<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1998
REGISTRATION NO. 333-59621
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
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:
<TABLE>
<S> <C>
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
</TABLE>
---------------
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. [_]
---------------
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
OCTOBER , 1998
3,500,000 SHARES
[LOGO OF METAWAVE COMMUNICATIONS CORPORATION]
COMMON STOCK
All of the 3,500,000 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 $14 and $16 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 INVOLVE 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
$1,000,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 525,000 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, 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.
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.]
Metawave has applied for federal registration of the marks "Metawave,"
"Metawave Communications," "SpotLight," "LampLighter," "SiteNet" and its
stylized cube logo. 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) a 7-for-10 reverse stock split that
will be effective prior to the effective date of the offering, (ii) no exercise
of the Underwriters' over-allotment option, (iii) no exercise of outstanding
warrants, (iv) the filing of the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") authorizing a class of 10,500,000
shares of undesignated Preferred Stock upon completion of this offering and
(v) the automatic conversion on a one-for-one basis of an aggregate of
9,191,222 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 believes that its 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") (which was recently
acquired by ALLTEL), GTE Wireless, Inc. ("GTE") 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 Southwestco Wireless, Inc. ("Southwestco"). St. Petersburg Telecom,
Telefonica Celular and ALLTEL accounted for approximately 27.4%, 24.0% and
44.2%, respectively, of the Company's net revenue in the six months ended June
30, 1998.
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
3
<PAGE>
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.
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 SpotLight 2000 system is currently deployed in cellular
networks in North America, South America and Europe. Commercial shipment of the
SpotLight 2000 system began in late 1997 for the Motorola HDII analog-only
version and Metawave recently completed a field trial of a Lucent Series II
dual-mode AMPS/CDMA SpotLight 2000 system. The Company has begun development of
a product designed for the GSM market and intends to explore other high-growth
markets such as PCS, TDMA and WLL and, if appropriate, to develop similar
solutions for these markets. There can be no assurance, however, that the
Company will successfully develop these new products or that field trials will
lead to commercial sales.
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 ten issued U.S.
patents and 23 pending patent applications, by investing substantial resources
in the research and the 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 was in the development stage until late 1997, when it commenced
shipments for commercial sale of its first spectrum management system. At June
30, 1998, the Company had generated total net revenues of $9.2 million and a
cumulative net loss of approximately $50.1 million. 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. 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 12 months. Thereafter, the Company
may be required to raise additional capital.
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........... 3,500,000 shares
Common Stock to be outstanding after the
offering..................................... 14,816,347 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 YEAR ENDED SIX MONTHS ENDED
JANUARY 19, 1995 DECEMBER 31, JUNE 30,
(INCEPTION) TO ------------------ -----------------
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)
======= ======== ======== ======= ========
Basic and diluted net
loss per share......... (1.09) (5.67) (11.59) (4.80) (7.92)
======= ======== ======== ======= ========
Shares used in
computation of basic
and diluted net loss
per share(2)........... 918 1,904 1,907 1,859 2,043
======= ======== ======== ======= ========
Pro forma net loss per
share.................. (.37) (1.51) (2.19) (.95) (1.44)
======= ======== ======== ======= ========
Shares used in
computation of pro
forma net loss per
share(2)............... 2,722 7,140 10,076 9,372 11,234
======= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 20,311 $ 51,936
Working capital........................................ 3,787 51,612
Total assets........................................... 46,557 78,182
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) $ 52,733
</TABLE>
- -------
(1) Based on the number of shares outstanding on June 30, 1998. Excludes as of
June 30, 1998, (i) 2,294,449 shares issuable upon exercise of outstanding
options at a weighted average exercise price of $2.81 per share (ii)
462,960 shares issuable upon exercise of outstanding warrants at a weighted
average exercise price of $0.98 per share and (iii) an aggregate of
1,407,448 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 and Note 7 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 376,245
shares of Series D Preferred Stock at a purchase price of $0.01 per share
(the "Note Warrants"). Concurrently with the automatic conversion of the
Company's outstanding Preferred Stock on a one-for-one basis into Common
Stock upon the closing of this offering, the Note Warrants will
automatically convert into warrants to purchase 376,245 shares of the
Company's Common Stock at an exercise price of $0.01 per share. 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 $15.00 per share net of offering expenses; (ii) the conversion of
convertible and redeemable Preferred Stock into 9,191,222 shares of 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 net 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, five 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 Company. The Company's sales cycle can last up to 18 months or more and
varies substantially from
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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 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 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 profits 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 profits. 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.
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
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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 ArrayComm, Inc. and GEC-Marconi Hazeltine Corporation. In
addition, Ericsson recently began a commercial trial of a GSM base station
which utilizes adaptive antenna technology. 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
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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.
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<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.
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<PAGE>
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 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,
Dr. Reudink and Victor K. Liang. 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. 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."
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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 51.4% 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 U.S. 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.
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dollar could make the Company's systems less price-competitive, or could cause
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. In the United States, the products must be
certified by the Federal Communications Commission before sales to customers
may commence. Other countries have similar regulations that must be complied
with before product sales may commence. 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
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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 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 ten issued U.S. patents and 23
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
16
<PAGE>
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, 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. Although the
Company believes that its internally developed products, systems and
applications are designed to be year 2000 compliant, the Company utilizes
third party equipment and software that may not be year 2000 compliant. The
Company has not fully assessed the compliance of its third party systems.
Failure of such third party systems to properly process data related to the
year 2000 could cause interruptions in the Company's operations and could
require the Company to incur unanticipated expenses to remedy any problems. In
addition, if the Company's customers or suppliers experience difficulties with
year 2000 issues, it could adversely impact sales of the Company's products to
such customers or disrupt the supply of necessary components to the Company by
such suppliers. The Company is in the early stages of assessing the risk and
impact of its customers' and suppliers' year 2000 issues and significant
uncertainty exists concerning the potential costs and effects associated with
any year 2000 compliance issues. Any year 2000 compliance problems of either
the Company, its customers or its suppliers could have a material adverse
effect on the Company's business, results of operations and financial
condition.
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
17
<PAGE>
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 of the proceeds from this offering 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 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 3,500,000 shares offered hereby and an additional 142,836
shares held by current stockholders may be resold immediately in the public
market. Beginning 90 days after the date of this Prospectus, approximately
46,147 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 691,369 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 10,458,787 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 10,736,787 shares of
Common Stock and the holders of the Note Warrants (collectively 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% 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
18
<PAGE>
the Company's Common Stock. Certain of these provisions allow the Company to
issue up to 10,500,000 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 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 $15.00 per share,
dilution to new investors will be $11.44 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 3,500,000
shares of Common Stock offered hereby, at an assumed initial public offering
price of $15.00 per share, are estimated to be $47.8 million ($55.1 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 businesses,
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 it 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 3,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $15.00 per share, (ii) and as
adjusted to give effect to the sale by the Company of the 3,500,000 shares of
Common Stock offered hereby at an assumed offering price of $15.00 per share,
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company, and the application of the
estimated net 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, 14,000,000 shares authorized, 9,191,222
shares which have been designated as convertible and
redeemable, actual; 10,500,000 shares authorized, none
issued or outstanding, as adjusted(1)..................... -- --
Common stock, 28,000,000 shares authorized, 2,125,125
shares issued and outstanding, actual; 105,000,000 shares
authorized, 14,816,347 shares issued and outstanding, as
adjusted(1)............................................... 2,162 103,692
Deferred stock compensation.................................. (877) (877)
Accumulated deficit.......................................... (50,082) (50,082)
------- -------
Total stockholders' equity (deficit)..................... (48,797) 52,733
------- -------
Total capitalization..................................... $40,008 $71,633
======= =======
</TABLE>
- --------
(1) Based on the number of shares outstanding on June 30, 1998 and as adjusted
to reflect the post-offering capitalization of the Company. Excludes as of
June 30, 1998 (a) 2,294,449 shares issuable upon exercise of outstanding
options at a weighted average exercise price of $2.81 per share as of June
30, 1998, (b) 462,960 shares issuable upon exercise of outstanding
warrants at a weighted average exercise price of $0.98 per share as of
such date and (c) an aggregate of 1,407,448 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 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 $0.43 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 3,500,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $15.00 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 $52.7 million, or $3.56 per share. This represents an
immediate increase in net tangible book value of $3.13 per share to existing
stockholders and an immediate dilution of $11.44 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................ $15.00
Pro forma net tangible book value per share as of June 30,
1998........................................................ $0.43
Increase per share attributable to new investors............. 3.13
-----
Pro forma net tangible book value per share after the offering. 3.56
------
Dilution per share to new investors............................ $11.44
======
</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).... 11,316,347 76.4% $ 49,562,853 48.6% $ 4.38
New investors............... 3,500,000 23.6 52,500,000 51.4% 15.00
---------- ----- ------------ -----
Total..................... 14,816,347 100.0% $102,062,853 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) Based on the pro forma number of shares outstanding on June 30, 1998.
