its shall not directly
or indirectly create, or directly or indirectly own any interest in, any
Subsidiary unless the holders of the Notes shall have received from each
Subsidiary, at such time as such Subsidiary is created or is in any manner
directly or indirectly owned or controlled by the Company, a written,
irrevocable and unconditional guaranty (joint and several with the Company and
all other Subsidiaries) of all of the Company's obligations (payment and
performance) under the Notes, under the Security Agreement and under this
Agreement, in form and content satisfactory to a majority of the holders of the
Notes.
Section 5.14. Covenants. The Company covenants and represents that (i) no
Stock shall be issued by the Company which is, directly or indirectly, senior to
the Warrant Shares or has, directly or indirectly, any dividend, liquidation,
dilution protection, redemption, conversion or other rights or privileges (by
contract, charter, by-laws, or otherwise) which are relatively more favorable
than those presently existing with respect to the Warrant Shares, unless all of
the proceeds thereof are promptly used to redeem outstanding Notes and (ii) no
Preferred Stock will be issued by the Company unless the cash purchase price
therefor is equal to or greater than the
<PAGE>
liquidation and redemption right and preference of such Preferred Stock, unless
all of the proceeds thereof are promptly used to redeem outstanding Notes.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue for more
than 5 Business Days; or
(b) Default shall occur in the making of any payment of principal
of any Note at the maturity date or at any date fixed for redemption or
prepayment; or
(i) Default shall occur in the observance or performance of
any other provision of this Agreement, the Notes, the Warrants or the Security
Agreement which is not remedied within 30 days after the date on which written
notice thereof is given to the Company by the holders of a majority in aggregate
outstanding principal amount of the outstanding Notes, or
(ii) Any judgment or order for the payment of money shall be
rendered against the Company or a Material Subsidiary of the Company by a court
of competent jurisdiction and shall not be discharged or stayed within 60 days,
and the amount thereof that is not directly covered by letters of credit or a
bond shall be in excess of $100,000 and either (i) an enforcement proceeding
shall have been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 30 consecutive days, after written notice has been
given to the Company by the holders of at least 25% in aggregate outstanding
principal amount (together with accrued and unpaid interest thereon) of the
outstanding Notes, during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect, or
(iii) A default occurs which extends beyond any period of
grace applicable thereto under any mortgage, indenture or other instrument under
which there may be issued any Indebtedness of the Company or any Material
Subsidiary of the Company for borrowed money having, with respect to all such
Indebtedness, outstanding principal amounts of $500,000 or more in the
aggregate, whether such Indebtedness now exists or shall hereafter be created,
if either (i) such default results from the failure to pay principal upon the
final maturity of such Indebtedness or (ii) as result of such event of default
such Indebtedness has been declared to be due and payable prior to its stated
maturity; provided, however, that if such default shall be remedied or cured or
-------- -------
waived by the holders of such Indebtedness, then the Event of Default hereunder
by reason thereof shall be deemed to have been thereupon remedied, cured or
waived without further action on the part of the holders of the Notes, or
A. Any default or adverse event occurs with respect to
or affecting any of the Collateral (except as expressly provided in Section 5.6
of this Agreement and
<PAGE>
paragraphs 5, 6 and 13 of the Closing Certificate), and same is not cured or
discharged within 30 days thereof, or
B. Any event allowing or resulting in the redemption,
call, put or use of the liquidation preference of any series or class (now
existing or hereafter created) of the Company's or a Subsidiary's preferred
stock shall have occurred, or
C. Any event of default or default shall have occurred
under the Liquidity Facility or any other material agreement of the Company or
any Material Subsidiary, and same is not timely cured or results in a right of
acceleration thereunder which is not waived, or
(c) The Company or any Material Subsidiary becomes (I) insolvent
or is generally not paying its debts as they become due and such situation is
not remedied within 45 days or (II) makes an assignment for the benefit of
creditors, or the Company or any Material Subsidiary applies for or consents to
the appointment of a custodian, trustee, liquidator, or receiver for the Company
or such Subsidiary or for the major part of the property of either, or
(d) A custodian, trustee, liquidator, or receiver is appointed for
the Company or any Material Subsidiary or for the major part of the property of
either and is not discharged within 45 days after such appointment, or
(e) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against the Company or
any Material Subsidiary and, if instituted against the Company or any Material
Subsidiary, are consented to or are not dismissed within 45 days after such
institution.
Section 6.2. Notice to Holders. When the Company has knowledge that any
Default or Event of Default described in the foregoing Section 6.1 has occurred,
the Company agrees to give notice to the holders of the outstanding Notes within
one Business Day of the date on which the Company becomes aware of such Event of
Default.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraphs (a) through (h), inclusive, of Section 6.1 has happened
and is continuing, the holder or holders of 25% or more of the principal amount
of outstanding Notes may, by notice to the Company, declare the entire principal
and all interest accrued and unpaid, if any, on all Notes to be, and all Notes
shall thereupon become, forthwith due and payable, without any presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived. When any Event of Default described in paragraphs (i) through (k) of
Section 6.1 has occurred, then the principal amount of all outstanding Notes
(together with accrued and unpaid interest, if any) shall immediately become due
and payable without presentment, demand or notice of any kind. Upon the Notes
becoming due and payable as a result of any Event of Default as aforesaid, the
Company will forthwith pay in cash to the holders of the Notes the entire
principal amount and interest accrued and unpaid, if any, on the Notes. No
course of dealing on the part of any Noteholder nor any delay or failure on the
part of any Noteholder to exercise any right shall
<PAGE>
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement relating to the Notes (and not affecting the
Warrants or the Preferred Shares) may, with the consent of the Company, be
amended or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the Company
shall have obtained the consent in writing of the holders of at least a majority
in aggregate principal amount of outstanding Notes; provided that without the
written consent of the holders of all of the Notes then outstanding, no such
waiver, modification, alteration or amendment shall be effective (a) that will
change the time of payment of the principal of or the interest on any Note or
reduce the principal amount thereof of change the rate or interest thereon or
(b) that will change the percentage of holders of the Notes required to consent
to any such amendment, modification or waiver of any of the provisions of this
Agreement.
Section 7.2. Solicitation of Noteholders. Executed or true and correct
copies of any waiver effected pursuant to the provisions of Section 7.1 shall be
delivered by the Company to each holder of outstanding Notes forthwith following
the date on which the same shall have been executed and delivered by the holder
or holders of the requisite percentage of outstanding Notes,
Section 7.3. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Note and upon the Company, whether or not
such Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT, DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
(a) "Affiliate" shall mean any Person (a) that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, any other Person or (b) is an officer, director or
employee of any such Affiliate or (c) is a member of the immediate family of any
of the foregoing. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock, by contract
or otherwise.
(b) "Board of Directors " shall mean, with respect to any Person,
the Board of Directors of such Person or any committee of the Board of Directors
authorized to act for it hereunder.
<PAGE>
(c) "Business Day" shall mean any day other than a Saturday,
Sunday, statutory holiday or other day on which banks in New York City are
required by law to close or are customarily closed.
(d) "Change of Control" shall mean the occurrence of (x) any
consolidation or merger of the Company with or into any other corporation or
other entity or person (whether or not the Company is the surviving
corporation), or any other corporate reorganization or transaction or series of
related transactions in which in excess of 50% of the Company's voting power is
transferred through a merger, consolidation, tender offer or similar
transaction, or (y) an event whereby any person (as defined in Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), together
with its affiliates and associates (as such terms are defined in Rule 405 under
the Securities Act, beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power, or (z) in
excess of 50% of the Company's Board of Directors consists of directors not
nominated by the prior Board of Directors of the Company.
(e) "Closing Date" shall have the meaning provided in Section 1.2.
herein.
(f) "Collateral" shall mean all assets of every kind and nature,
both tangible and intangible, of the Company and its Subsidiaries, other than
real estate.
(g) "Company" shall mean Metawave Communications Corporation, a
Delaware corporation.
(h) "Default" shall mean any event or condition, the occurrence of
which would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default as defined in Section 6.1.
(i) "ERISA " shall mean the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
(j) "Event of Default" shall have the meaning set forth in Section
6.1 hereof.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any successor statute thereto.
(l) "Existing Stockholder" means the stockholders of the Company
on the date hereof (as listed on Schedule 8.1) and the Related Persons of such
stockholders.
(m) "GAAP" shall mean generally accepted accounting principles in
the United States as in effect on the date of this Agreement and not including
any interpretations or regulations that have been proposed but that have not
been enacted.
<PAGE>
(n) "Indebtedness" means, without duplication, as to any Person or
Persons: (i) indebtedness for borrowed money; (ii) indebtedness for the
deferred purchase price of property or services; (iii) indebtedness evidenced by
bonds, debentures, notes or other similar instruments; (iv) obligations and
liabilities secured by a Lien upon property owned by such Person, whether or not
owing by such Person and even though such Person has not assumed or become
liable for the payment thereof; (v) Indebtedness directly or indirectly
guaranteed by such Person; (vi) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person; (viii) obligations of
such Person as Lessee under capital leases; (ix) net liabilities of such Person
under hedging agreements and foreign currency exchange agreements, as calculated
on a basis satisfactory to the Purchasers and in accordance with accepted
practice; (x) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit; (xi) all obligations of such
Person in respect of bankers' acceptances; and (xii) obligations with respect to
equipment leases.
(o) "Initial Public Offering" shall mean the closing of a public
offering of the Company's Common Stock pursuant to an effective registration
statement under the Securities Act.
(p) "Interest Note" shall have the meaning specified in Section 1.1 of
this Agreement.
(q) "Interest Rate" shall have the meaning provided under Section 1.1
of this Agreement.
(r) "Lien" shall mean any lien (statutory or otherwise) security
interest, mortgage, deed of trust, pledge, charge, conditional sale, title
retention agreement, capital lease or other encumbrance or similar right of
others, contingent or otherwise, or any agreement to give any of the foregoing.
(s) "Liquidity Facility" shall mean obligations for borrowed money not
to exceed $7,500,000 in the aggregate to Imperial Bank under a Loan Agreement
dated October 14, 1997, as same may be amended from time to time in a manner not
inconsistent with the terms of this Agreement.
(t) "Material Subsidiary" shall mean a Subsidiary of the Company that
is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X
promulgated under the Securities Act.
(u) "Note" shall have the meaning provided in Section 1.1 of this
Agreement.
(v) "Note Register" shall have the meaning provided in Section 9.1 of
this Agreement.
(w) "Note Registrar" shall have the meaning provided in Section 9.1 of
this Agreement.
<PAGE>
(x) "Notice" shall have the meaning provided in Section 1.3 of this
Agreement.
(y) "Noteholder" shall mean any of the holders of one or more Notes
from time to time.
(z) "Officer" shall mean the Chairman of the Board, the President,
any Vice President, the Treasurer, the Secretary or the Controller of any
Person.
(aa) "Person" shall mean an individual. partnership, corporation,
trust or unincorporated organization, and a government or agency or political
subdivision thereof.
(bb) "Purchase Price" with respect to any Note shall mean the Purchase
Price thereof, expressed as a percentage of the principal amount thereof and as
an amount in U.S. dollars, as set forth on Schedule I attached hereto.
(cc) "Purchaser" shall mean the Persons listed under Schedule I
attached hereto.
(dd) "Related Person" shall mean, with respect to any Person, (A) an
Affiliate of such Person, (B) any investment manager, investment advisor or
general partner of such Person, and ( ) any investment fund, investment account
or investment entity whose investment manager, investment advisor or general
partner is such Person or a Related Person of such Person.
(ee) "Securities Act" shall have the same meaning as in Section
3.2(g).
(ff) "Security Agreement" means the security agreement in the form
attached hereto as Exhibit E.
(gg) "Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including common
stock, preferred stock, or any other "equity security" (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Exchange Act).
(hh) "Stock Based Plan" means any stock option plan, stock
appreciation rights plan or other similar plan or supplement relating to capital
Stock of the Company or any of its Subsidiaries, whether in effect on the date
hereof or established hereafter, established for the benefit of employees of the
Company or of any Subsidiary of the Company.
(ii) "Subsidiary " shall mean, as to any particular parent
corporation, any corporation, partnership, limited liability company, business
trust or other entity of which more than 50% (by number of votes) of the Voting
Stock shall be owned by such parent corporation and/or one or more corporations
which are themselves Subsidiaries of such parent corporation.
(jj) "Transaction" shall have the meaning provided under Section 5.9
herein.
<PAGE>
(kk) "Voting Stock" shall mean securities of any class or classes the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
SECTION 9. MISCELLANEOUS.
Section 9.1. Note Register. The Company or the Company's transfer agent (if
any), in its capacity as note registrar (the "Note Registrar"), shall cause to
be kept a register (the "Note Register") for the registration and transfer of
the Notes; provided, however, the Company may at any time upon prior written
notice to the Purchasers designate and cause any other Person to act as the Note
Registrar in order to maintain the Note Register pursuant to the terms of this
Note Agreement. The Note Registrar will register or transfer or cause to be
registered or transferred, as hereinafter provided and under such reasonable
regulations as it may prescribe, any Note issued pursuant to this Agreement.
At any time, and from time to time, the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note upon surrender
thereof with the Note Registrar duly endorsed or accompanied by a written
instrument of transfer duly executed by the holder of such Note or its attorney
duly authorized in writing.
Promptly upon request of a Noteholder, the Company shall provide such
holder, and any qualified institutional buyer designated by such holder, such
financial and other information as is necessary in order to permit compliance
with the information requirements of Rule 144A(d)(4) under the Securities Act in
connection with the resale of Notes, except at such times as the Company is
subject to and is in compliance with the reporting requirements of Section 13 or
15(d) of the Exchange Act. For purposes of this paragraph, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
The Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium and interest, if any, on any
Note shall be made to or upon the written order of such holder.
Section 9.2. Exchange of Notes. At any time and from time to time, upon not
less than five (5) Business Days' notice given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section 9.1,
this Section 9.2 or Section 9.3, and, upon surrender of such Note at its office,
the Company will deliver in exchange therefor, without expense to the holder,
except as set forth below, Notes for the same aggregate principal amount
(together with accrued but unpaid interest) as the then unpaid principal amount
(together with accrued but unpaid interest) of the Note so surrendered, dated as
of the date to which interest has been paid on the Note so surrendered or, if
such surrender is prior to the payment of any interest thereon, then dated as of
the date of issue, registered in the name of such Person or Persons as may be
designated by such holder, and otherwise of the same form and tenor as the Notes
so surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
<PAGE>
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, mutilation or
destruction of any Note, and in the case of any such loss, theft, or destruction
upon delivery of an indemnity in such form as shall be reasonably satisfactory
to the Company, or in the event of such mutilation upon surrender and
cancellation of any Note, the Company will make and deliver without expense to
the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Note.
Section 9.4. Powers and Rights Not Waived; Remedies Cumulative. No delay
or failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to and are not exclusive of any rights or remedies
any such holder would otherwise have, and no waiver or consent, given or
extended pursuant to Section 7 hereof or otherwise, shall extend to or affect
any obligation or right not expressly waived or consented to.
Section 9.5. Notices. All communications provided for hereunder shall be
in writing and, if to any Purchaser, delivered or mailed by prepaid overnight
air courier, or by facsimile communication, in each case addressed to such
Purchaser at its address appearing on Schedule I to this Agreement or such other
address as such Purchaser or subsequent holder may designate to the Company in
writing, and if to the Company, delivered and mailed by prepaid overnight air
courier, or by facsimile communication, in each case to the Company at 8700
148th Avenue N.E., Redmond, Washington 98052; facsimile: (425) 702-5978,
Attention: Chief Financial Officer and General Counsel or to such other address
as the Company may in writing designate to such Purchaser or subsequent holder;
provided, however, that a notice sent by overnight air courier shall only be
effective if delivered at a street address designated for such purpose in
Schedule 1, and a notice to such Purchaser by facsimile communication shall only
be effective if confirmed by a copy thereof by prepaid overnight air courier, in
either case, as such Purchaser or a subsequent holder of any Note may designate
to the Company in writing.
Section 9.6. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to each
Purchaser's benefit and to the benefit of its successors and assigns, including
each successive holder or holders of any Notes.
Section 9.7. Integration and Severability. This Agreement embodies the
entire agreement and understanding between the Purchasers and the Company, and
supersedes all prior agreements and understandings relating to the subject
matter hereof. Should any part of this Agreement for any reason be declared
invalid or unenforceable, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Agreement had been executed with the invalid or unenforceable portion
thereof eliminated (or, if possible, rewritten to the extent necessary to
eliminate such invalidity or unenforceability) and it is hereby declared the
intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
<PAGE>
Section 9.8. Like Treatment of Holders. Neither the Company nor any of
its Affiliates shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, payment for redemptions or
exchanges of Notes, or otherwise, to any holder of any Notes, for or as an
inducement to, or in connection with the solicitation of, any consent, waiver or
amendment of any terms or provisions of the Notes or this Agreement or the
Warrants, unless such consideration is required to be paid to all holders of
Notes bound by such consent, waiver or amendment whether or not such holders so
consent, waiver or agree to amend and whether or not such holders tender their
Notes for redemption or exchange. The Company shall not, directly or
indirectly, redeem any Notes unless such offer of redemption is made pro rata to
all holders of Notes on identical terms.
Section 9.9. Governing Law. This Agreement and the notes and warrants
issued and sold hereunder shall be governed by and construed and enforced in
accordance with the laws of the State of New York, as applied to contracts made
and performed entirely within the State of New York. Each party hereto hereby
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York or the State Courts of New York sitting in New
York County for purposes of all legal proceedings arising out of or relating to
this Agreement and the notes or the transactions contemplated hereby. Each
party hereto irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. If any
provision of this agreement is determined to be unenforceable under the laws of
the State of New York, and if such provision would be enforceable under the laws
of the State of Washington, then it is agreed that the Courts of the State of
New York shall interpret and enforce such provision pursuant to the laws of the
State of Washington.
Section 9.10. Captions. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
Section 9.11. Brokerage Fees. BT Alex. Brown Incorporated has acted as
agent for the Company in connection with the transactions contemplated hereby
and is being paid a commission by the Company pursuant to a separate letter
agreement.
Section 9.12. Intentionally Left Blank.
Section 9.13. Possible Future Notes. If the Company's revenues, expenses,
cash flow and other material financial projections for the year ending December
31, 1998 are within ten percent of the revenues, etc. projected in the projected
budget provided to and accepted in writing by the Purchasers prior to the date
hereof, and if in the Purchasers' judgment neither the Company nor any
---
Subsidiary, if any, has experienced or is likely to experience an event
materially adverse to the profits, revenues, prospects, operations or condition
of the Company or such Subsidiary, and if the Purchasers are otherwise satisfied
---
with the adequacy of the Collateral,
<PAGE>
and if no Default or Event of Default then exists hereunder or under the
- ---
Warrants or the Security Agreement, and if the representations and warranties
---
made by the Company herein are true and correct on and as of December 31, 1998
and on and as of each day thereafter until the completion of the new purchase
referred to below, and if the Company has not yet completed an Initial Public
---
Offering, and if the Company has not exercised or expressed its intention to
---
exercise its redemption and repurchase right under Section 1.4 hereof, then, if
and only if the Company so chooses, the Purchasers will purchase from the
Company (assuming all the conditions of this Section 9.13 are satisfied), and
the Company will sell to the Purchasers as soon as reasonably practicable after
the later of April 28, 1999 or the date the Purchasers receive the Company's
audited financial statements for the year ended December 31, 1998, and using
documents substantially similar to those used in these transactions, up to an
additional $8 million in aggregate principal amount of new Notes; provided such
--------
new Notes will in all respects (except for the accrual and payment of interest
between April 28, 1998 and the actual date of their issuance, which accrual and
payment shall be suspended through the date of such issuance) be treated as if
they had been issued on April 28, 1998. For example, on the 12 month anniversary
of the Closing Date, such new Notes would experience a 200 basis point increase
in the Base Interest Rate. Additional Warrants to purchase 148,276 additional
Preferred Shares (as the same may be adjusted from the date hereof under the
terms of the Warrants) shall be issued in respect of such new Notes, such
Warrants to be dated the Closing Date. Should any dispute arise as to the
meaning, intention or interpretation of any term or provision of this Section
9.13, the determination thereof by MacKay-Shields Financial Corporation shall be
final and binding on all parties to this Agreement. The Company acknowledges and
agrees that it shall be bound by any such determination of MacKay-Shields
Financial Corporation; or if the Company does not agree with such determination,
it shall have the right, as its sole and exclusive remedy, to treat all (but not
less than all) of the terms and provisions of this Section 9.13 as null and void
and of no force and effect. Any action by the Purchasers, or any exercise by the
Purchasers of their judgment or requiring the Purchasers to be satisfied, under
this Section 9.13 shall require the consent of all of the Purchasers.
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION,
as Company
By: /s/ Vito Palermo
---------------------------------
Name: Vito Palermo
Title: Chief Financial Officer
[signature pages continued on next page]
Wiring Instruction to Company:
CITIBANK
111 Wall Street
New York, NY 10005
ABA# 021000089
FOR CREDIT TO:
Morgan Stanley & Co., Inc.
Account #3889-0774
FOR FURTHER CREDIT TO:
ACCOUNT NAME: METAWAVE COMMUNICATIONS
-----------------------
MORGAN STANLEY ACCOUNT: 14-78607
--------
<PAGE>
THE BROWN & WILLIAMSON MASTER
RETIREMENT TRUST
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: /s/ Jeffry B. Platt
---------------------------------------
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
THE MAINSTAY FUNDS, ON BEHALF OF
ITS STRATEGIC INCOME FUND SERIES
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: /s/ Jeffry B. Platt
---------------------------------------
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
HIGHBRIDGE CAPITAL CORPORATION
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: /s/ Jeffry B. Platt
----------------------------------------
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
THE MAINSTAY FUNDS, ON BEHALF OF
ITS HIGH YIELD CORPORATE BOND FUND SERIES
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: /s/ Jeffry B. Platt
_____________________________
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
MAINSTAY VP SERIES FUND INC. ON BEHALF OF ITS HIGH
YIELD CORPORATE BOND PORTFOLIO
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By:/s/ Jeffry B. Platt
____________________________
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
POLICE OFFICERS PENSION SYSTEM OF THE CITY OF HOUSTON
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By:/s/ Jeffry B. Platt
_____________________________
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
VULCAN MATERIALS COMPANY HIGH YIELD ACCOUNT
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By:/s/ Jeffry B. Platt
________________________________
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
THE 1199 HEALTH CARE EMPLOYEES PENSION FUND
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By:/s/ Jeffry B. Platt
______________________________
Name: Jeffry B. Platt
Title: Director
[signature pages continued on next page]
<PAGE>
BT HOLDINGS (NY), INC.
By:/s/ Edward Burdick
____________________________
Name: Edward Burdick
Title: Vice President
[signature pages continued on next page]
<PAGE>
IMPERIAL BANK
By:/s/ Jim Ellison
_____________________________
Name: Jim Ellison
Title: Senior Vice President
[signature pages continued on next page]
<PAGE>
POWERWAVE TECHNOLOGIES, INC.
By:/s/ Bruce C. Edwards
___________________________________________
Name: Bruce C. Edwards
Title: President and Chief Executive Officer
[signature pages continued on next page]
<PAGE>
BANKAMERICA INVESTMENT CORPORATION
By:/s/ C. Richard Schuler
_____________________________
Name: C. Richard Schuler
Title: Attorney-in-Fact
[signature pages continued on next page]
<PAGE>
SCHEDULE I TO NOTE AGREEMENT
Purchaser: THE BROWN & WILLIAMSON MASTER RETIREMENT TRUST
1. Principal Amount $500,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $500,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 0 1 1000028
STATE STREET BANK AND TRUST COMPANY
BOSTON, MASS 02101
FOR CREDIT TO:
ACCT NAME: BROWN & WILLIAMSON MASTER RETIREMENT
TRUST
DDA # 09237520
ACCT # ZH23
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
CHASE BANK
ACO: STATE STREET BANK & TRUST COMPANY
4 NEW YORK PLAZA
GROUND FLOOR RECEIVING WINDOW
NEW YORK, NEW YORK 10004
ACCT. NO.: ZH23
ACCT. NAME: BROWN & WILLIAMSON
MASTER RETIREMENT TRUST
4. All communications shall be delivered or mailed to:
The Brown & Williamson Master Retirement Trust
c/ o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
<PAGE>
5. Tax I.D. #: 043216086
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of Iceship & Co.