Excludes as of June 30, 1998 (a) 2,294,449 shares issuable upon exercise
of outstanding options at a weighted average exercise price of $2.81 per
share as of June 30, 1998, (b) 462,960 shares issuable upon exercise of
outstanding warrants at a weighted average exercise price of $0.98 per
share as of such date and (c) an aggregate of 1,407,448 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)
======= ======== ======== ======= ========
Basic and diluted net
loss per share......... (1.09) (5.67) (11.59) (4.80) (7.92)
======= ======== ======== ======= ========
Shares used in
computation of basic
and diluted net loss
per share(1)........... 918 1,904 1,907 1,859 2,043
======= ======== ======== ======= ========
Pro forma net loss per
share.................. (.37) (1.51) (2.19) (.95) (1.44)
======= ======== ======== ======= ========
Shares used in
computation of pro
forma net loss per
share(1)............... 2,722 7,140 10,076 9,372 11,234
======= ======== ======== ======= ========
</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 and Note 7 of Notes to Financial Statements for an explanation
of the method used to compute the number of shares used in computing 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 believes that its
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. 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. If a material
amount of future sales are denominated in foreign currencies, a decrease in
the value of foreign currencies relative to the U.S. dollar could result in
losses from such transactions.
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 profits 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."
RECENT DEVELOPMENT
Net revenue for the quarter ended September 30, 1998 was $6.6 million, of
which 2.1% was international sales.
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 51.4% 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
net revenues, the Company expects international sales to decrease as a
percentage of net revenue in the near term as sales of the Company's Spotlight
2000 system for the CDMA protocol in North America are expected to increase.
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.
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<PAGE>
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, 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 $45.6 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 8 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 establishment of an inventory obsolescence
reserve of $870,000 and 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
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<PAGE>
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
$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.................. $ (0.44) $ (0.51) $ (0.61) $ (0.61) $ (0.60) $ (0.82)
======= ======= ======= ======= ======= =======
</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.
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<PAGE>
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 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 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. Although the Company believes that its internally developed
products, systems and applications are designed to be year 2000 compliant, the
Company utilizes third party equipment and software that may not be year 2000
compliant. The Company has not fully assessed the compliance of its third
party systems. Failure of such third party systems to properly process data
related to the year 2000 could cause interruptions in the Company's operations
and could require the Company to incur unanticipated expenses to remedy any
problems. In addition, if the Company's customers or suppliers experience
difficulties with year 2000 issues, it could adversely impact sales of the
Company's products to such customers or disrupt the supply of necessary
components to the Company by such suppliers. The Company is in the early
stages of assessing the risk and impact of its customers' and suppliers' year
2000 issues and significant uncertainty exists concerning the potential costs
and effects associated with any year 2000 compliance issues. Any year 2000
compliance problems of either the Company, its customers or its suppliers
could have a material adverse effect on the Company's business, results of
operations and financial condition.
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
29
<PAGE>
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 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
376,245 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
30
<PAGE>
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 9 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.
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
"Risk Factors--Need for Additional Capital" and "Use of Proceeds."
31
<PAGE>
BUSINESS
OVERVIEW
Metawave designs, develops, manufactures and markets spectrum management
solutions for the wireless communications industry. Metawave believes that its
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 (which
was recently acquired by ALLTEL), GTE 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 Southwestco.
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. In addition, the
Company has recently accelerated its engineering and market development
activities aimed at the GSM market. The Company intends to explore other high-
growth markets such as PCS, TDMA and WLL and, if appropriate, to develop
similar solutions for such markets. There can be no assurance, however, that
the Company will successfully develop and commercialize products for these
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
34
<PAGE>
operator's network. In addition, the Company has developed expertise in
assisting cellular network operators in planning and improving overall network
performance.
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 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. There can be no assurance, however,
that the Company will successfully develop and commercialize products for
these additional markets. 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.
35
<PAGE>
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. The Company believes that approximately half of
the 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 111 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 GSM product that is intended to provide cost-
effective spectrum management solutions for GSM network operators. The product
is currently in the engineering prototype stage.
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. The
Company's products currently are compatible only with AMPS and CDMA wireless
products.
<TABLE>
<CAPTION>
PREDOMINANT
GEOGRAPHIC ESTIMATED SUBSCRIBERS
MARKET PROTOCOL REGIONS WORLDWIDE, 1997(2)
<C> <S> <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 Europe 4,933,956
Telephone) Asia
- ---------------------------------------------------------------------------------
Digital Cellular CDMA (Code Division North America 3,963,162
Multiple Access)(1) Latin America
Asia
-------------------------------------------------------------------
TDMA (Time Division North America 6,721,635
Multiple Access) Latin America
Asia
-------------------------------------------------------------------
GSM (Global System for Europe 48,495,238
Mobile Asia
Communications)(3)
-------------------------------------------------------------------
PDC (Pacific Digital Japan 21,959,350
Cellular)
- ---------------------------------------------------------------------------------
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 Asia 8,161,656
System)
- ---------------------------------------------------------------------------------
</TABLE>
(1) Indicates markets the Company's products currently address.
(2) As reported by the Strategis Group, 1997.
(3) The Company is currently developing a GSM engineering prototype. There can
be no assurance, however, that the Company will successfully develop a
product that addresses the needs of the GSM market or the other markets
that it does not currently address. See "Risk Factors--Rapid Technological
Change and Requirement for Frequent New Product Introductions."
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
37
<PAGE>
wireless bandwidth, thereby enhancing the performance and increasing overall
network capacity of the cellular 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 or cylindrical arrays with a
combination of both ground-based and tower-based feed networks. The
40
<PAGE>
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
through 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 a field trial to demonstrate the capability of its
SpotLight 2000 Lucent Series II system for both analog and CDMA, which was
completed in July 1998.
The following table sets forth a list of companies that have purchased or
are evaluating the purchase of the SpotLight 2000 system as of October 1,
1998.
<TABLE>
<CAPTION>
CUSTOMER OR PROSPECTIVE
CUSTOMER LOCATION SALES STATUS
<S> <C> <C>
ALLTEL(1) Augusta, Georgia Commercial Sale
Columbia, South Carolina Commercial Sale
Savannah, Georgia Commercial Sale
Springfield, Missouri Commercial Sale
---------------------------------------------------
360(degrees)
Communications(1) Ft. Walton, Florida Commercial Sale
---------------------------------------------------
GTE Fremont, California 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
---------------------------------------------------
Southwestco Phoenix, Arizona 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. There can be no assurance that
the performance criteria will be met. 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 51.4% of net
revenue 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's 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. Certain other parts and
44
<PAGE>
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. In September 1998, the Company
received its registration pursuant to the ISO 9001 standard. 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 ArrayComm, Inc. and GEC-Marconi Hazeltine Corporation. In
addition, Ericsson recently began a commercial trial of a GSM base station
which utilizes adaptive antenna technology. 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 ten issued U.S. patents and
23 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. In the
United States, the products must be certified by the Federal Communications
Commission before sales to customers may commence. Other countries have
similar regulations that must be complied with before product sales may
commence. 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,
Washington, D.C. and Sao Paulo, Brazil 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
October 1, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
President, Chief Executive Officer and
Robert H. Hunsberger..... 52 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
Victor K. Liang.......... 46 Senior Vice President, GSM Products Group
Ray K. Butler............ 40 Vice President of Engineering
Martin J. Feuerstein..... 35 Vice President of Advanced Technology
Richard Henderson........ 37 Vice President of Sales and Marketing
Mark P. Johnson.......... 40 Vice President of Manufacturing
Robert N. Shuman......... 37 Vice President of Product Management
Bandel L. Carano(1)...... 37 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. From 1981 to 1995, Mr. Hunsberger held various executive positions at
Northern Telecom Inc., a telecommunications company ("Nortel"), 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 Metawave 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 ("US WEST"). 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>
Victor K. Liang has served as Senior Vice President, GSM Products Group of
Metawave since July 1998. From 1989 until March 1998, Mr. Liang held various
senior executive positions with Siemens and its subsidiaries, most recently
serving as Managing Director of two Siemens' joint ventures in The People's
Republic of China, Siemens Shanghai Mobile Communications and Siemens Shanghai
Communication Terminals. From 1995 to 1996, Mr. Liang served as Vice President
of Wireless Products Group at Siemens Stromberg-Carlson. From 1994 to 1995, he
served as Senior Director at Siemens A.G., Munich, Germany and from 1989
through 1994 he served as Vice President Product Development of Siemens
Telecommunications Ltd. in Taiwan. Mr. Liang graduated from Chiao Tung
University in Taiwan with a B.S. in Electrical Engineering and from the
business school of Cheng Chih University with a degree in business
administration.
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 January 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.
Martin J. Feuerstein has served as Vice President of Advanced Technology of
Metawave since August 1998 and Director of Research from March 1997 to July
1998. From 1995 to March 1997, Mr. Feuerstein served as Technical Manager at
Lucent. From 1992 to 1995, he served as a Senior Member Technical Staff at U S
WEST. Mr. Feuerstein graduated from Vanderbilt University with a B.E. in
Electrical Engineering and received an M.S. in Electrical Engineering from
Northwestern University and a Ph.D. in Electrical Engineering from Virginia
Polytechnic Institute.
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.
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 March 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 1996.
49
<PAGE>
Mr. Edwards was Executive Vice President, Chief Financial Officer and a
director of AST Research, Inc., a personal computer company ("AST"), 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
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., a wireless communications company
("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.
50
<PAGE>
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.
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.............. $ 90,751 $54,167 630,000 $ 50,660
Douglas O. Reudink, Chairman and Chief
Technology Officer................... 161,545 14,100 -- 2,466
Vito E. Palermo, Senior Vice President
and Chief Financial Officer.......... 136,294 15,000 140,000 169,633
Ray K. Butler, Vice President of
Engineering.......................... 108,238 6,900 70,000 40,322
Robert N. Shuman, Vice President of
Product Management................... 67,649 5,600 70,000 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. Mr. Palermo's employment began on
January 20, 1997 and his base salary on an annualized basis, at year end,
was $160,000. 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.
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<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 ANNUAL
RATES OF STOCK
NUMBER OF PERCENTAGE OF PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE 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.... 630,000 44.3% $0.89 7/28/07 $352,621 $893,611
Vito E. Palermo......... 94,500 6.6% $0.89 1/20/07 52,638 133,396
45,500 3.2% $0.89 5/22/07 25,467 64,539
Ray K. Butler........... 9,800 0.7% $0.89 1/27/07 5,459 13,834
12,600 0.9% $0.89 4/01/07 7,052 17,872
47,600 3.3% $4.80 12/16/07 143,690 364,138
Robert N. Shuman........ 10,500 0.7% $0.89 4/01/07 5,877 14,893
7,000 0.5% $1.71 10/21/07 7,413 19,077
52,500 3.7% $4.80 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 1,421,887 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.
53
<PAGE>
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 34,528
shares with a value realized of $41,928. The following table provides certain
summary information concerning the shares of Common Stock represented by
outstanding stock options held by each of the Named Executive Officers as of
December 31, 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
DECEMBER 31, DECEMBER 31,
1997(2) 1997 ($)(3)
------------ -------------------
NAME(1) VESTED UNVESTED VESTED UNVESTED
------- ------ -------- -------- ----------
<S> <C> <C> <C> <C>
Robert H. Hunsberger....................... -- 630,000 -- $8,892,000
Douglas O. Reudink......................... -- -- -- --
Vito E. Palermo............................ -- 140,000 -- $1,976,000
Ray K. Butler.............................. -- 70,000 -- $ 801,680
Robert N. Shuman........................... -- 70,000 -- $ 776,700
Harold Carey............................... 24,905 54,790 $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 $15.00 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,
Richard Henderson, Vice President of Sales and Marketing and Victor K. Liang,
Senior Vice President, GSM Products Group.
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
54
<PAGE>
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 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.
On July 23, 1998, in connection with the employment of Mr. Liang, the
Company entered into an agreement with Mr. Liang that provides that if the
Company were to terminate his employment without cause within the first two
years of his employment, the Company would be obligated to make a lump-sum
payment to Mr. Liang 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 approved by the stockholders of the
Company in September 1998. A total of 595,000 shares of Common Stock has been
reserved for issuance under the 1998 Stock Option Plan, and, as of
September 30, 1998, 531,500 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
2,905,000 shares of Common Stock has been reserved for issuance under the 1995
Stock Option Plan, and, as of September 30, 1998, 1,266 options remained
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
55
<PAGE>
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 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
56
<PAGE>
price paid for such shares. 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 1998 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
May 1998 and approved by the stockholders in September 1998. A total of
350,000 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 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 1,750 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 Purchase 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 Purchase 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 262,500 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 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 210,000 shares
of Common Stock has been reserved for issuance under the Directors' Plan and
as of June 30, 1998, 157,500 options remained available for grant under such
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.
57
<PAGE>
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 17,500 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 12,600 shares of Common Stock, except in the case of
Messrs. Jarvis, Edwards and Twyver who were granted options to purchase
17,500 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 4,900 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.
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. 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 Board of Directors determines that 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 3,849,998 shares of
Series A Preferred Stock at $1.43 per share beginning in July 1995, an
aggregate of 1,918,513 shares of Series B Preferred Stock at $4.82 per share
in May 1996, an aggregate of 1,744,306 shares of Series C Preferred Stock at
$8.80 per share beginning in October 1996 and an aggregate of 1,678,405 shares
of Series D Preferred Stock at $11.43 per share in August 1997. Upon
completion of this offering, each outstanding share of Series A, Series B,
Series C and Series D Preferred Stock will convert into one share of the
Company's Common Stock.
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).. -- 1,277,032 622,221 227,272 127,953 $ 8,295,652
Entities affiliated with
Oak Investment
Partners(3)............ -- 1,283,333 622,221 227,272 127,953 $ 8,295,651
Entities affiliated with
The Sevin Rosen
Funds(4)............... -- 1,283,333 622,220 227,271 127,953 $ 8,295,651
Entities affiliated with
Worldview Technology
Partners............... -- -- -- 568,179 32,777 $ 5,374,598
Entities affiliated with
Bowman Capital
Management............. -- -- -- -- 875,000 $10,000,000
Douglas O. Reudink...... 1,155,000 -- -- -- -- $ 16,500
Jennifer Gill
Roberts(4)............. -- 3,500 5,185 -- -- $ 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 3,500 shares of Series A
Preferred Stock and 5,185 shares of Series B Preferred Stock for her own
account and (ii) Steven L. Domenik, a general partner of Sevin Rosen,
purchased 4,148 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 140,000 shares of Common Stock to entities affiliated
with Sevin Rosen, Venrock and Oak at a price per share of $2.86. Sevin Rosen
and Venrock each purchased 46,666 shares of Common Stock and Oak purchased
46,668 shares of Common Stock. On May 28, 1997, Douglas O. Reudink, Chairman
of the Board and Chief Technical Officer of the Company, sold 38,500 shares of
Common Stock to each of Sevin Rosen, Venrock and Oak at a price per share of
$2.86.
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
59
<PAGE>
over a three-year period provided that Mr. Palermo remains employed with the
Company with the remaining balance of $25,000 plus interest due on the earlier
of October 22, 2000 or the date his employment terminates. The outstanding
indebtedness under the Promissory Note as of October 1, 1998 was $63,236. 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 35,000 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 outstanding indebtedness
under the Secured Promissory Note as of October 1, 1998 was $170,262.
On January 10, 1998, the Company repurchased 96,443 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 caused Mr.
Huseby to surrender 70,000 shares of Common Stock in 1996 for no
consideration.
In December 1997, the Company determined that it would discontinue the
Company's Network Services division. In March 1998, the Company sold the
assets of this division for an aggregate purchase price of $78,000 to Advanced
Wireless Engineering ("AWE"), a company that was majority-owned by Mr. Harold
Carey, who at the time was the Company's Vice President, Network Services. Mr.
Carey resigned from the Company in March 1998 to run AWE on a full time basis.
On April 3, 1998, Dr. Reudink sold 21,539 shares of Common Stock at a price
of $9.29 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 14,000 shares of Common Stock at a price of
$9.29 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, including Powerwave, whose chief executive officer is
a director of the Company. 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 376,245 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. Powerwave purchased
$2,500,000 in aggregate principal amount of the 13.75% Senior Secured Bridge
Notes and was issued a Note Warrant to purchase up to an aggregate of 32,435
shares of Series D Preferred Stock at an exercise price of $0.01 per share.
Upon the closing of this offering, the Note Warrants will automatically
convert into warrants to purchase up to an aggregate of 376,245 shares of the
Company's Common Stock at an exercise price of $0.01 per share.
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. Pursuant to a manufacturing
agreement with Powerwave, Powerwave will manufacture and sell to the Company
100% of the Company's requirements for linear power amplifiers that Powerwave
manufactures. The initial term of the agreement is 18 months with an automatic
18 month extension, unless either party otherwise terminates the agreement.
60
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of September 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).................... 2,345,944 20.7% 15.8%
525 University Avenue, Suite 1300
Palo Alto, CA 94301-1902
Venrock Associates(3)......................... 2,339,644 20.6% 15.8%
30 Rockefeller Plaza
New York, NY 10112-0184
The Sevin Rosen Funds(4)...................... 2,333,106 20.6% 15.7%
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301-1542
Douglas O. Reudink(5)......................... 982,961 8.7% 6.6%
Bowman Capital Management(6).................. 889,000 7.8% 6.0%
1875 South Grant Street, Suite 600
San Mateo, CA 94402
Robert H. Hunsberger(7)....................... 630,000 5.3% 4.1%
Worldview Technology Partners(8).............. 600,956 5.3% 4.0%
435 Tasso Street, Suite 120
Palo Alto, CA 94301-1546
Thomas Huseby(9).............................. 463,557 4.1% 3.1%
Vito E. Palermo(10)........................... 140,000 1.2% *
Robert N. Shuman(11).......................... 70,000 * *
Ray K. Butler(12)............................. 70,000 * *
James J. Daley................................ 34,528 * *
Harold Carey.................................. 29,885 * *
Bandel L. Carano(2)........................... 2,345,944 20.7% 15.8%
Jennifer Gill Roberts(13)..................... 2,341,791 20.6% 15.8%
David R. Hathaway(3).......................... 2,339,644 20.6% 15.8%
Scot B. Jarvis(14)............................ 39,039 * *
Bruce C. Edwards(15).......................... 17,500 * *
David A. Twyver(16)........................... 17,500 * *
All directors and officers as a group (15
persons)(17)................................. 9,501,879 74.5% 58.5%
</TABLE>
- --------
* Less than 1%.