<PAGE>
Purchaser: THE MAINSTAY FUNDS, ON BEHALF OF ITS STRATEGIC INCOME FUND SERIES
1. Principal Amount $155,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $155,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 021000018
BANK OF NEW YORK/CUST.
GLA 11 1612
FOR CREDIT TO:
ACCT NAME: MAINSTAY STRATEGIC INCOME FUND
ACCT # 267451
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
BANK OF NEW YORK
ONE WALL STREET - 3RD FLOOR
WINDOW A
NEW YORK, NEW YORK 10286
FOR CREDIT TO:
ACCT. NAME: MAINSTAY STRATEGIC FUND
ACCT. # 267451
4. All communications shall be delivered or mailed to:
The Mainstay Funds, on behalf of its Strategic Income Fund Series
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
5. Tax I.D. #: 133924140
<PAGE>
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of Hare & Co.
<PAGE>
Purchaser: HIGHBRIDGE CAPITAL CORPORATION
1 Principal Amount $1,900,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $1,900,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 021-000-089
BEAR STEARNS SECURITIES INC.
ACCT # 09253186
ACCT NAME: HIGHBRIDGE CAPITAL CORPORATION
ACCT # 101-44079-2-6
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
NSCCNY WINDOW
55 WATER STREET, CONCOURSE LEVEL, SOUTH BUILDING
ACCT: BEAR STEARNS
FOR FURTHER CREDIT TO: HIGHBRIDGE CAPITAL CORPORATION
ACCT. NO. 101-44079-2-6
4. All communications shall be delivered or mailed to:
Highbridge Capital Corporation
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
5. Tax I.D. #: Bear Stearns Securities Corp.-Foreign (no tax i.d.#)
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of Bear Stearns Securities
Corp.
<PAGE>
Purchaser: THE MAINSTAY FUNDS, ON BEHALF OF ITS HIGH YIELD CORPORATE BOND FUND
SERIES
1. Principal Amount $8,870,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $8,870,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 0 1 1000028
STATE STREET BANK AND TRUST COMPANY
BOSTON, MASS 02101
FOR CREDIT TO:
ACCT NAME: MAINSTAY HIGH YIELD CORPORATE BOND FUND
DDA # 4266 0761
ACCT # SNO4
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
CHASE BANK
A/C STATE STREET BANK AND TRUST COMPANY
4 NEW YORK PLAZA
GROUND FLOOR/RECEIVE WINDOW
NEW YORK, NEW YORK 10004
FOR CREDIT TO:
ACCT. NAME: MAINSTAY HIGH YIELD CORPORATE BOND FUND
ACCT. # SN04
4. All communications shall be delivered or mailed to:
The Mainstay Funds, on behalf of its High Yield
Corporate Bond Fund Series
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
<PAGE>
5. Tax I.D.#: 04-2910780
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of Daffodil & Co.
<PAGE>
Purchaser: MAINSTAY VP SERIES FUND, INC., ON BEHALF OF HIGH YIELD CORPORATE BOND
PORTFOLIO
1. Principal Amount $2,500,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $2,500,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 021000018
BANK OF NEW YORK/CUST.
GLA 11 1612
FOR CREDIT TO:
ACCT NAME: MAINSTAY V.P. SERIES HIGH YIELD
CORPORATE BOND FUND
ACCT # 274467
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
BANK OF NEW YORK
1 WALL STREET
3RD FLOOR, WINDOW A
ACCT. NO. 274467
ACCT. NAME: MAINSTAY VP SERIES HIGH YIELD CORPORATE BOND FUND
[NOTIFY: SYLVIA ORTIZ]
4. All communications shall be delivered or mailed to:
Mainstay VP Series Fund, Inc., on behalf of High Yield
Corporate Bond Portfolio
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
5. Tax I.D. #: 13-3818793
<PAGE>
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of Hare & Co.
<PAGE>
Purchaser: POLICE OFFICERS PENSION SYSTEM OF THE CITY OF HOUSTON
1. Principal Amount $500,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $500,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 071-000-152
NORTHERN TRUST/CHGO TRUST
FOR CREDIT TO:
ACCT # 5186061000
ACCT NAME: POLICE OFFICERS PENSION SYSTEM OF THE
CITY OF HOUSTON
ACCT # 26-41113
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
NORTHERN TRUST COMPANY
40 BROAD STREET
8TH FLOOR
NEW YORK, NEW YORK 10004
ACCT. NO. 26-41113
ACCT. NAME: POLICE OFFICERS PENSION SYSTEM OF THE
CITY OF HOUSTON
NOTIFY: GLEN JOHNSON
4. All communications shall be delivered or mailed to:
Police Officers Pension System of the City of Houston
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
5. Tax I.D. #: 74-6036541
<PAGE>
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of Booth & Co.
<PAGE>
Purchaser: VULCAN MATERIALS COMPANY HIGH YIELD ACCOUNT
1. Principal Amount $75,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $75,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 071-000-152
NORTHERN TRUST/CHGO TRUST
FOR CREDIT TO:
ACCT # 5186061000
ACCT NAME: VULCAN MATERIALS
ACCT # 22-00065
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
NORTHERN TRUST COMPANY
40 BROAD STREET
8TH FLOOR
NEW YORK, NEW YORK 10004
ACCT. NO. 22-00065
ACCT. NAME: VULCAN MATERIALS
NOTIFY: GLEN JOHNSON
4. All communications shall be delivered or mailed to:
Vulcan Materials Company High Yield Account
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
5. Tax I.D. #: 751867619
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
<PAGE>
Notes and Interest Notes to be registered in the name of Booth & Co.
<PAGE>
Purchaser: THE 1199 HEALTH CARE EMPLOYEES PENSION FUND
1. Principal Amount 1,500,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $1,500,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 071-000-152
NORTHERN TRUST/CHGO TRUST
FOR CREDIT TO:
ACCT # 5186061000
ACCT NAME: LOCAL 1199 HEALTHCARE
ACCT # 26-44894
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
NORTHERN TRUST COMPANY
40 BROAD STREET
8TH FLOOR
NEW YORK, NEW YORK
ACCT. NO. 26-44894
ACCT. NAME: 1199 HEALTH CARE FUND
NOTIFY: GLEN JOHNSON
4. All communications shall be delivered or mailed to:
The 1199 Health Care Employees Pension Fund
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
Attn: Steven Tananbaum
Fax: (212) 758-4735
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Fredric A. Kleinberg, Esq.
Fax: (212) 986-8866
5. Tax I.D. #: 13-3604862
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
<PAGE>
Notes and Interest Notes to be registered in the name of Booth & Co.
<PAGE>
Purchaser: IMPERIAL BANK
1. Principal Amount $2,000,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $2,000,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 122201444
IMPERIAL BANK
FOR CREDIT TO:
ACCT NAME: IMPERIAL BANK
ACCT # 736000021
ATTN: DONALD ROBERTS RE: METAWAVE
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
Imperial Bank
Attn.: Etta Tucker #2560
9920 La Cienega Bl. #628
Inglewood, CA 90301
Fax: 310-338-6110
with a copy to:
Imperial Bank
777 108th Avenue NE
Bellevue, Washington 98004-6672
Attn: Jim Ellison
Senior Vice President
Fax: (425) 454-6224
4. All communications shall be delivered or mailed to:
Imperial Bank
777 108th Avenue NE
Bellevue, Washington 98004-6672
Attn: Jim Ellison
Senior Vice President
Fax: (425) 454-6224
with a copy to:
Imperial Bank
Attn: Donald Roberts
<PAGE>
226 Airport Parkway
San Jose, CA 95110
Fax: (408) 451-8524
5. Tax I.D. #: 95-2247354
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of [______________________
______________________] (if other than Purchaser).
<PAGE>
Purchaser: POWERWAVE TECHNOLOGIES, INC.
1. Principal Amount $2,500,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $2,500,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
---- --------
each payment as to issuer, security and principal or interest) to:
ABA # 121000358
BANK OF AMERICA NT&SA
SAN FRANCISCO, CALIFORNIA
FOR CREDIT TO:
ACCT NAME: POWERWAVE TECHNOLOGIES, INC.
ACCT # 09326-00675
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to Purchaser at its address provided below.
4. All communications shall be delivered or mailed to:
Powerwave Technologies, Inc.
2026 McGaw Avenue
Irvine, California 92614
Attn: Kevin Michaels
Fax: (714) 757-6675
with a copy to:
5. Tax I.D. #: 11-2723423
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of [______________________
______________________] (if other than Purchaser).
<PAGE>
Purchaser: BT HOLDINGS (NY), INC.
1. Principal Amount $4,500,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $4,500,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
each payment as to issuer, security and principal or interest) to:
ABA # 021 001 033
Bankers Trust Co.
FOR CREDIT TO: BT Holdings (NY), Inc.
ACCT # 01-418-767
ACCT NAME: Ref: Metawave
Profit Center 808425
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
BT Alex Brown Inc.
14 Wall Street, 7th Floor
New York, New York 10005
Attn: Fran Lombardi
Ref: Metawave Communications Corporation (Acct. No.: 215 69 001)
4. All communications shall be delivered or mailed to:
BT Holdings (NY), Inc.
c/o Bankers Trust Corp.
130 Liberty Street, 29th Floor
New York, New York 10006
Attn: Christine Barbella-Foggia
Phone: 212-250-6751
Fax: 212-669-1502
5. Tax I.D. #: 13-3311934
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of BT Alex Brown Inc.
<PAGE>
Purchaser: BANKAMERICA INVESTMENT CORPORATION
1. Principal Amount $4,000,000.00 (in U.S. Dollars).
The Purchase Price of the Note will be $4,000,000.00
2. In the case of cash payments on account of the Notes:
By wire transfer of Federal or other immediately available funds (identifying
each payment as to issuer, security and principal or interest) to:
BANK OF AMERICA ILLINOIS
231 SOUTH LASALLE STREET
CHICAGO, IL 60697
ABA # 071-000-039
A/C NAME: BANKAMERICA INVESTMENT CORP.
DDA ACCOUNT # 72-50967
REF: METAWAVE COMMUNICATIONS
3. In case of PIK interest payments (Interest Notes) on account of the Note,
deliver the Interest Notes to:
BankAmerica Investment Corporation,
a subsidiary of BankAmerica Corporation
231 South LaSalle Street - 19th Floor
Chicago, IL 60697
Attn: Rosemary E. Szurko
(PLEASE MAIL ALL HARDCOPY CONFIRMATIONS)
4. All communications shall be delivered or mailed to:
BankAmerica Investment Corporation
231 South LaSalle Street
Chicago, IL 60697
Attn: Moira A. Cary, Esq.
Christopher S. Field, Esq.
Fax: (312) 828-5423
with a copy to:
Rosemary E. Szurko
Bank of America NT & SA
231 South LaSalle Street
Chicago, IL 60697
Fax: (312) 828-5423
5. Tax I.D. #: 36-3101574
<PAGE>
6. Notes and Interest Notes are to be registered in the name of the Purchaser,
unless otherwise provided below:
Notes and Interest Notes to be registered in the name of [______________________
______________________] (if other than Purchaser).
<PAGE>
EXHIBIT A
This note has not been registered under the United State Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws. Neither
this note nor any interest or participation herein may be reofferred, sold,
assigned, transferred, pledged, encumbered or otherwise disposed of in the
absence of such registration or unless such transaction is exempt from, or not
subject to, registration. The holder of this note by its acceptance hereof
agrees to offer, sell or otherwise transfer this note, prior to the date which
is two years after the later of the original issue date hereof and the last date
on which any issuer, or any affiliate of any issuer, was the owner of this note
(or any predecessor of this security) only (A) to the issuer, (B) pursuant to a
registration statement which has been declared effective under the Securities
Act, (C) for so long as this security is eligible for resale pursuant to Rule
144A under the Securities Act ("Rule 144A"), to a person it reasonably believes
is a "qualified institutional buyer" as defined in Rule 144A that purchases for
its own account or for the account of a qualified institutional buyer to whom
notice is given that the transfer is being made in reliance on Rule 144A, (D)
pursuant to offers and sales to non-U.S. Persons that Occur outside the United
States within the meaning of Regulation S under the Securities Act, (E) to an
institutional "accredited investor," and not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act, or
(F) pursuant to another available exemption from the registration requirements
of the Securities Act, subject to the issuer's right prior to any such offer,
sale or transfer pursuant to clause (E) or (F) to require the delivery of an
opinion of counsel reasonably satisfactory to it.
<PAGE>
METAWAVE COMMUNICATION CORPORATION
13.75% Senior Secured Bridge Note Due April [ ], 2000
No. ______ April [ ],1998
METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"), for
value received, hereby promises to pay to
[______________]
or registered assigns
on the [ ] day of April, 2000
the principal amount of
[__________________________________] ($_______)
Interest on this Note will accrue at a rate equal to the lower of (i)
13.75% per annum (as adjusted in accordance with the following sentence, the
"Base Interest Rate") or, (ii) the highest rate permitted by law (such lower
amount being referred to as the "Interest Rate"), and be payable semi-annually
on April [ ] and October [ ] of each year, commencing on October [ ], 1998,
and at maturity. On April [ ], 1999, and at the end of each subsequent one
hundred eighty (180) day period, the Base Interest Rate will increase by 200
basis points, to a maximum interest rate of 18.0%. Interest on this Note shall
accrue and be computed semi-annually on the basis of a 360-day year of twelve
30-day months.
The interest shall be payable at the option of the Company (x) in kind by
the issuance to the holders thereof of separate promissory notes (each an
"Interest Note," and, collectively, the "Interest Notes"), in each case having a
principal amount equal to the amount of interest due and payable on such date or
(y) in cash; provided that the Company will only be entitled to pay in cash if
it has irrevocably notified in writing the holders of the Notes of its intention
to make a cash interest payment at least ten (10) Business Days before the
relevant interest payment date, it being agreed that payment in kind via
Interest Notes is the default interest payment method in the absence of such
notice. Interest on Interest Notes shall accrue at the same Interest Rate per
annum and shall be payable in kind by the issuance of additional Interest Notes
or in cash as provided above on the same date as interest is payable on the
Notes. The unpaid principal balance of all Notes (including Interest Notes),
together with unpaid accrued interest thereon, shall be due and payable in cash
on the stated date of maturity of the Notes. Such Interest Notes shall be
substantially in the form of this Note. Notwithstanding different issue dates
and interest terms, unless the context clearly requires otherwise, all Interest
Notes shall be Notes for all purposes of the Agreement.
The Company agrees to pay interest in cash on overdue principal (including
any overdue required or optional prepayment of principal) and premium, if any,
and (to the extent legally
-2-
<PAGE>
enforceable) on any overdue installment of interest at the Interest Rate per
annum from the date such payment is due, whether by acceleration or otherwise,
until paid. At maturity or upon any acceleration of this Note, the principal
hereof and accrued but unpaid interest hereon are payable at the principal
office of the Company at 8700 148th Avenue NE, Redmond, Washington 98052 in
immediately available coin or currency of the United States of America which at
the time of payment shall be legal tender for the payment of public and private
debts.
If any amount of principal, premium or interest, if any, on or in respect
of this Note becomes due and payable on any date which is not a Business Day,
such amount shall be payable on the next preceding Business Day. "Business Day"
means any day other than a Saturday, Sunday, statutory holiday or other day on
which banks in New York City are required by law to close or are customarily
closed.
This Note is one of the 13.75% Senior Secured Bridge Notes due April [ ],
2000 of the Company in the aggregate original principal amount of $29,000,000
issued or to be issued under and pursuant to the terms and provisions of the
Note Agreement, dated as of April [ ], 1998 (the "Note Agreement"), entered
into by the Company with the original purchasers therein referred to and this
Note and the holder hereof are entitled equally and ratably with the holders of
all other Notes outstanding under the Note Agreement to all the benefits
provided for thereby or referred to therein. Capitalized terms used herein and
not otherwise defined shall have the meanings provided in the Note Agreement.
The consent and waiver provisions contained in Section 7.1 of the Note Agreement
are incorporated herein and made a part hereof.
This Note (including Interest Notes) and the other Notes issued under the
Note Agreement are senior secured obligations of the Company, ranking pari passu
in right of payment with all permitted existing and permitted future senior
secured Indebtedness of the Company and senior to all unsecured or subordinated
Indebtedness of the Company, all non-permitted senior secured indebtedness of
the Company and all other senior indebtedness of the Company.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates and certain prepayments are
required to be made thereon, all in the events, on the terms and in the manner
and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing, such
transfer to be made in accordance with the requirements set forth in this Note
and the Note Agreement. Payment of or on account of principal, premium and
interest, if any, on this Note shall be made only to or upon the order in
writing of the registered holder.
-3-
<PAGE>
This Note and the Note Agreement are governed by and construed and enforced
in accordance with the laws of the State of New York applicable to contracts
executed and to be performed entirely in such state. If any provision of this
Note is determined to be unenforceable under the laws of the State of New York,
and if such provision would be enforceable under the laws of the State of
Washington, then it is agreed that the Courts of the State of New York shall
interpret and enforce such provision pursuant to the laws of the State of
Washington.
METAWAVE COMMUNICATIONS CORPORATION
By:_________________________________
Name:
Title:
-4-
<PAGE>
EXHIBIT B
---------
This Warrant has not been registered under the Securities Act of 1933, as
amended, or any state securities laws. It may not be sold or offered for sale
except pursuant to an effective registration statement under said act and any
applicable state securities law or an applicable exemption from such
registration requirements.
________________________
April [ ], 1998
METAWAVE COMMUNICATIONS CORPORATION
________________________
Preferred Stock Purchase Warrant
Metawave Communications Corporation, a Delaware corporation (the
"COMPANY"), hereby certifies that for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, [NAME OF PURCHASER]
having an address at [ADDRESS OF PURCHASER] ("PURCHASER") or any other Warrant
Holder is entitled, on the terms and conditions set forth below, to purchase
from the Company at any time beginning on the date hereof and ending on the
second anniversary of the Closing Date, [537,500 IN THE AGGREGATE] fully paid
and nonassessable shares of Series D Preferred Stock, par value $.0001 of the
Company (the "PREFERRED STOCK"), at a purchase price per share of Preferred
Stock equal to $.01 per share (the "PURCHASE PRICE"), as the same may be
adjusted pursuant to Section 5 herein.
1. DEFINITIONS.
-----------
a) The term "AGREEMENT" shall mean the Note Agreement, dated as of
April [ ], 1998, between the Company and the Purchasers signatory thereto.
b) The term "CERTIFICATE" shall mean the Third Amended and Restated
Certificate of Incorporation of the Company filed by the Company with the
Secretary of State of State of Delaware on August 4, 1997, containing the
designations of the Preferred Stock.
c) The term "CLOSING DATE" shall mean April [ ], 1998.
d) The term "INVESTORS' RIGHTS AGREEMENT" shall mean the Third
Amended and Restated Investors' Rights Agreement of the Company dated August 6,
1997 with the Investors listed on Schedule A thereto, containing, inter alia,
----- ----
certain registration rights, as in effect on the date hereof.
<PAGE>
e) The term "NOTE" shall mean one of the 13.75% Senior Secured
Bridge Notes issued pursuant to the Agreement.
f) The term "PREFERRED STOCK" shall mean the Series D Preferred
Stock of the Company issued pursuant to the Certificate.
g) The term "WARRANT HOLDER" shall mean the Purchaser or any
assignee of all or any portion of this Warrant.
h) The term "WARRANT SHARES" shall mean the Shares of Preferred
Stock or other securities issuable upon exercise of this Warrant.
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Agreement.
2. EXERCISE OF WARRANT.
-------------------
This Warrant may be exercised by the Warrant Holder, in whole or in part,
at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent for
the Preferred Stock; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the offices of
the Company or any transfer agent for the Preferred Stock this Warrant, together
with a Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares ("SURRENDERED
SHARES"); provided that the Purchase Price multiplied by the number of
Deliverable Shares shall not exceed the value of the Surrendered Shares; and
provided further that the sum of the number of Deliverable Shares and the number
of Surrendered Shares so specified shall not exceed the aggregate number of
Warrant Shares represented by this Warrant. For the purposes of this provision,
each Warrant Share as to which this Warrant is surrendered will be attributed a
value equal to the fair market value (as defined below) of the Warrant Share
minus the Purchase Price of the Warrant Share.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within five (5) Business Days issue and deliver to or upon the order of
Warrant Holder a new Warrant of like tenor in the name of Warrant Holder or as
Warrant Holder (upon payment by Warrant Holder of any applicable transfer taxes)
may request, reflecting such adjusted Warrant Shares.
-2-
<PAGE>
3. DELIVERY OF STOCK CERTIFICATES.
------------------------------
a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) Business Days thereafter, the Company shall transmit the
certificates (together with any other stock or other securities or property to
which Warrant Holder is entitled upon exercise) by messenger or overnight
delivery service to reach the address designated by such holder within five (5)
Business Days after the receipt of the Subscription Notice ("B+5"). If such
certificates are not received by the Warrant Holder within B+5, then the Warrant
Holder will be entitled to revoke and withdraw its exercise of its Warrant at
any time prior to its receipt of those certificates.
b) This Warrant may not be exercised as to fractional shares of
Preferred Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Preferred Stock,
then in such event the Warrant Holder shall be entitled to cash equal to the
fair market value of such fractional share. For purposes of this Warrant, "fair
market value" shall equal the closing trading price of the Common Stock on the
New York Stock Exchange, or the American Stock Exchange or the Nasdaq Stock
Market, whichever market (any, an "APPROVED MARKET") is the principal trading
exchange or market for the Common Stock (the "PRINCIPAL MARKET") on the date of
determination, multiplied by the aggregate number of shares of Common Stock into
which such Preferred Shares may then be converted, or, if the Common Stock is
not listed or admitted to trading on any Approved Market, the average of the
closing bid and asked prices on the over-the-counter market as furnished by any
New York Stock Exchange member firm reasonably selected from time to time by the
Company for that purpose and reasonably acceptable to the Warrant Holder,
multiplied by the aggregate number of shares of Common Stock into which such
Preferred Shares may then be converted, or, if the Common Stock is not listed or
admitted to trading on any Approved Market or traded over-the-counter and the
average price cannot be determined as contemplated above, the fair market value
of the Preferred Stock shall be as reasonably determined in good faith by the
Company's Board of Directors with the concurrence of the Warrant Holder.
4. (A) REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
a) The Company shall comply with its obligations under Section 6
with respect to the Warrant Shares and the Common Stock issuable upon conversion
of the Warrant Shares ("COMMON SHARES"), including, without limitation, the
Company's obligation, subject to Section 6(a) below, to include the Warrant
Shares and the Common Shares in any registration statement registering the
Warrant Shares and/or the Common Shares under the Securities Act of 1933, as
amended (the "ACT").
b) The Company shall take all necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, including,
without limitation (after the Initial Public Offering) the notification of the
Principal Market, for the legal and valid issuance of this Warrant and the
Warrant Shares to the Warrant Holder under this Warrant and the Common Shares
under the Warrant Shares.