(1) Applicable beneficial ownership percentage is based on 11,346,969 shares
of Common Stock outstanding prior to this offering and 14,846,969 shares
outstanding after this offering, and assuming no exercise of the
Underwriters' over-allotment option, together with applicable options
and warrants, if any, 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, if any, held by that person that are currently exercisable or
exercisable within 60 days of September 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
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<PAGE>
this table have sole voting and investment power with respect to all
shares of Common Stock shown as owned by them, 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 2,292,458 shares held by Oak Investment Partners VI, L.P. and
53,486 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 1,486,778 shares held by Venrock Associates and 852,866 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 10,653 shares held by Sevin Rosen Bayless Management Co.,
1,801,398 shares held by Sevin Rosen Fund IV L.P., 499,695 shares held
by Sevin Rosen Fund V L.P. and 21,360 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 10,500 shares held in trust for Matthew Reudink, Dr. Reudink's
son.
(6) Includes 30,625 shares held by Spinnaker Clipper Fund, L.P., 280,000
shares held by Spinnaker Founders Fund, L.P., 301,875 shares held by
Spinnaker Technology Fund, L.P., 262,500 shares held by Spinnaker
Technology Offshore Fund Limited and 14,000 shares held by Spinnaker
Offshore Founders Fund Ltd.
(7) Includes 630,000 shares issuable upon the exercise of immediately
exercisable options held by Mr. Hunsberger, 210,000 of which are fully
vested within 60 days of September 30, 1998 and 420,000 shares of which
remain subject to the Company Repurchase Right.
(8) Includes 35,072 shares held by Worldview Strategic Partners I, L.P.,
158,702 shares held by Worldview Technology International I, L.P. and
407,182 shares held by Worldview Technology Partners I, L.P.
(9) Includes 5,530 shares held by Margaret D. Huseby, spouse of Mr. Huseby,
and 22,120 shares held in trust for Katheryn Huseby, Max Huseby, Conor
Huseby and Devin Huseby, Mr. Huseby's children.
(10) Includes 140,000 shares issuable upon the exercise of outstanding
options held by Mr. Palermo, of which 60,374 are exercisable and vested
within 60 days of September 30, 1998. In accordance with the SEC Rules,
Mr. Palermo is the beneficial owner of 60,374 shares.
(11) Includes 2,625 shares owned by Mr. Shuman, and 67,375 shares issuable
upon the exercise of outstanding options held by Mr. Shuman, 57,604 of
which are immediately exercisable and subject to the Company's right of
repurchase, and an additional 3,427 shares of which are vested and
exercisable within 60 days of September 30, 1998. In accordance with the
SEC Rules, Mr. Shuman is the beneficial owner of 63,656 shares.
(12) Includes 70,000 shares issuable upon the exercise of outstanding options
held by Mr. Butler, 47,600 of which are immediately exercisable and
subject to the Company's right of repurchase and an additional 9,479 of
which are vested and exercisable within 60 days of September 30, 1998.
In accordance with the SEC Rules, Mr. Butler is the beneficial owner of
57,079 shares.
(13) Includes the shares referenced in footnote (4) and 8,685 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 21,539 shares owned by Cedar Grove Investments, LLC ("Cedar
Grove") and 17,500 shares issuable upon the exercise of immediately
exercisable options held by Mr. Jarvis within 60 days of September 30,
1998, all of which are subject to the Company's right of repurchase. 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 17,500 shares issuable upon the exercise of immediately
exercisable options held by Mr. Edwards within 60 days of September 30,
1998, all of which are subject to the Company's right of repurchase.
(16) Includes 17,500 shares issuable upon the exercise of immediately
exercisable options held by Mr. Twyver within 60 days of September 30,
1998, all of which are subject to the Company's right of repurchase.
(17) Includes (i) shares referred to in footnotes (2), (3), (5), (7) and (10)-
(16) and (ii) 47,600 shares owned by four other executive officers and
459,900 shares issuable upon the exercise of outstanding options held by
the same four executive officers, 323,146 of which are immediately
exercisable and subject to the Company's right of repurchase and an
additional 89,730 of which are vested and exercisable within 60 days of
September 30, 1998. In accordance with the SEC Rules, such other officers
are the beneficial owners of 459,476 shares.
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
105,000,000 shares of Common Stock, $0.001 par value, and 10,500,000 shares of
Preferred Stock, $0.001 par value.
COMMON STOCK
As of September 30, 1998, there were 11,346,969 shares of Common Stock
outstanding that were held of record by approximately 41 stockholders. There
will be 14,846,969 shares of Common Stock outstanding (assuming no exercise of
outstanding options after September 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 10,500,000 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 September 30, 1998, the Company has warrants outstanding to purchase
an aggregate of 45,791 shares of Series A Preferred Stock, 13,999 shares of
Series B Preferred Stock, 23,863 shares of Series C Preferred Stock and
379,307 shares of Series D Preferred Stock. Concurrently with the automatic
conversion of the Company's outstanding Preferred Stock on a one-for-one basis
into Common Stock upon the closing of this offering, all warrants to purchase
Preferred Stock will automatically convert into warrants to purchase Common
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 34,125 shares
of Series A Preferred Stock to Comdisco, Inc. ("Comdisco") at an exercise
price of $2.14 per share. The warrant expires on December 13, 2002. 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 11,666 shares of
Series A Preferred Stock to Comdisco at an exercise
63
<PAGE>
price of $3.13 per share. The warrant expires on April 9, 2003. In connection
with a third equipment lease line entered into in August 1996, the Company
issued a warrant to purchase up to an aggregate of 13,999 shares of Series B
Preferred Stock to Comdisco at an exercise price of $6.74 per share. The
warrant expires on August 20, 2003. 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 23,863 shares of Series C Preferred Stock to Comdisco at
an exercise price of $8.80 per share. The warrant expires on June 9, 2004.
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 376,245 shares of Series D
Preferred Stock at an exercise 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 3,062 shares of Series D Preferred Stock at an
exercise price of $11.43 per share. The warrant expires on the closing of this
offering.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 10,736,787 shares of Common Stock and the holders of the Note
Warrants (collectively, the "Registrable Securities") or certain of 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
underwritten 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
64
<PAGE>
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" 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 10,500,000 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
14,846,969 shares of Common Stock, assuming no exercise of options after
September 30, 1998. Of these shares, the 3,500,000 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 11,346,969 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 11,156,477 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), 142,836
shares in addition to the 3,500,000 shares offered hereby will be eligible for
sale in the public market. Beginning 90 days after the effective date of this
offering, approximately 46,147 Restricted Shares will be eligible for sale in
the public market. Beginning 180 days after the effective date of this
offering, approximately 11,150,286 Restricted Shares (as well as an additional
462,960 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. Upon the expiration of one-year minimum
holding periods, an additional 7,700 shares will be eligible for sale.
<TABLE>
<CAPTION>
SHARES
DAYS AFTER DATE ELIGIBLE
OF THIS PROSPECTUS FOR SALE COMMENT
------------------ ---------- -------
<C> <C> <S>
Upon Effectiveness............... 3,500,000 Shares sold in offering
Upon Effectiveness............... 142,836 Freely tradable shares salable under
Rule 144(k) that are not subject to
the Lockup
91 days.......................... 46,147 Shares salable under Rules 701 and 144
and not subject to the Lockup
181 days......................... 11,150,286 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
66
<PAGE>
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.
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 2,579,754 shares of Common Stock reserved for issuance under the 1995
Stock Option Plan (assuming no exercise of options after September 30, 1998),
(ii) a total of 531,500 shares of Common Stock reserved for issuance under the
1998 Stock Option Plan (assuming no exercise of options after September 30,
1998), (iii) a total of 210,000 shares of Common Stock reserved for issuance
under the Directors' Plan (assuming no exercise of options after September 30,
1998), and (iv) a total of 350,000 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 above 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 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.............................................................. 3,500,000
=========
</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 525,000 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 3,500,000 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
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<PAGE>
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. 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 58,383 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. 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 Room of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information regarding the
Public Reference Room by calling the Commission at 1-800-SEC-0330. 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.
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.
</TABLE>
73
<PAGE>
GLOSSARY OF TECHNICAL TERMS--(CONTINUED)
<TABLE>
<S> <C>
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
RADIO)..................... A two-way radio telephony service making use of macrocells
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
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statements of Stockholders' Equity (Deficit)................................ F-5
Statements of Cash Flows.................................................... F-6
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.
Seattle, Washington
March 13, 1998, except for
Note 13,as to which the date
is April 28, 1998 and
paragraphs 1 and 2 of Note 6
as to which the date is
October , 1998.