-3-
<PAGE>
c) From the date of the Initial Public Offering through the last
date on which this Warrant is exercisable, the Company shall take all steps
necessary to insure that the Preferred Stock and the Common Stock remains listed
on the Principal Market.
d) The Warrant Shares, when issued in accordance with the terms
hereof, and the Common Shares, when issued in accordance with the terms of the
Warrant Shares, will be duly authorized and, when paid for or issued in
accordance with the terms hereof and thereof, shall be validly issued, fully
paid and non-assessable. The Company has authorized and reserved for issuance
to Warrant holders and Warrant Share holders the requisite number of shares of
Preferred Stock and Common Stock to be issued pursuant to this Warrant and
pursuant to the Warrant Shares.
e) The Company shall at all times, commencing within five days from
the date hereof, reserve and keep available, solely for issuance and delivery as
Warrant Shares hereunder and as Common Shares under the Warrant Shares, one and
one-half times such number of shares of Preferred Stock and one and one-half
times such number of shares of Common Stock as shall from time to time be
issuable hereunder and thereunder.
f) The Company agrees to use its reasonable best efforts to promptly
provide to the holders of this Warrant, and the holders of the Warrant Shares,
and the holders of the Common Shares, from time to time upon request the
information required under Rule 144A under the Securities Act, so as to permit a
sale at such time or times of the Warrant and/or the Warrant Shares and/or the
Common Shares under said Rule 144A.
g) With a view to making available to Warrant holders, the holders
of Warrant Shares and the holders of Common Shares the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the Securities and
Exchange Commission ("SEC") that may at any time permit Warrant holders, the
holders of Warrant Shares and the holders of Common Shares to sell securities of
the Company to the public without registration, the Company agrees to use its
reasonable best efforts after the Initial Public Offering to:
i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"); and
iii) furnish to any such holder forthwith upon request a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 and of the Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents so
filed by the Company as may be reasonably requested to permit any such holder to
take advantage of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
h) The Company covenants and represents that, so long as any of the
Warrants or the Warrant Shares are outstanding (i) the Company will not take any
action which will impair or otherwise weaken the rights and privileges of the
holders of the Warrants and the
-4-
<PAGE>
Warrant Shares and (ii) the Company will deliver to the holders of the Warrants
and Warrant Shares, at the same time as same is required to be delivered to
Investors under the Investors' Rights Agreement, the financial statements of
other documents and information referred to in Section 2.1 of the Investors'
Rights Agreement.
(B) REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
----------------------------------------------
The Purchaser shall not transfer Warrant Shares, unless such transfer
is pursuant to an effective registration statement under the Act or pursuant to
an applicable exemption from such registration requirements.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of and
-------------------------------------------------
kind of securities purchasable upon exercise of this Warrant and the Purchase
Price shall be subject to adjustment from time to time as follows:
a) Subdivisions, Combinations and other Issuances. If the Company
----------------------------------------------
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide its outstanding securities as to which purchase rights under
this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate proportional adjustments
(decrease in the case of subdivision, increase in the case of combination) shall
also be made to the Purchase Price payable per share, so that the aggregate
Purchase Price payable for the total number of Warrant Shares purchasable under
this Warrant as of such date shall remain the same as it would have been before
such subdivision or combination.
b) Stock Dividend. If at any time after the date hereof the Company
--------------
declares a dividend or other distribution on Preferred Stock payable in
Preferred Stock or other securities or rights convertible into Preferred Stock
("PREFERRED STOCK EQUIVALENTS") without payment of any consideration by holders
of Preferred Stock for the additional shares of Preferred Stock or the Preferred
Stock Equivalents (including the additional shares of Preferred Stock issuable
upon exercise or conversion thereof), then the number of shares of Preferred
Stock for which this Warrant may be exercised shall be increased as of the
record date (or the date of such dividend distribution if no record date is set)
for determining which holders of Preferred Stock shall be entitled to receive
such dividends, in proportion to the increase in the number of outstanding
shares (and shares of Preferred Stock issuable upon conversion of all such
securities convertible into Preferred Stock) of Preferred Stock as a result of
such dividend, and the Purchase Price shall be proportionately reduced so that
the aggregate Purchase Price for all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such distribution, if
applicable), for such dividend shall equal the aggregate Purchase Price so
payable immediately before such record date (or on the date of such
distribution, if applicable).
c) Other Distributions. If at any time after the date hereof the
-------------------
Company distributes to holders of its Preferred Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
Preferred Stock), then the number of Warrant Shares for which this Warrant
-5-
<PAGE>
is exercisable shall be increased to equal: (i) the number of Warrant Shares for
which this Warrant is exercisable immediately prior to such event, (ii)
multiplied by a fraction, (A) the numerator of which shall be the fair market
value per share of Preferred Stock on the record date for the dividend or
distribution, and (B) the denominator of which shall be the fair market value
price per share of Preferred Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Preferred Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Warrant Holder) of any and all such evidences of indebtedness,
shares of capital stock, other securities or property, so distributed. The
Purchase Price shall be reduced to equal: (i) the Purchase Price in effect
immediately before the occurrence of any event (ii) multiplied by a fraction,
(A) the numerator of which is the number of Warrant Shares for which this
Warrant is exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment.
d) Merger, etc. If at any time after the date hereof there shall be
-----------
a merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Warrant Holder shall be entitled to receive upon or after such transfer, merger
or consolidation becoming effective, and upon payment of the Purchase Price then
in effect, the number of shares or other securities or property of the Company
or of the successor corporation resulting from such merger or consolidation,
which would have been received by Warrant Holder for the shares of stock subject
to this Warrant had this Warrant been exercised just prior to such transfer,
merger or consolidation becoming effective or to the applicable record date
thereof, as the case may be. The Company will not merge or consolidate with or
into any other corporation, or sell or otherwise transfer its property, assets
and business substantially as an entirety to another corporation, unless the
corporation resulting from such merger or consolidation (if not the Company), or
such transferee corporation, as the case may be, shall expressly assume, by
supplemental agreement reasonably satisfactory in form and substance to the
Warrant Holder, the due and punctual performance and observance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company.
e) Reclassification, etc. If at any time after the date hereof
---------------------
there shall be a reorganization or reclassification of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
f) Warrant Share Adjustment. In the event that the Company issues
------------------------
or sells any Additional Stock, as that term is defined in Section 4(d)(ii) of
Article IV of the Certificate at an effective purchase price per share of Common
Stock ("NEW PRICE") which is less than $9.25 per share ("FIXED PRICE"), as
adjusted for stock splits and stock dividends, then in each such case ("DILUTION
EVENT"), the number of Warrant Shares which may be purchased upon the exercise
of this Warrant shall be increased by multiplying the number of Warrant Shares
which may be purchased upon the exercise of this Warrant by a fraction, the
numerator of which is the Fixed Price minus the New Price and the denominator of
which is the New Price. However, to the
-6-
<PAGE>
extent that a Dilution Event results, pursuant to the terms of the Certificate,
in the holder of this Warrant being entitled to purchase more Common Shares
("EXCESS SHARES") upon conversion of the Warrant Shares issuable hereunder into
Common Shares, then the additional number of Warrant Shares to which the holder
hereof would have been entitled to receive pursuant to the immediately preceding
sentence of this Section 5(f) with respect to such Dilution Event shall be
reduced by the number of Excess Shares to which the holder of this Warrant would
then be entitled to receive upon exercise of this Warrant and the conversion of
the Warrant Shares issuable hereunder into Common Shares.
6. PIGGYBACK REGISTRATIONS/MARKET STAND-OFF PROVISION.
--------------------------------------------------
a) Right to Piggyback. The Company covenants that the Warrant
------------------
holders and the holders of the Warrant Shares shall at all times have the same
piggyback and other rights (other than demand registration rights referred to in
Sections 1.2 and 1.12 of the Investor's Rights Agreement) as a "Holder" and as a
"Series D Investor" as are contained in the Investors' Rights Agreement, which
rights are incorporated herein and made a part hereof.
b) Market Stand-Off Provision. The holders of the Warrants and the
---------------------------
Warrant Shares agree to be bound (as an "Investor") by the market stand-off
provisions contained in Section 1.15 of the Company's Investors' Rights
Agreement on condition that: (i) all officers, directors and "control persons"
of the Company, and members of their immediately family, are and remain bound by
such provisions, (ii) all persons and entities who have registration rights
(piggy-back, demand or otherwise) of any kind with respect to the Company's
Stock are and remain bound by such provisions, and (iii) the Company enforces
such provisions against all the holders of the Warrants only to the same extent
and same degree that it enforces such provisions against all of the persons and
entities referred to in (i) and (ii) immediately above. The Company
acknowledges that the term "donees" as used in said Section 1.15 shall include
successive transferees, assignees, participants and the like.
7. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
-------------
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant or the terms of the Warrant Shares, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Warrant Holder and the holder of the Warrant Shares against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any Warrant Shares above the amount payable
therefor on such exercise, and (b) will take all such action as may be
reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant and Common Stock upon conversion of the Warrant Shares.
8. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price or number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof, the
Company shall execute and deliver to the Warrant Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated and the
Purchase Price and number of shares purchasable hereunder after giving
-7-
<PAGE>
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first class mail, postage prepaid) to the Warrant Holder.
9. RIGHTS AS STOCKHOLDER. Prior to exercise of this Warrant, the Warrant
---------------------
Holder shall not be entitled to any rights as a stockholder of the Company with
respect to the Warrant Shares, including (without limitation) the right to vote
such shares, receive dividends or other distributions thereon or be notified of
stockholder meetings. However, in the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Company shall mail to each Warrant Holder, at least 10
Trading Days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
10. LIMITATION ON EXERCISE. Notwithstanding anything to the contrary
----------------------
contained herein, this Warrant may not be exercised by the Warrant Holder to the
extent that, after giving effect to Warrant Shares to be issued pursuant to a
Subscription Notice, the total number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of ownership of this
Warrant, or ownership of other securities that have limitations on the holder's
rights to convert or exercise similar to the limitations set forth herein),
together with all shares of Common Stock deemed beneficially owned by the
holder's "affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") exists,
would exceed 9.9% of the Common Shares issued and outstanding immediately
following such exercise (the "Restricted Ownership Percentage"); provided that
--------
(w) each Warrant Holder shall have the right at any time and from time to time
to reduce its Restricted Ownership Percentage immediately upon notice to the
Company or in the event of a Change of Control Transaction, (x) each Warrant
Holder shall have the right at any time and from time to time to increase its
Restricted Ownership Percentage or otherwise waive in whole or in part the
restrictions of this Section 10 upon 61 days' prior notice to the Company or
immediately in the event of a Change of Control Transaction, (y) each Warrant
Holder can make subsequent adjustments pursuant to (w) or (x) any number of
times from time to time (which adjustment shall be effective immediately if it
results in a decrease in the Restricted Ownership Percentage or shall be
effective upon 61 days' prior written notice or immediately in the event of a
Change of Control Transaction if it results in an increase in the Restricted
Ownership Percentage) and (z) each Warrant Holder may eliminate or reinstate
this limitation at any time and from time to time (which elimination will be
effective upon 61 days' prior notice and which reinstatement will be effective
immediately). Without limiting the foregoing, in the event of a Change of
Control Transaction, any holder may reinstate immediately (in whole or in part)
the requirement that any increase in its Restricted Ownership Percentage be
subject to 61 days' prior written notice, notwithstanding such Change of Control
Transaction, without imposing such requirement on, or otherwise changing such
holder's rights with respect to, any other Change of Control Transaction. For
this purpose, any material modification of the terms of a Change of Control
Transaction will be deemed to create a new Change of Control Transaction. A
"CHANGE OF CONTROL TRANSACTION" will be deemed to have occurred upon the earlier
of the announcement or consummation of a transaction or series of transactions
involving (x) any consolidation or merger
<PAGE>
of the Company with or into any other corporation or other entity or person
(whether or not the Company is the surviving corporation), or any other
corporate reorganization or transaction or series of related transactions in
which in excess of 50% of the Company's voting power is transferred through a
merger, consolidation, tender offer or similar transaction, or (y) in excess of
50% of the Company's Board of Directors consists of directors not nominated by
the prior Board of Directors of the Company, or (z) any person (as defined in
Section 13(d) of the Exchange Act, together with its affiliates and associates
(as such terms are defined in Rule 405 under the Act), beneficially owns or is
deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise period) in excess of 50% of the Company's
voting power. The delivery of a Subscription Notice by the Warrant Holder shall
be deemed a representation by such holder that it is in compliance with this
paragraph.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such Warrant, the Company at its expense promptly will execute
and deliver, in lieu thereof a new Warrant of like tenor.
12. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW.
------------------------------------------------------------
a) The Company and the Warrant Holder acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall he entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF SUCH COURT AND ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT TO SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY AND THE WARRANT HOLDER
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT
UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW. IF ANY PROVISION OF THIS WARRANT IS DETERMINED TO BE
UNENFORCEABLE UNDER THE LAWS OF THE STATE OF NEW YORK, AND IF SUCH PROVISION
WOULD BE ENFORCEABLE UNDER THE LAWS OF THE STATE OF WASHINGTON, THEN IT IS
AGREED THAT THE COURTS OF THE STATE OF NEW YORK SHALL INTERPRET AND ENFORCE SUCH
PROVISION PURSUANT TO THE LAWS OF THE STATE OF WASHINGTON.
-9-
<PAGE>
c) THE COMPANY AND THE WARRANT HOLDER IRREVOCABLY WAIVE THEIR RIGHT
TO TRIAL BY JURY.
d) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO ALL
CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
13. REDEMPTION. This Warrant shall be subject to the provisions of
----------
Section 1.4 of the Agreement.
14. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits and the
----------------------------
provisions contained in the Agreement and incorporated into this Warrant and the
Warrant Shares contain the entire understanding of the parties with respect to
the matters covered hereby and thereby and, except as specifically set forth
herein and therein, neither the Company nor the Warrant Holder makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such amendment or
waiver is sought.
15. NOTICES. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
to the Company:
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, Washington 98052
Attention: Chief Financial Officer; General Counsel
Facsimile: (425) 702-5970
to the Warrant Holder:
[NAME AND ADDRESS OF WARRANT HOLDER]
Attention:
Facsimile:
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
-10-
<PAGE>
Attention: Fredric A. Kleinberg, Esq.
Facsimile: (212) 986-8866
Either party hereto may from time to time change its address for notices under
this Section 14 by giving at least 10 days prior written notice of such changed
address to the other party hereto.
16. MISCELLANEOUS. This Warrant and the Warrant Shares and any term
-------------
hereof or thereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. The headings in this Warrant
are for purposes of reference only, and shall not limit or otherwise affect any
of the terms hereof. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
17. ASSIGNMENT. This Warrant may be transferred or assigned, in whole or
----------
in part (but not in amounts exercisable for less than 1,000 shares of Preferred
Stock unless such smaller amount is all that remains under the Warrant), at any
time and from time to time by the then Warrant Holder by submitting this Warrant
to the Company together with a duly executed Assignment in substantially the
form and substance of the Form of Assignment which accompanies this Warrant and,
upon the Company's receipt hereof, and in any event, within three (3) business
days thereafter, the Company shall issue a new Warrant to such assignee and a
Warrant to the Warrant Holder to evidence that portion of this Warrant, if any
as shall not have been so transferred or assigned. By accepting an assignment of
this Warrant, the transferee agrees to be bound by the terms and conditions
hereof, and shall be entitled to all of the rights and remedies of a holder of
this Warrant.
Dated:________________________ METAWAVE COMMUNICATIONS CORPORATION
By: _______________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By: _______________________
Its
[SIGNATURE BLOCK OF WARRANT HOLDER]
(SIGNATURE PAGE OF METAWAVE COMMUNICATIONS CORPORATION PREFERRED STOCK PURCHASE
WARRANT)
-11-
<PAGE>
(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: METAWAVE COMMUNICATIONS CORPORATION
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
______(A) for, and to purchase thereunder, ____________ shares of Preferred
Stock of Metawave Communications Corporation, a Delaware corporation (the
"PREFERRED STOCK"), and herewith, or by wire transfer, makes payment of $
______________ therefor; or
______(B) in a "cashless" or "net-issue exercise" for, and to purchase
thereunder , ______ shares of Preferred Stock, and herewith makes payment
therefor with ______________ Surrendered Warrant Shares.
The undersigned requests that the certificates for such shares be issued
in the name of, and delivered to ___________________, whose address is
_______________________________.
Dated:_____________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
(Address)
Tax Identification Number:___________
-12-
<PAGE>
_____________
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
________________ the right represented by the within Warrant to purchase _______
shares of Preferred Stock of METAWAVE COMMUNICATIONS CORPORATION, a Delaware
corporation, to which the within Warrant relates, and appoints
___________________ Attorney to transfer such right on the books of METAWAVE
COMMUNICATIONS CORPORATION, a Delaware corporation, with full power of
substitution of premises.
Dated: ______________
(Signature must conform to name of holder
as specified on the face of the Warrant)
(Address)
Signed in the presence of:
-13-
<PAGE>
EXHIBIT E
COMPANY SECURITY AGREEMENT
SECURITY AGREEMENT dated as of the [_] day of April, 1998 by and between
METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation, having its
principal place of business at 8700 148th Avenue NE, Redmond, Washington (the
"Company") and each other person signatory hereto and their respective
successors and assigns (each, a "Secured Party" and together, the "Secured
Parties").
RECITALS
A. The Secured Parties and the Company have entered into a Note Agreement,
dated as of April [_], 1998 (as the same may be further amended, modified or
supplemented from time to time, the "Note Agreement"), pursuant to which the
Company will issue Notes (as defined in the Note Agreement) and Warrants (as
defined in the Note Agreement) to each Secured Party.
B. To induce the Secured Parties to enter into the Note Agreement with the
Company on and after the date hereof as provided in the Note Agreement, the
Company wishes to grant each Secured Party a first priority perfected security
interest in certain of its assets and a second priority perfected security
interest in certain of its assets, and in connection therewith to execute and
deliver this Security Agreement.
Accordingly, the parties hereto hereby agree as follows:
DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Note Agreement.
"Agreement": shall mean this Agreement and shall include all
---------
amendments, modifications and supplements hereto and shall refer to this
Agreement as the same may be in effect at the time such reference becomes
operative.
"Equipment": shall mean all machinery, equipment, office machinery,
---------
furniture, fixtures, conveyors, tools, materials, storage and handling
equipment, computer equipment and hardware including central processing units,
terminals, drives, memory units, printers, keyboards, screens, peripherals and
input or output devices, automotive equipment, trucks, molds, dies, stamps,
motor vehicles and other equipment of every kind and nature and wherever
situated now or hereafter directly or indirectly owned by the Company or in
which the Company may have any interest together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers or others in
connection therewith, and together with all substitutions for any of the
foregoing.
<PAGE>
"General Intangibles": shall mean all "General Intangibles," as such
-------------------
term is defined in Section 9-106 of the Uniform Commercial Code of the State of
New York, now or hereafter directly or indirectly owned by Company, including,
without limitation, present and future trade secrets and other proprietary
information; trademarks, trade names and trademark applications, service marks,
business names, logos and the goodwill of the business relating thereto;
copyrights and copyright applications and all tangible property embodying the
copyrights; unpatented inventions (whether or not patentable); designs; research
and development results; patent applications and patents; customer contracts;
license agreements related to any of the foregoing and the income therefrom;
books, records, computer tapes or disks, flow diagrams, specification sheets,
source codes, object codes, and other physical manifestations of the foregoing.
"Inventory": shall mean all goods now or hereafter directly or
---------
indirectly owned by the Company or in which the Company now or hereafter has an
interest intended for sale, lease or other disposition by, or consumption in the
business of, the Company of every kind and nature and wherever located,
including, without limitation, all raw materials, work in process, finished
goods, goods consigned to the Company to the extent of its interest therein as
consignee, goods in transit, materials and supplies of any kind, nature or
description which are or might be used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of any such goods; and all
documents of title or documents representing the same and all records, files and
writings with respect thereto.
"Investment Adviser": shall mean MacKay-Shields Financial Corporation.
------------------
"Receivable": shall mean and include, with respect to the Company, all
----------
directly or indirectly right, title and interest of the Company in all present
and future accounts receivable, contract rights, promissory notes, chattel
paper, all tax refunds and rights to receive tax refunds, bonds, rights of
indemnification, contribution and subrogation, leases, computer tapes, programs
and software, computer service contracts, deposits, causes of action, choses in
action, judgments, and claims against third parties of every kind or nature,
investment securities, notes, drafts, acceptances, letters of credit and rights
to receive proceeds (as such term is defined in Section 9-306 of the New York
State Uniform Commercial Code) of letters of credit, instruments and deposit
accounts, book accounts, credits and reserves and all forms of obligations
whatsoever owing, together with all instruments, all documents of title
representing any of the foregoing, and all rights in any merchandise or goods
which any of the same may represent, all books, ledgers, files and records with
respect to any Collateral or security given to the Secured Party hereunder by
Company, together with all right, title, security and guaranties with respect to
each Receivable, including any right of stoppage in transit.
1. SECURITY
1.01 GRANT OF SECURITY. As security for the Company's obligations
-----------------
under the Note Agreement, the Notes and the Warrants (the "Obligations"), the
Company hereby transfers, assigns and grants to the Secured Parties for the
ratable benefit of the Secured Parties a first priority perfected lien on and
first priority perfected security interest in all of its present and
-2-
<PAGE>
future property and assets (other than real estate) of every kind and
description, both tangible and intangible, including, without limitation, all of
its Receivables (except as provided for in the Intercreditor Agreement, dated as
of the date hereof, by and among Secured Parties, Imperial Bank and the Company
(the "Intercreditor Agreement")) Equipment (except as provided for in any (i)
bona fide equipment leases in the ordinary course of business or (ii) bona fide
purchase money security agreement for fair value ("PM Security Interest") with
respect to any Equipment purchased or financed by the Company from such purchase
money secured party, not to exceed $2,500,000 in the aggregate; but only to the
extent of such fair value and reduced from time to time by payments with respect
thereto), Inventory (except as provided for in the Intercreditor Agreement) and
General Intangibles and all proceeds thereof together with all accessions and
additions thereto, substitutions and replacements therefor and products and
proceeds thereof whether now owned or existing or hereafter arising or acquired
and wherever located (collectively, the "Collateral").
1.02 RELEASE AND SATISFACTION. Upon the termination of this
------------------------
Agreement and the payment in full of the Obligations, the Secured Parties shall
deliver to the Company upon request therefor and at the Company's expense,
releases and satisfactions of all financing statements, notices of assignment
and other registrations of security.
1.03 RECORDS; LOCATION OF COLLATERAL. So long as the Company shall
-------------------------------
have any Obligation to any Secured Party (a) the Company shall not move its
chief executive office, principal place of business or office at which is kept
its books and records (including computer printouts and programs) from the
locations existing on the date hereof and listed on Schedule 1.03 annexed
hereto; (b) the Company shall not establish any offices or other places of
business at any other location; (c) the Company shall not move any of the
Collateral having an aggregate book or market value in excess of $50,000 to any
location other than those locations existing on the date hereof and listed on
Schedule 1.03 annexed hereto, unless, in each case of clauses (a), (b) and (c)
above, (i) the Company shall have given the Secured Parties thirty (30) day's
prior written notice of its intention to do so, identifying the new location and
providing such other information as the Secured Parties deem reasonably
necessary, and (ii) the Company shall have delivered to the Secured Parties
financing statements and such other documentation in form and substance
reasonably satisfactory to each Secured Party and reasonably required by such
Secured Party to preserve the Secured Party's security interest in the
Collateral. Notwithstanding the foregoing, the Company may open sales offices
at other locations without complying with the above requirements provided that
the book or market value of Collateral at each such office does not exceed
$15,000, and the aggregate book or market value of all such Collateral does not
exceed $100,000.
2. REPRESENTATIONS AND WARRANTIES AND COVENANTS
2.01 REPRESENTATIONS AND WARRANTIES AND COVENANTS. The Company
--------------------------------------------
hereby represents and warrants and covenants to each Secured Party with respect
to itself as follows:
-3-
<PAGE>
(a) OWNERSHIP OF COLLATERAL. The Company owns all of the Collateral
-----------------------
free and clear of any lien, encumbrance, mortgage, security agreement, pledge or
charge, except as described on Schedule 2.01(a) hereto.
(b) TRADEMARKS, PATENTS AND COPYRIGHTS. Annexed hereto as Schedule
----------------------------------
2.01(b) is a complete list of all patents, trademarks, trade names, copyrights,
applications therefor, and other similar General Intangibles which the Company
owns or has the right to use as of the date of this Agreement. The Company is
not aware of any assertions or claims challenging the validity or use of any of
the foregoing. The Company has no reason to believe that the business of the
Company as now conducted conflicts with any patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights or copyrights of
others. The Company has no reason to believe that there is any infringement of
any General Intangible of the Company.