- -------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon completion of
the reverse stock split described in paragraph 2 of Note 6 to the financial
statements.
ERNST & YOUNG LLP
Seattle, Washington
October 14, 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 7,512,817 shares in
1996 and 9,191,222
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 14,000,000
shares, of which 9,191,222
have
been designated as convertible
and redeemable
at June 30, 1998 and December
31,1997....................... -- -- -- --
Common stock, $.0001 par value,
authorized 28,000,000 shares;
issued and outstanding
1,855,000 in 1996, 2,052,458
in 1997 and
2,125,125 at June 30, 1998 and
11,316,347
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)
======= ======== ======== ======= ========
Basic and diluted net
loss per share......... (1.09) (5.67) (11.59) (4.80) (7.92)
======= ======== ======== ======= ========
Shares used in
computation of basic
and diluted net loss
per share.............. 918 1,904 1,907 1,859 2,043
======= ======== ======== ======= ========
Pro forma net loss per
share.................. (.37) (1.51) (2.19) (.95) (1.44)
======= ======== ======== ======= ========
Shares used in
computation of pro
forma net loss per
share.................. 2,722 7,140 10,076 9,372 11,234
======= ======== ======== ======= ========
</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................... 1,925 $ 10 $ -- $ -- $ 10
Net loss for the period
from January 19, 1995
to December 31, 1995... -- -- -- (1,000) (1,000)
----- ------ ------- -------- --------
Balance, December 31,
1995................... 1,925 10 -- (1,000) (990)
Shares surrendered to
Company for no
consideration......... (70) -- -- -- --
Net loss for the year
ended December 31,
1996.................. -- -- -- (10,795) (10,795)
----- ------ ------- -------- --------
Balance, December 31,
1996................... 1,855 10 -- (11,795) (11,785)
Exercise of stock
options............... 197 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................... 2,052 1,968 (1,205) (33,899) (33,136)
Repurchased restricted
stock *............... (96) -- -- -- --
Exercise of stock
options *............. 161 84 -- -- 84
Exercise of stock
warrants*............. 8 110 -- -- 110
Stock compensation
expense *............. -- -- 328 -- 328
Net loss for the period
ended June 30, 1998 *. -- -- -- (16,183) (16,183)
----- ------ ------- -------- --------
Balance, June 30, 1998
*...................... 2,125 $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. The Company believes that
its 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
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)
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, including
stock options and warrants, are excluded from the computation as their effect
is antidilutive. For the periods presented, there is no difference between the
basic and diluted net loss per share. Historical basic and diluted earnings
per share are not presented on the accompanying statement of operations
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.
Research and Development Costs
Research and development costs are expensed as incurred.
Advertising Costs
Advertising costs are charged to expense as incurred. The Company had no
material advertising expense for the period ended December 31, 1995 while
$355,000, $535,000 and $342,000 were recorded for the years ended December 31,
1996, 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, which to date have not
been material, for potential credit losses, and such losses have been within
management's expectations.
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)
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.
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. 131, Disclosures About Segments of
an Enterprise and Required Information, and SOP 97-2, Software Revenue
Recognition, SFAS No. 130, Reporting Comprehensive Income, establishing
standards for reporting and disclosure of comprehensive income and its
components in a full set of general-purpose financial statements.
Comprehensive loss is the same as net loss for all periods reported. 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.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in 2000. Because the Company does not currently use
derivatives, management does not anticipate that the adoption of SFAS No. 133
will have a significant effect on earnings or the financial condition of the
Company.
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)
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>
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>
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)
4. NOTES PAYABLE (CONTINUED)
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 376,245 shares of series D Preferred Stock at
$.01 per share. The Company recorded debt issuance fees of approximately
$5,820,000 related to the issuance of these warrants. The fees are amortized
over the 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 warrants to purchase an additional 140,000
shares of the Company's Series D Preferred Stock. 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 3,849,998 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 1,897,772 shares of Series B Preferred Stock
(Series B) through a private offering. Proceeds from the financing amounted to
$9,150,006. An additional 20,741 shares of Series B were issued in November
1996 with proceeds of $100,002.
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)
In October and November 1996, the Company issued 1,744,306 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 1,678,405 shares of Series D Preferred
Stock (Series D) through a private offering. Proceeds from the financing
amounted to $19,181,816.
Holders of Series A, B, C, and D have preferential rights to dividends
($.11, $.39, $.70, and $.91 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 $1.43, $4.82, $8.80, and $11.43 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 certain leasing agreements, the Company has issued
warrants providing for the purchase of 34,125 shares and 11,666 shares of
Series A Preferred Stock at an exercise price of $2.14 and $3.13 per share
respectively, subject to adjustment as provided in the warrant agreements. The
warrant agreements expire after seven years or eighteen months to three years,
respectively, from the effective date of an initial public offering, whichever
comes later. During 1996, the Company entered into an additional lease line
which included the issuance of a warrant to purchase 13,999 shares of Series B
Preferred Stock with an exercise price of $6.74 per share. During 1997, the
Company entered into an additional lease line which included the issuance of a
warrant to purchase 23,863 shares of Series C Preferred Stock with an exercise
price of $8.80 per share. The Black-Scholes valuation model was used to
calculate the value of the warrants at the date of grant with the following
weighted-average assumptions: risk free interest rate of 6.0%; dividend yields
of 0%; volatility factors of the expected market price of the Company's stock
of .00; and a weighted-average life of the warrants of three years. The value
of the warrants was recorded as additional debt issuance cost and is being
amortized using the interest method over the term of the related lease
agreements.
During 1998, the Company entered into a new equipment lease line. The new
lease included the issuance of a warrant to purchase 3,062 shares of Series D
Preferred Stock with an exercise price of $11.43 per share. The Black-Scholes
valuation model was used to calculate the value of the warrants at the date of
grant with the following weighted-average assumptions: risk free interest rate
of 6.0%; dividend yields of 0%; volatility factors of the expected market
price of the Company's stock of .66; and a weighted-average life of the
warrants of four years. The value of the warrants was recorded as additional
debt issuance cost and is being amortized using the interest method over the
term of the related lease agreement.
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)
5. CONVERTIBLE AND REDEEMABLE PREFERRED STOCK (CONTINUED)
In connection with the Senior Secured Bridge financing, the Company has
issued warrants providing for the purchase of an aggregate of 376,245 shares
of Series D Preferred Stock at an exercise price of $.01 per share (Note 4).
The Black-Scholes valuation model was used to calculate the value of the
warrants at the date of grant with the following weighted-average assumptions:
risk free interest rate of 6.0%; dividend yields of 0%; volatility factors of
the expected market price of the Company's stock of .66; and a weighted-
average life of the warrants of two years. The value of the warrants was
recorded as additional debt issuance cost and is being amortized using the
interest method over the term of the related Notes.
Concurrently with the automatic conversion of the Company's outstanding
Preferred Stock on a one-for-one basis into Common Stock upon the closing of
this offering, all warrants to purchase Preferred Stock will automatically
convert into warrants to purchase Common Stock.
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 10,500,000 shares and increase the number of authorized shares of Common
Stock of the Company to 105,000,000 shares. These changes are to take effect
upon completion of the IPO.
In October 1998, the Board of Directors authorized a 7:10 reverse stock
split to become effective prior to the effective date of the offering. These
consolidated financial statements and notes thereto have been restated to
reflect this action.
Stock Repurchases
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 241,106
shares subject to repurchase with an aggregate purchase price of $1,240. On
January 10, 1998, the Company repurchased 96,443 shares of common stock from
one of the founders for $501 pursuant to the terms of the stock repurchase
agreement. In addition, the Company caused Mr. Huseby to surrender 70,000
shares of Common Stock in 1996 for no consideration.
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
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)
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
2,905,000 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 595,000 shares and 350,000 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 210,000 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 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)
Basic and diluted net loss per share:
As reported................................. (1.09) (5.67) (11.59)
Pro forma................................... (1.09) (5.68) (11.59)
</TABLE>
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)
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.
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.............. -- -- 696,850 $.14 1,359,998 $ .35 2,204,163 $ 1.14
Granted at deemed
value................. 708,400 .14 831,847 .49 481,587 2.79 371,312 11.70
Granted at below deemed
value................. -- -- -- -- 940,300 .98 --
Canceled............... (11,550) .14 (168,699) .17 (380,264) .41 (120,381) 2.59
Exercised.............. -- -- -- -- (197,458) .39 (160,645) .52
------- --------- --------- ---------
Outstanding at end of
period................. 696,850 .14 1,359,998 .35 2,204,163 1.14 2,294,449 2.81
======= ========= ========= =========
Exercisable at end of
period................. -- -- 225,304 .14 1,495,391 1.38 1,843,968 3.36
======= ========= ========= =========
Weighted average fair
value of options
granted during the
period.................
Granted at value....... $.14 $.49 $2.79 $11.70
Granted at below value. -- -- -- $2.70 --
</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>
$ .14- .50................ 639,179 $ .21 7.98 349,277 $ .18
.89-1.71................ 1,260,268 .94 9.36 841,404 .97
2.86-4.80................ 304,716 3.89 9.91 304,710 3.89
--------- ---------
.14-4.80................ 2,204,163 1.14 9.03 1,495,391 1.38
========= =========
</TABLE>
In connection with the Company's stock option and stock purchase plans,
1,407,448 shares of common stock are available for future issuance at June 30,
1998.
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)
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............................. 3,849,998 3,849,998
Series B Preferred Stock............................. 1,918,513 1,918,513
Series C Preferred Stock............................. 1,744,306 1,744,306
Series D Preferred Stock............................. 1,678,405 1,678,405
Convertible redeemable preferred stock warrants...... 83,653 651,085
Stock option and stock purchase plans................ 2,567,535 3,701,896
---------- ----------
11,842,410 13,544,203
========== ==========
</TABLE>
7. NET LOSS PER SHARE
Basic and diluted loss per share is calculated using the average number of
shares of common stock outstanding. The effect of stock options and warrants
have not been included as their effect is antidilutive. Pro forma basic and
diluted loss per share is computed on the basis of the average number of
shares of common stock outstanding plus the effect of convertible preferred
shares using the if-converted method as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -----------------
1995 1996 1997 1997 1998
-------- --------- --------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net loss (A)................ $(1,000) $(10,795) $(22,104) $(8,927) $(16,183)
======== ========= ========= ======= ========
Weighted average
outstanding:
Common stock (B).......... 918 1,904 1,907 1,859 2,043
Convertible preferred
stock.................... 1,804 5,236 8,169 7,513 9,191
-------- --------- --------- ------- --------
Total weighted average
outstanding (C)............ 2,722 7,140 10,076 9,372 11,234
======== ========= ========= ======= ========
Basic and diluted net loss
per share (A/B)............ $ (1.09) $ (5.67) $ (11.59) $ (4.80) $ (7.92)
======== ========= ========= ======= ========
Pro forma net loss per share
(A/C)...................... $ (0.37) $ (1.51) $ (2.19) $ (0.95) $ (1.44)
======== ========= ========= ======= ========
</TABLE>
8. 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-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. 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>
9. 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-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)
9. 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.
10. 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.
11. 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. Fifty
thousand dollars of the principal amount of the loan is to be forgiven over a
three year period provided that the Company's Chief Financial Officer remains
employed with the Company, with the remaining balance of $25,000 plus interest
due on the earlier of October 22, 2000 or the date on which his employment
terminates. The portion of the loan being forgiven is expensed ratably as
compensation over the three-year period.
F-18
<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)
In December 1997, the Company determined that it would discontinue the
Company's Network Services division. In March 1998, the Company sold the
assets of this division for an aggregate purchase price of $78,000 to Advanced
Wireless Engineering ("AWE"), a company that was majority-owned by an
individual who at that time was the Company's Vice President, Network
Services. This individual resigned from the Company in March 1998 to run AWE
on a full time basis.
12. 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. Export sales represented an
aggregate 51.4% of net revenue for the six month period ended June 30, 1998
and none in 1997. Export sales were made in Russia and Latin America,
representing 27.4% and 24.0%, respectively, of the Company's net revenue for
the six months ended June 30, 1998. 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, Telfonica Celular and ALLTEL,
accounted for approximately 27.4%, 24.0% and 44.2%, respectively, of the
Company's net revenue. During 1997, two customers of the Network Services
division represented 63% and 27% of net 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 net realizable value, thereby resulting in an
impairment loss of $200,000, which is included in other expenses in the
accompanying 1997 Statement of Operations. These assets were sold in March
1998. Included in net revenue for the year ended December 31, 1997 and the six
months ended June 30, 1997 and 1998 were revenue of $1.5 million, $392,000 and
$252,000, respectively, relating to the Network Services division and the cost
of sales were $858,000, $516,000 and $242,000, respectively.
In June 1998, in connection with certain patent licenses, the Company issued
11,000 Common Stock warrants and recorded fees for an aggregate amount of
$360,000. The Common Stock warrants had an exercise price of $.01 per share
and were immediately exercised. The Black-Scholes valuation model was used to
calculate the value of the warrants at the date of grant with the following
weighted-average assumptions: risk free interest rate of 6.0%; dividend yields
of 0%; volatility factors of the expected market price of the Company's stock
of .66; and a weighted-average life of the warrants of .01 years. The value of
these warrants of $110,000 and cash of $250,000 was appropriately recorded as
an operating expense for the period ended June 30, 1998.
F-19
<PAGE>
[INSIDE BACK COVER ARTWORK:
MAP OF THE WORLD INDICATING THE LOCATION OF THE COMPANY'S
COMMERCIAL SALES AND FIELD TRIALS.]
(FIELD TRIALS MAY NOT RESULT IN COMMERCIAL SALES.)
<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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,500,000 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............................................. $ 19,507
NASD Filing Fee.................................................. 7,113
Nasdaq National Market Listing Fee............................... 90,500
Printing Fees and Expenses....................................... 175,000
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.................................................... 192,880
----------
Total.......................................................... $1,000,000
==========
</TABLE>
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 3,849,998 shares
of Common Stock to 6 investors for an aggregate purchase price of
$5,500,000.
(2) In May 1996, the Registrant issued and sold shares of Series B
Preferred Stock convertible into an aggregate of 1,918,513 shares of Common
Stock to 13 investors for an aggregate purchase price of $9,250,008.
(3) In October and November 1996, the Registrant issued and sold shares
of Series C Preferred Stock convertible into an aggregate of 1,744,306
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 1,678,405 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 34,125 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 11,666 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 13,999 shares of Common Stock for an aggregate purchase price of
$94,396; (D) in June 1997, a warrant to purchase shares of Series C
Preferred Stock convertible into 23,863 shares of Common Stock for an
aggregate purchase price of $210,001.
II-1
<PAGE>
(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 376,245 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
3,062 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 7,700 shares of Common
Stock for an aggregate purchase price of $110. Such licensor subsequently
exercised the warrant and purchased 7,700 shares of Common Stock for an
aggregate purchase price of $110.
(9) As of June 30, 1998, an aggregate of 358,103 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Underwriting Agreement.(a)
3.1 Certificate of Incorporation of the Registrant.(a)
3.2 Bylaws of the Registrant.(a)
3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to effect the reverse stock split to be effected prior to
the effective date of the offering.(c)
3.4 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
offering.(b)
5.1 Opinion of Venture Law Group, A Professional Corporation.(b)
10.1 Form of Indemnification Agreement.(a)
10.2 1995 Stock Option Plan, as amended, and form of stock option
agreement.(a)
10.3 1998 Stock Option Plan, as amended, and form of stock option
agreement.(b)
10.4 1998 Employee Stock Purchase Plan and form of subscription agreement.(a)
10.5 1998 Directors' Stock Option Plan and form of stock option agreement.(a)
10.6 Third Amended and Restated Investors Rights Agreement dated August 6,
1997 by and among the Registrant and certain holders of the Registrant's
capital stock.(a)
10.7 [Intentionally Omitted]
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.8 Lease for Willow Creek Corporate Center dated September 29, 1997 by and
between the Registrant and Carr America Realty Corporation.(b)
10.9+ Purchase Agreement dated October 21, 1997 by and between the Registrant
and 360 Degree Communications Company.(b)
10.10+ Purchase Agreement dated December 12, 1997 by and between the
Registrant and Telefonica Celular de Paraguay S.A.(b)
10.11+ Purchase Agreement dated March 4, 1998 by and between the Registrant
and ALLTEL Supply Inc.(b)
10.12+ Purchase Agreement dated March 5, 1998 by and between the Registrant
and OJSC St. Petersburg Telecom.(b)
10.13 Loan Agreement dated October 14, 1997 by and between Registrant and
Imperial Bank.(a)
10.14 Amendment No. 1 to the Loan Agreement dated October 14, 1997 by and
between Registrant and Imperial Bank.(a)
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.(a)
10.16+ Manufacturing Agreement between the Registrant and Powerwave
Technologies, Inc. dated as of September 3, 1998.(b)
10.17+ Purchase Agreement between the Registrant and GTE Wireless Incorporated
dated as of September 8, 1998.(b)
10.18 Founders Stock Repurchase Agreement dated as of July 7, 1995 between
the Registrant and Thomas Huseby.(a)
10.19 Employment Agreement with Mr. Douglas O. Reudink dated July 7, 1995.(a)
10.20 Employment Agreement with Mr. Robert H. Hunsberger dated July 27,
1997.(a)
10.21 Employment Agreement with Mr. Vito E. Palermo dated July 23, 1997.(a)
10.22 Employment Agreement with Mr. Richard Henderson dated October 29,
1997.(a)
10.23 Employment Agreement with Mr. Victor K. Liang dated July 23, 1998.(a)
21.2 Subsidiaries of the Registrant.(a)
23.1 Consent of Ernst & Young LLP, Independent Auditors.(b)
23.2 Consent of Counsel (included in Exhibit 5.1).(b)
24.1 Power of Attorney (see page II-6).(a)
27.1 Financial Data Schedule.(a)
99.1 Report of Ernst & Young LLP, Independent Auditors on Financial
Statement Schedule.(a)
99.2 Financial Statement Schedule.(a)
</TABLE>
- --------
(a) Previously filed.
(b) Filed herewith.
(c) To be filed by subsequent 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.
(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 schedules are omitted because the information
called for is not required or is shown either in the financial statements or
the notes thereto.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 2 to 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 October 14, 1998.
METAWAVE COMMUNICATIONS CORPORATION
/s/ Robert H. Hunsberger
By: _________________________________
Robert H. Hunsberger
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to 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 October 14, 1998
____________________________________ Officer and Director
Robert H. Hunsberger (Principal Executive Officer)
/s/ Vito E. Palermo* Senior Vice President, Chief October 14, 1998
____________________________________ Financial Officer and
Vito E. Palermo Secretary (Principal Financial
and Accounting Officer)
/s/ Douglas O. Reudink* Chief Technical Officer and October 14, 1998
____________________________________ Chairman of the Board of
Douglas O. Reudink Directors
/s/ Bandel L. Carano* Director October 14, 1998
____________________________________
Bandel L. Carano
/s/ Bruce C. Edwards* Director October 14, 1998
____________________________________
Bruce C. Edwards
/s/ David R. Hathaway* Director October 14, 1998
____________________________________
David R. Hathaway
/s/ Scot B. Jarvis* Director October 14, 1998
____________________________________
Scot B. Jarvis
/s/ Jennifer Gill Roberts* Director October 14, 1998
____________________________________
Jennifer Gill Roberts
/s/ David A. Twyver* Director October 14, 1998
____________________________________
David A. Twyver
</TABLE>
/s/ Robert H. Hunsberger
*By:
----------------------------
Robert H. Hunsberger
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Underwriting Agreement.(a)
3.1 Certificate of Incorporation of the Registrant.(a)
3.2 Bylaws of the Registrant.(a)
3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to effect the reverse stock split to be effected prior to
the effective date of the offering.(c)
3.4 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
Offering.(b)
5.1 Opinion of Venture Law Group, A Professional Corporation.(b)
10.1 Form of Indemnification Agreement.(a)
10.2 1995 Stock Option Plan, as amended, and form of stock option
agreement.(a)
10.3 1998 Stock Option Plan, as amended, and form of stock option
agreement.(b)
10.4 1998 Employee Stock Purchase Plan and form of subscription
agreement.(a)
10.5 1998 Directors' Stock Option Plan and form of stock option
agreement.(a)
10.6 Third Amended and Restated Investors Rights Agreement dated August 6,
1997 by and among the Registrant and certain holders of the
Registrant's capital stock.(a)
10.7 [Intentionally Omitted]
10.8 Lease for Willow Creek Corporate Center dated September 29, 1997 by
and between the Registrant and Carr America Realty Corporation.(b)
10.9+ Purchase Agreement dated October 21, 1997 by and between the
Registrant and 360 Degree Communications Company.(b)
10.10+ Purchase Agreement dated December 12, 1997 by and between the
Registrant and Telefonica Celular de Paraguay S.A.(b)
10.11+ Purchase Agreement dated March 4, 1998 by and between the Registrant
and ALLTEL Supply Inc.(b)
10.12+ Purchase Agreement dated March 5, 1998 by and between the Registrant
and OJSC St. Petersburg Telecom.(b)
10.13 Loan Agreement dated October 14, 1997 by and between Registrant and
Imperial Bank.(a)
10.14 Amendment No. 1 to the Loan Agreement dated October 14, 1997 by and
between Registrant and Imperial Bank.(a)
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.(a)
10.16+ Manufacturing Agreement between the Registrant and Powerwave
Technologies, Inc. dated as of September 3, 1998.(b)
10.17+ Purchase Agreement between the Registrant and GTE Wireless
Incorporated dated as of September 8, 1998.(b)
10.18 Founders Stock Repurchase Agreement dated as of July 7, 1995 between
the Registrant and Thomas Huseby.(a)
10.19 Employment Agreement with Mr. Douglas O. Reudink dated July 7,
1995.(a)
10.20 Employment Agreement with Mr. Robert H. Hunsberger dated July 27,
1997.(a)
10.21 Employment Agreement with Mr. Vito E. Palermo dated July 23, 1997.(a)
10.22 Employment Agreement with Mr. Richard Henderson dated October 29,
1997.(a)
10.23 Employment Agreement with Mr. Victor K. Liang dated July 23, 1998.(a)
21.2 Subsidiaries of the Registrant.(a)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
23.1 Consent of Ernst & Young LLP, Independent Auditors.(b)
23.2 Consent of Counsel (included in Exhibit 5.1).(b)
24.1 Power of Attorney (see page II-6).(a)
27.1 Financial Data Schedule.(a)
99.1 Report of Ernst & Young LLP, Independent Auditors on Financial
Statement Schedule.(a)
99.2 Financial Statement Schedule.(a)
</TABLE>
- --------
(a) Previously filed.
(b) Filed herewith.
(c) To be filed by subsequent 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 3.4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
METAWAVE COMMUNICATIONS CORPORATION
THE UNDERSIGNED, ROBERT H. HUNSBERGER AND VITO E. PALERMO, HEREBY CERTIFY
THAT:
1. They are the duly elected and acting President 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 7, 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 (the
"Corporation").
ARTICLE II
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.
ARTICLE III
The purpose of the Corporation 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. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is One
Hundred Sixty Five Million (115,500,000) shares, each with a par value of $0.001
per share. One Hundred Fifty Million (105,000,000) shares shall be Common Stock
and Fifteen Million (10,500,000) shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
<PAGE>
increase or decrease the number of shares of any series subsequent to the
issuance 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 which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by at least 66 2/3% of the Board of
Directors.
ARTICLE VI
In the event of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled. Vacancies in the Board of
Directors and newly created directorships resulting from any increase in the
authorized number of directors shall be filled by a vote of the majority of the
directors then in office, though less than a quorum, or by a sole remaining
director. 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.
ARTICLE VII
In the election of directors, each holder of shares of any class or series
of capital stock of the Corporation shall be entitled to one vote for each share
held. No stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE VIII
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this 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 X
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation. In addition to any requirements of
law and any other provisions hereof (and notwithstanding the fact that approval
by a lesser vote may be permitted by law or
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<PAGE>
any other provision hereof), the affirmative vote of the holders of at least 66
2/3% of the voting power of the then outstanding shares of stock of all classes
and all series of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend, alter,
repeal, or adopt any provision inconsistent with, this Article X or Article V
hereof.
ARTICLE XI
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the 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 the Corporation.
ARTICLE XII
The Corporation shall have perpetual existence.
ARTICLE XIII
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
If the General Corporation Law of Delaware is hereafter amended to authorize,
with the approval of a corporation's stockholders, further reductions in the
liability of the Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
(B) Any repeal or modification of the foregoing provisions of this Article
XIII shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XIV
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the Corporation
to provide indemnification) though bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to a corporation, its stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XIV shall not adversely affect any right or protection of a director,
officer, agent or other person
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<PAGE>
existing at the time of, or increase the liability of any director of the
Corporation with respect to any acts or omissions of such director, officer or
agent occurring prior to such repeal or modification."
* * *
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<PAGE>
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.
Executed at Redmond, Washington, on November __, 1998.
-----------------------------------
Robert H. Hunsberger, President
-----------------------------------
Vito E. Palermo, Secretary
<PAGE>
EXHIBIT 5.1
October 14, 1998
Metawave Communications Corporation
10735 Willows Road NE
P.O. Box 97069
Redmond, WA 98073
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-59621)
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No.
333-59621) (the "Registration Statement") filed by you, Metawave Communications
Corporation, with the Securities and Exchange Commission on July 22, 1998, and
as amended, in connection with the registration under the Securities Act of
1933, as amended, of shares of your Common Stock (the "Shares"). As your counsel
in connection with this transaction, we have examined the proceedings taken and
we are familiar with the proceedings proposed to be taken by you in connection
with the sale and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold in the manner
described in the Registration Statement will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
/s/ Venture Law Group
WWE
<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.
<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.
<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.
<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:
<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
<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 850,000. 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:
<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.
<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.
<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.
<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.
<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
<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
<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.
<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.
<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 $1,389,651.00 $115,804.25 $14.50 nnn/rsf
6-1-01 through 5-31-03 $1,557,367.50 $129,780.63 $16.25 nnn/rsf
6-1-03 through 5-31-05 $1,677,165.00 $139,763.75 $17.50 nnn/rsf
</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
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
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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;
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(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
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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.
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(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
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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
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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
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<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").
-------------------------
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<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.
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<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.
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<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
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<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:
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<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
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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
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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
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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
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<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
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<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
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<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
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<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
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<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
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<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
REDACTED VERSION
[***] INDICATES THAT CONFIDENTIAL TREATMENT IS REQUESTED FOR CERTAIN
INFORMATION THAT HAS BEEN DELETED.
<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>
"Performance Criteria" shall mean the [***] to be [**] for the [**] of the
Products in the Initial Order [**] Performance Evaluation Period as set forth in
Exhibit D.