(c) RECEIVABLES. Annexed hereto on Schedule 1.03 is a list showing
-----------
the chief place of business and chief executive offices of the Company and all
places at which Company maintains records relating to its Receivables as of the
date of this Agreement.
(d) INVENTORY. Annexed hereto on Schedule 1.03 is a list showing all
---------
places where the Company maintains its Inventory as of the date of this
Agreement. The Company hereby represents and warrants and covenants that none
of its Inventory is currently maintained or will be maintained with any bailee
that issues negotiable warehouse receipts or other negotiable instruments
therefore.
(e) EQUIPMENT. Annexed hereto on Schedule 1.03 is a list describing
---------
all the places where the Equipment of the Company is located.
(f) TRADE NAMES. The Company has not done during the five years prior
-----------
to this Agreement, and does not currently do, business under fictitious business
names or trade names. The Company has not been known under any other name
during such five year period. The Company will only change its name or do
business under any other fictitious business names or trade names during the
term of this Agreement after giving not less than thirty (30) days prior written
notice to the Secured Parties.
(g) ENFORCEABILITY OF SECURITY INTERESTS. Upon the execution of this
------------------------------------
Agreement by the Company and the filing of financing statements describing the
Collateral and identifying the Company as debtor and each Secured Party as the
secured party in the jurisdictions identified on Schedule 2.01(g)(i) annexed
hereto, the security interests and liens granted to the Secured Parties under
Section 1.01 hereof shall constitute valid, perfected and first priority
security interests and liens in and to the Collateral, other than (i) Collateral
listed on Schedule 2.01(g)(ii) which may not be perfected by filing under the
Uniform Commercial Code, in each case enforceable against all third parties and
securing the payment of all Obligations purported to be secured thereby, (ii)
Equipment, subject to a Purchase Money Security Interest, in which the Secured
Parties shall have a valid, perfected and second priority security interest and
liens in and to such Equipment, and (iii) Inventory and Receivables, in which
the Secured Parties shall have a valid, perfected and first and second priority
security interest and liens to
-4-
<PAGE>
such Inventory and Receivables as provided in the Inter-Creditor Agreement. As
to the Collateral listed on Schedule 2.01(g)(ii) the Secured Party will have a
valid, perfected and first priority securities interest and lien in and to such
Collateral upon the taking of such steps as shall be legally required to perfect
such security interest.
(h) SUBSIDIARIES. The Company represents and warrants that it
------------
has no subsidiaries. In the event that the Company shall create, own or have any
interest in any subsidiary, the Company shall: (i) cause such subsidiary to
issue a joint and several guarantee for the benefit of Secured Parties,
guaranteeing payment and performance of the Obligations, in form and substance
satisfactory to Secured Parties; (ii) cause such subsidiary to grant to Secured
Parties, to secure the Obligations, pursuant to a security agreement in form and
substance satisfactory to Secured Parties, a first priority perfected lien in
all assets of such subsidiary; except where such subsidiary has been acquired by
the Company in a transaction where the purchase consideration consisted of the
Company's capital stock, in which case such subsidiary shall grant to Secured
Parties a perfected lien in all such subsidiary's assets, junior in priority
only to perfected liens existing prior to the acquisition; and (iii) pledge to
Secured Parties, to secure the Obligations, all outstanding capital stock of
such subsidiary.
3. FURTHER RIGHTS OF SECURED PARTY,
-------------------------------
3.01 FURTHER ACTIONS. The Company shall do all things, take all
---------------
further action and deliver all documents and instruments requested by a Secured
Party to protect or perfect any security interest, mortgage or lien given
hereunder or under any other related document to which it is a party, including,
without limitation, financing statements under the Uniform Commercial Code and
all documents and instruments necessary under the Federal Assignment of Claims
Act and under any applicable foreign law. The Company authorizes each Secured
Party or the Investment Advisor to execute, alone, any financing statement or
other documents or instruments that such Secured Party may require to perfect,
protect or establish any lien or security interest hereunder or under any other
related document and further authorizes each Secured Party or the Investment
Advisor to sign the Company's name on the same. Upon the occurrence of an Event
of Default, the Company appoints each Secured Party or the Investment Advisor or
either's designee as the Company's attorney-in-fact to endorse the name of the
Company on any checks, notes, drafts or other forms of payment or security that
may come into the possession of such Secured Party or the Investment Advisor or
either's designee or any affiliate thereof, to sign the Company's name on
invoices or bills of lading, drafts against customers, notices of assignment,
verifications and schedules and, generally, to do all things necessary to carry
out this Agreement. Upon the occurrence and continuance of an Event of Default,
such attorney-in-fact may, at any time, notify the Postal Service authorities to
change the Company's address of delivery of mail to an address designated by the
Secured Party or the Investment Advisor or either's designee. The powers
granted herein, being coupled with an interest, are irrevocable until all of the
Obligations are irrevocably paid and discharged in full and this Agreement is
terminated. No Secured Party, no Investment Advisor nor any attorney-in-fact
shall be liable for any act or omission, error in judgment or mistake of law
provided the same is not the result of bad faith or willful misconduct.
-5-
<PAGE>
3.02 INSURANCE AND ASSESSMENTS. In the event the Company shall fail
-------------------------
to purchase or maintain insurance, or pay any tax, assessment, government charge
or levy, or in the event that any lien, encumbrance or secured interest
prohibited hereby shall not be paid in full or discharged, or in the event the
Company shall fail to perform or comply with any other covenant, promise or
obligation to a Secured Party hereunder, such Secured Party may, but shall not
be required to, perform, pay, satisfy, discharge or bond the same for the
account of the Company, and all money so paid by such Secured Party, including
reasonable attorney's fees, shall be deemed an Obligation of the Company.
3.03 NOTICES. Any Secured Party or the Investment Advisor may at any
-------
time after the occurrence and continuance of an Event of Default notify
customers or account debtors that the Collateral has been assigned to such
Secured Party or of its secured interest therein and to direct such account
debtors or customers to make payment of all amounts due or to become due to the
Company directly to such Secured Party and upon such notification and at the
Company's expense to enforce collection of any such Collateral, and to adjust,
compromise or settle for cash, credit or otherwise upon any terms the amount of
payment thereof.
3.04 INSPECTION. Any Secured Party or the Investment Advisor or
----------
their designee may from time to time examine and inspect the Inventory,
Equipment or other Collateral and may from time to time examine, inspect and
copy all books and records with respect thereto or relevant to the Collateral
and/or Obligations during the Company's normal business hours upon reasonable
prior notice to the Company.
3.05 RIGHT OF ENTRY. Upon the occurrence of an Event of Default, any
--------------
Secured Party may (to the extent not prohibited by law), without charge, enter
any of the Company's premises, and until it completes the enforcement of its
rights in the Inventory or the Equipment or other Collateral subject to its
security interest hereunder and the sale or other disposition of any property
subject thereto, take possession of such premises without charge, rent or
payment therefor (through self help without judicial process and without having
first given notice or obtained an order of any court), or place custodians in
control thereof, remain on such premises and use the same for the purpose of
completing any work in progress, preparing any Collateral for disposition, and
disposition of or collecting any Collateral.
3.06 MORTGAGEE/LANDLORD WAIVERS. The Company shall, promptly
--------------------------
following the date hereof, cause each mortgagee of real property owned by the
Company and each landlord of real property leased by the Company to execute and
deliver instruments satisfactory in form and substance to each Secured Party by
which such mortgagee or landlord waives its rights, if any, in the Collateral
and acknowledges the right of such Secured Party to enter the premises to remove
the Collateral.
3.07 INDEMNIFICATION. The Company agrees to indemnify each Secured
---------------
Party and the Investment Advisor and their respective members, managers,
partners, officers, directors and employees and hold all of them harmless from
and against any and all injuries, claims, damages, judgments, liabilities, costs
and expenses (including, without limitation, reasonable fees and disbursements
of counsel), charges and encumbrances which may be incurred by or
-6-
<PAGE>
asserted against them in connection with or arising out of or relating to the
Collateral or the Obligations, including any assertion, declaration or defense
of their claims, rights or security interest under the provisions of this
Agreement, permitting them to collect, settle or adjust Collateral or to deal
with account debtors in any way or in connection with the realization,
repossession, safeguarding, insuring or other protection of the Inventory, the
Equipment or other Collateral or in connection with the collecting, perfecting
or protecting each such Secured Party's liens and security interests hereunder,
or in connection with this Agreement or the enforcement of this Agreement or the
amendment of this Agreement, except to the extent resulting from such secured
party's bad faith or willful misconduct.
4. REMEDIES OF SECURED PARTY.
4.01 ENFORCEMENT. Upon the occurrence of any Event of Default, a
-----------
Secured Party shall have, in addition to all of its other rights under this
Agreement by operation of law or otherwise (which rights shall be cumulative),
all of the rights and remedies of a secured party under the Uniform Commercial
Code and shall have the right to enter upon any premises where such Collateral
is kept and retake possession thereof. Upon the occurrence of an Event of
Default, a Secured Party or the Investment Adviser or their designee may,
without demand, advertising or notice, all of which the Company hereby waives
(except as the same may be required by law), sell, lease, dispose of, deliver
and grant options to a third party to purchase, lease or otherwise dispose of
any and all Equipment, Inventory, Receivables, General Intangibles or other
security or Collateral held by it or for its account at any time or times in one
or more public or private sales or other dispositions, for cash, on credit or
otherwise, at such prices and upon such terms as such Secured Party, in its sole
discretion, deems advisable. The Company agrees that if notice of sale shall be
required by law such requirement shall be met if such notice is mailed, postage
prepaid, to the Company at its address set forth above or such other address as
it may have, in writing, provided to the Secured Parties, at least five (5) days
before the time of such sale or dispositions. Notice of any public sale shall
be sufficient if it describes the security or Collateral to be sold in general
terms, stating the amounts thereof, the nature of the business in which such
Collateral was created and the location and nature of the properties covered by
the other security interests or mortgages and the prior liens thereon. A
Secured Party or the Investment Adviser or their designee may postpone or
adjourn any sale of any Collateral from time to time by an announcement at the
time and place of the sale to be so postponed or adjourned without being
required to give a new notice of sale. A Secured Party or the Investment
Adviser or their designee may be the purchaser at any such sale if it is public,
free from any right of redemption, which the Company also waives, and payment
may be made, in whole or in part, in respect of such purchase price by the
application of the Obligations to the Secured Party. The Company, with respect
to its property constituting such Collateral, shall be obligated for, and the
proceeds of sale shall be applied first to, the reasonable costs of retaking,
assembling, finishing, collecting, refurbishing, storing, guarding, insuring,
preparing for sale, and selling the Collateral, including the reasonable fees
and disbursements of attorneys, auctioneers, appraisers and accountants employed
by a Secured Party or the Investment Adviser or their designee. Proceeds shall
then be applied to the payment, in whatever order such Secured Party or the
Investment Adviser or their designee may elect, of all of the Obligations. Such
Secured Party shall return any excess to the Company or to whomever may be fully
entitled to receive the
-7-
<PAGE>
same or as a court of competent jurisdiction may direct. The Company shall
remain liable for any deficiency.
4.02 WAIVER. The Company waives any right, to the extent applicable
------
law permits, to receive prior notice of or a judicial or other hearing with
respect to any action or prejudgment remedy or proceeding by a Secured Party (or
the Investment Advisor or their designee) to take possession, exercise control
over, or dispose of any item of the Collateral in any instance (regardless of
where the same may be located) where such action is permitted under the terms of
this Agreement or by applicable law or of the time, place or terms of sale in
connection with the exercise of such Secured Party's rights hereunder and also
waives, to the fullest extent permitted by law, any bonds, security or sureties
required by any statute, rule or otherwise by law as an incident to any taking
of possession by such Secured Party or the Investment Adviser or their designee
of property subject to such Secured Party's lien. The Company also waives any
damages (direct, consequential or otherwise) occasioned by the enforcement of a
Secured Party's rights under this Agreement including the taking of possession
of any Collateral all to the extent that such waiver is permitted by law and to
the extent that such damages are not caused by such Secured Party's bad faith or
willful misconduct. These waivers and all other waivers provided for in this
Agreement have been negotiated by the parties and the Company acknowledges that
it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.