"Performance Evaluation Period" shall mean the [***] the Products in the
Initial Order [***] in [***] the Performance Criteria set forth in Exhibit D.
"Performance Results" shall mean the [***] Performance Evaluation Period as
agreed by the Company and the Seller which shall be [***] as a [***] of a [***].
"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. [***] Product
Seller [***] to the Company [***] Product. This Product will be an [***] in
the Product to allow both [***] in the Product. This [***] product [***] when
attached to a [***] available for [***] to the Company on or before [***]. The
purchase price for the [***], excluding [***].
[***] 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 three (3) years 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>
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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
Certain information in this Exhibit has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential treatment
request.
<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.
"Performance Acceptance" shall mean Customer's [***] Product's [***] to the
Performance Criteria set forth in Exhibit E.
"Performance Criteria" shall mean [***] to be [***] of the Products in the
Initial Order [***] Performance Evaluation Period [***] the parties by January
15, 1998 and set forth in Exhibit E.
"Performance Evaluation Period" shall mean the [***] in Exhibit E [***] on the
[***] Certificate of Acceptance [***] the Products in the Initial Order [***]
the Performance Criteria set forth in Exhibit E.
"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. For the Products in the Initial Order, the payment schedule shall be
as follows:
1. Seller [***] for [***] of the Purchase Price [***] Product [***]
Product.
2. [***] of a Product, [***] Acceptance Test Procedure for the
Product [***] Customer. [***] of the Acceptance Test Procedure,
Seller and Customer [***] Certificate of Acceptance and Seller
[***] an [***] Purchase Price for each Product.
[***] 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. [***] Performance Evaluation Period, Seller and Customer [***]
Performance Results. [***] the Performance Results [***] the
Performance Criteria [***] Performance Evaluation Period set
forth in Exhibit E, [***] Performance Acceptance and Seller [***]
for the [***] the Purchase Price for each Product and [***] of
the Purchase Price of the Services.
4. [***] the Performance Results [***] the Performance Criteria set
forth in Exhibit E, Customer [***] (i) [***] of the Products and
Services at the Purchase Price set forth in Exhibit A [***]
Seller [***] in [***] set forth in Section 8(a) or (ii) [***]
Products to the Seller. If Customer [***] the Products [***]
Initial Order to Seller, Seller [***] such Products and [***]
Customer [***] Purchase Price [***] Seller for the Services
provided for such Products. In the [***] by Customer to Seller
[***] from Customer, Seller [***] for [***] and Customer [***]
with subsection (e) hereof. Customer [***] the Products [***]
Seller's [***].
b. For Products and Services in all Follow-on Orders, Seller [***] for
[***] of the Purchase Price of each Product upon [***] Product by
Seller. Seller [***] of the Purchase Price of the Product and for
[***] of [***] Services to occur of (i) the [***] Certificate of
Acceptance [***] and (ii) the last day of a [***] during which Product
[***] at the [***].
c. If [***] Customer's [***] Products and Services pursuant to this
Agreement [***], Customer may utilize such financing in making
payments 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.
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 two (2) years 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
<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 [***] [***]
- -----------------------------------------------------------------------------
[***] [***] [***] [***]
- -----------------------------------------------------------------------------
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- -----------------------------------------------------------------------------
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- -----------------------------------------------------------------------------
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>
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</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>
[***]
[***]
[***]
[***]
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[***]
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[***]
[***]
[***] 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
Certain information in this Exhibit has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential treatment
request.
<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.
"Conditional Acceptance" shall mean, [***] Initial Spectrum Clearing Order and
Follow-on Orders, the [***] of (i) the [***] Certificate of Conditional
Acceptance [***] or (ii) the [***] which a Product has [***].
"Final Acceptance" shall mean (i) for Products in the Initial Spectrum Clearing
Order, 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.
"Follow-on Order" shall mean any Products (and any associated Services) [***]
Initial Spectrum Clearing Order [***] of this Agreement.
"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.
"Performance Criteria" shall mean the [***] of the Products in the Initial
Spectrum Clearing Order [***] Performance Evaluation Period set forth in Exhibit
E.
"Performance Evaluation Period" shall mean [***] specified in Exhibit E [***]
Products in the Initial Spectrum Clearing Order [***] with Exhibit E.
"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.
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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
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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. For the Products in the Initial Spectrum Clearing Order only, the
payment schedule shall be as follows:
1. Seller [***] for [***] of the Purchase Price of the Products and
[***] of the Purchase Price of the Services [***] Products [***] of a
Certificate of Final Acceptance for such Products.
2. Seller [***] for the [***] of the Purchase Price for the Products
upon Final Acceptance of such Products.
3. [***] Final Acceptance for the Products in the Initial Spectrum
Clearing Order [***], Customer [***] (i) [**] of the Products [***] Seller
[***] or (ii) [***] Products to the Seller, Seller [***] such Products at
Seller's [***] to Customer [***] Purchase at Seller's [***] to Customer [***]
Purchase Price [***] for Products and Services [***] [***] such Products. Seller
shall [***] of [***] of 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. For Products and Services in all Follow-on Orders, Seller [***] as
follows: (i) [***] of the Purchase Price of each Product upon [***] Product to
Customer, (ii) [***] of the Purchase Price of each Product and [***] of [***]
Services [***] Conditional Acceptance of such Product, and (iii) [***] of the
Purchase Price of each Product promptly following Final Acceptance Follow-on
Order, Seller [***] of the Purchase Price of each Product [***] Product to
Customer and [***] Conditional Acceptance and Final Acceptance.
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;
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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 three (3) years 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
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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. [***] PRODUCT
Seller [***] to Customer an [***] in the Product to [***] Product (the "[***]
Product"). This [***] Product will [***] in Exhibit B, Section 4.1, in a [***]
in Exhibit B, Section 2.2.7 ([***]). Seller [***] to make [***] for [***]
Customer on [***] on the terms and conditions set forth in Exhibit A.
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.
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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. [***].
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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>
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SPOTLIGHT UNITS
(BY NO. OF CHANNELS) [***] [***]
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<TABLE>
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LPA CONFIGURATION PRICING
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Configuration [***] [***]
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<S> <C> <C>
4 LPA Module Assy. [***] [***]
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16 LPA Module Assy. [***] [***]
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</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.
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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
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PART NUMBER DESCRIPTION [***] [***] [***]
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<S> <C> <C> <C> <C>
250-0035-XX Tx Driver [***] [***] [***]
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250-0042-XX Voice LNA [***] [***] [***]
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250-0044-XX LNA Alarm [***] [***] [***]
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250-0082-XX LNA Power [***] [***] [***]
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250-0083-XX External I/O card [***] [***] [***]
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270-0002-XX RX SMU Assy. [***] [***] [***]
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270-0026-XX TX SMU Assy. [***] [***] [***]
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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 [***]
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<S> <C> <C>
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</TABLE>
Notes:
1. [***]
2. [***]
<TABLE>
<CAPTION>
6. Engineering Services Pricing
ENGINEERING SERVICES
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DESCRIPTION [***]
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<S> <C>
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</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
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</TABLE>
Products and Services Pricing
================================================================================
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</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
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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. [***]
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<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
Certain information in this Exhibit has been
omitted and filed separately with the
Securities and Exchange Commission
pursuant to a confidential treatment request.
<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.
"Certificate of Conditional Acceptance" shall mean [***] Acceptance Test
Procedure as set forth in Exhibit F.
"Certification of Final Acceptance" shall mean, Customer's certification of the
resolution of all Punchlist items, which shall not be unreasonably withheld.
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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.
"Conditional Acceptance" shall mean [***] Products at the [***] Certification of
Conditional Acceptance [***] as set forth in Exhibit F.
"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).
"Final Acceptance" shall [***] Conditional Acceptance, [***] Punchlist [***].
"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
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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).
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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
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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. Seller [***] to Customer for [***] of the Purchase Commitment, as set
forth in Exhibit A, [***] prior to the [***]. Seller [***] such
Product [***] from Customer by [***].
b. [***] Conditional Acceptance, Seller [***] for the [***] of the
Purchase Commitment set forth in Exhibit A. The foregoing
notwithstanding, all payments must occur on or before June 30, 1998.
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
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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
[***]
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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
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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 the earlier of (i) performance of all
obligations by the parties under this Agreement or (ii) 180 days following
Seller's shipment of the Purchase Commitment. If either party is in material
default of any of its obligations under this Agreement
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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, [***].
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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. [***] [***] [***]
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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>
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PURCHASE COMMITMENT PRICE [***]
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</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>
[***] [***]
- ------------------------------------------------------------------------------------------
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</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
===================================================
[***] [***] [***]
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[***]
[***] 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>
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</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
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[***] 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
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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]
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EXHIBIT 10.16
Certain information in this Exhibit has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential treatment
request.
<PAGE>
EXHIBIT 10.16
METAWAVE COMMUNICATIONS CORPORATION
MANUFACTURING AGREEMENT
This agreement is made this 3rd day of September, 1998 between Metawave
Communications Corporation, a Delaware corporation ("Customer") and Powerwave
Technologies, Inc., a