4.03 OTHER RIGHTS. The Company agrees that no Secured Party shall
------------
have any obligation to preserve rights to any Collateral against prior parties
or to proceed first against any Collateral or to marshall any Collateral of any
kind for the benefit of any other creditors of the Company or any other Person.
Each Secured Party is hereby granted, to the extent that the Company is
permitted to grant a license or right of use, a license or other right to use,
without charge, labels, patents, copyrights, rights of use, of any name, trade
secrets, trade names, trademarks and advertising matter, or any property of a
similar nature of the Company as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and the
Company's rights under all licenses and any franchise, sales or distribution
agreements shall inure to each Secured Party's benefit.
4.04 DISPOSITION OF PROCEEDS. The proceeds of any sale or
-----------------------
disposition of all or any part of the Collateral shall be applied by each
Secured Party in the following order: (i) to the payment in full of the costs
and expenses of such sale or sales, collections, and the protection, declaration
and enforcement of any security interest granted hereunder including the
compensation of such Secured Party's agents and attorneys; (ii) to the payment
of the Obligations; and (iii) to the payment to the Company of any surplus then
remaining from such proceeds, subject to the rights of any holder of a lien on
the Collateral of which such Secured Party has actual notice. In the event that
the proceeds of any sale or other disposition of the Collateral are insufficient
to cover the principal of, and premium, if any, and interest on, the Obligations
secured thereby plus costs and expenses of the sale or other disposition, the
Company shall remain liable for any deficiency.
-8-
<PAGE>
4.05 EXPENSES. The Company agrees that it shall pay all costs and
--------
expenses incurred in amending, implementing, perfecting, collecting, defending,
declaring and enforcing such Secured Party's rights and security interests in
the Collateral hereunder or under the Note Agreement, the Notes, the Warrants or
any other related document, or other instrument or agreement delivered in
connection herewith or therewith, including, but, not limited to, searches and
filings at all times, and such Secured Party's reasonable attorneys fees and
disbursements (regardless of whether any litigation is commenced, whether
default is declared hereunder, and regardless of tribunal or jurisdiction).
5. GENERAL PROVISIONS
5.01 TERMINATION. This Agreement shall remain in full force and
-----------
effect until all the Obligations shall have been indefeasible fully paid and
satisfied and, until such time, the Secured Party shall retain all security in
and title to all existing and future Equipment, Inventory, Receivables and
General Intangibles and other Collateral held by it hereunder.
5.02 REMEDIES CUMULATIVE. A Secured Party's rights and remedies
-------------------
under this Agreement shall be cumulative and non-exclusive of any other rights
or remedies which it may have under the Note Agreement, the Notes, the Warrants
or any other agreement or instrument, by operation of law or otherwise and may
be exercised alternatively, successively or concurrently as such Secured Party
may deem expedient.
5.03 BINDING EFFECT. This Agreement is entered into for the benefit
--------------
of the parties hereto and their successors and assigns. It shall be binding
upon and shall inure to the benefit of the said parties, their successors and
assigns.
5.04 NOTICES. Wherever this Agreement provides for notice to any
-------
party (except as expressly provided to the contrary), it shall be given in the
manner specified and shall be addressed as set forth in Section 9.5 of the Note
Agreement.
5.05 WAIVER. No delay or failure on the part of a Secured Party or
------
the Investment Advisor in exercising any right, privilege, remedy or option
hereunder shall operate as a waiver of such or any other right, privilege,
remedy or option, by such Secured Party or the Investment Advisor, and no waiver
shall be valid as to a Secured Party or the Investment Advisor, unless in
writing and signed by an officer or other authorized signatory of such Secured
Party or the Investment Advisor and then only to the extent therein set forth.
5.06 MODIFICATIONS AND AMENDMENTS. This Agreement and the other
----------------------------
agreements and instruments to which it refers constitute the complete agreement
between the parties with respect to the subject matter hereof and may not be
changed, modified, waived, amended or terminated orally, but only by a writing
signed by the party to be charged.
5.07 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
------------------------------------------
and warranties of the Company made or deemed made herein shall survive the
execution and delivery of this Agreement.
-9-
<PAGE>
5.08 APPLICABLE LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
-------------------------------------------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK OR THE STATE COURTS OF NEW YORK SITTING IN NEW
YORK COUNTY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
5.09 SEVERABILITY. If any provision hereof shall be held to be void,
------------
illegal or unenforceable it shall be deemed severable from the remaining
provisions hereof which shall remain in full force and effect.
5.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
-------------------------
any number of counterparts and by different Parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
5.11 ASSIGNMENT. The Company may not assign or transfer its rights
----------
or obligations hereunder without the prior written consent of the Secured
Parties. Secured Parties may assign their rights under this Agreement to
transferees of the Notes.
5.12 ACTION OF SECURED PARTIES. Any action required or permitted to
-------------------------
be taken, or otherwise taken, by the Secured Parties shall be by a vote of a
majority-in-interest of the Secured Parties.
5.13 INVESTMENT ADVISOR. The Investment Advisor shall have no
------------------
obligation or responsibility hereunder of any kind, and may refrain from taking
any action for any reason or for no reason without incurring any liability to
any party. The Investment Advisor shall not be deemed a fiduciary or agent of
any party by virtue of this agreement.
5.14 CONSTRUCTION OF CERTAIN PROVISIONS. If any provision of this
----------------------------------
Agreement is determined to be unenforceable under the laws of the State of New
York, and if such provision would be enforceable under the laws of the State of
Washington, then it is agreed that the Courts of the State of New York shall
interpret and enforce such provision pursuant to the laws of the State of
Washington.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized, on the day and year first
above written.
-10-
<PAGE>
METAWAVE COMMUNICATIONS
CORPORATION, as Company
By: _______________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-11-
<PAGE>
THE BROWN & WILLIAMSON MASTER
RETIREMENT TRUST
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-12-
<PAGE>
THE MAINSTAY FUNDS, ON BEHALF OF
ITS STRATEGIC INCOME FUND SERIES
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-13-
<PAGE>
HIGHBRIDGE CAPITAL CORPORATION
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-14-
<PAGE>
THE MAINSTAY FUNDS, ON BEHALF OF
ITS HIGH YIELD CORPORATE BOND FUND SERIES
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-15-
<PAGE>
MAINSTAY VP SERIES FUND INC. ON BEHALF OF
ITS HIGH YIELD CORPORATE BOND PORTFOLIO
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-16-
<PAGE>
POLICE OFFICERS PENSION SYSTEM OF THE
CITY OF HOUSTON
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-17-
<PAGE>
VULCAN MATERIALS COMPANY HIGH YIELD
ACCOUNT
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-18-
<PAGE>
THE 1199 HEALTH CARE EMPLOYEES PENSION
FUND
By: MacKay-Shields Financial Corporation
Its: Investment Advisor
By: ______________________________________
Name: Jeffrey B. Platt
Title: Director
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-19-
<PAGE>
BT HOLDINGS (NY), INC.
By: ______________________________________
Name:
Title:
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-20-
<PAGE>
IMPERIAL BANK
By: ______________________________________
Name: Jim Ellison
Title: Senior Vice President
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-21-
<PAGE>
POWERWAVE TECHNOLOGIES, INC.
By: ______________________________________
Name: Bruce C. Edwards
Title: President and Chief Executive
Officer
[SIGNATURE PAGES CONTINUED ON NEXT PAGE]
-22-
<PAGE>
BANKAMERICA INVESTMENT CORPORATION
By: ______________________________________
Name:
Title:
-23-
<PAGE>
Schedule of Lenders
- -------------------
The Brown & Williamson Master Retirement Trust (Registered holder: Iceship &
Co.)
The Mainstay Funds, on behalf of its Strategic Income Fund Series (Registered
holder: Hare & Co.)
Highbridge Capital Corporation (Registered holder: Bear Stearns Securities
Corp.)
The Mainstay Funds, on behalf of its High Yield Corporate
Bond Fund Series (Registered holder: Daffodil & Co.)
Mainstay VP Series Fund Inc., on behalf of its High Yield Corporate
Bond Portfolio (Registered holder: Hare & Co.)
Police Officers Pension System of the City of Houston (Registered holder: Booth
& Co.)
Vulcan Materials Company High Yield Account (Registered holder: Booth & Co.)
The 1199 Health Care Employees Pension Fund (Registered holder: Booth & Co.)
c/o MacKay-Shields Financial Corporation
9 West 57th Street
New York, New York 10019
BT Holdings (NY), Inc. (Registered holder: BT Alex Brown Inc.)
14 Wall Street
7th Floor
New York, New York 10005
Imperial Bank
777 108th Avenue NE
Bellevue, Washington 98004-6672
Powerwave Technologies, Inc.
2026 McGaw Avenue
Irvine, California 92614
BankAmerica Investment Corporation
231 South LaSalle Street
Chicago, Illinois 60697
-24-
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our reports dated March 13,
1998, except for Note 13, as to which the date is April 28, 1998, in the
Registration Statement (Form S-1) and related Prospectus of Metawave
Communications Corporation for the registration of 5,000,000 shares of its
common stock.
Ernst & Young LLP
Seattle, Washington
July 22, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 MAR-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 13,334 20,311
<SECURITIES> 0 0
<RECEIVABLES> 1,444 3,792
<ALLOWANCES> 0 0
<INVENTORY> 4,080 12,000
<CURRENT-ASSETS> 142 5,253
<PP&E> 5,658 8,421
<DEPRECIATION> 2,252 3,389
<TOTAL-ASSETS> 22,575 46,557
<CURRENT-LIABILITIES> 3,323 37,569
<BONDS> 0 0
0 0
49,282 49,282
<COMMON> 1,968 2,162
<OTHER-SE> (35,104) (50,959)
<TOTAL-LIABILITY-AND-EQUITY> 22,575 46,557
<SALES> 0 0
<TOTAL-REVENUES> 1,450 6,501
<CGS> 0 0
<TOTAL-COSTS> 1,728 6,396
<OTHER-EXPENSES> 22,228 14,541
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 449 2,231
<INCOME-PRETAX> (22,104) (16,183)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (22,104) (16,183)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (22,104) (16,183)
<EPS-PRIMARY> (1.54) (1.01)
<EPS-DILUTED> (1.54) (1.01)
</TABLE>
<PAGE>
EXHIBIT 99.1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE
We have audited the financial statements of Metawave Communications
Corporation as of December 31, 1997 and 1996, and the related statements of
operations, shareholders' equity (deficit) and cash flows for the years then
ended and the period from January 19, 1995 (inception) to December 31, 1995,
and have issued our report thereon dated March 13, 1998, except for Note 13,
as to which the date is April 28, 1998, (included elsewhere in this
Registration Statement). Our audits also included the financial statement
schedule listed in Item 16(b) of this Registration Statement. This schedule is
the reponsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Seattle, Washington
March 13, 1998
<PAGE>
EXHIBIT 99.2
<TABLE>
<CAPTION>
METAWAVE COMMUNICATIONS CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Balance at Charged To Charged to Balance at
Beginning of Costs and Other End of
DESCRIPTION Period Expenses Accounts Deductions Period
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Period from January 16,
(Date of formation) through
December 31, 1995:
Balance sheet allowances $ -- -- -- -- $ --
Inventory reserves $ -- -- -- -- $ --
Warranty reserves $ -- -- -- -- $ --
Year ended December 31, 1996:
Balance sheet allowances $ -- -- -- -- $ --
Inventory reserves $ -- -- -- -- $ --
Warranty reserves $ -- -- -- -- $ --
Year ended December 31, 1997:
Balance sheet allowances $ -- 467 -- -- $ 467
Inventory reserves $ -- 870 -- -- $ 870
Warranty reserves $ -- -- -- -- $ --
Period ended June 30 , 1998:
Balance sheet allowances $ 467 28 -- 200(a) $ 295
Inventory reserves $ 870 -- -- 96(b) $ 774
Warranty reserves $ -- 320 -- 90(b) $ 230
</TABLE>
(a) Represents writeoff of assets reserve for disposition of assets
(b) Represents adjustments of estimates
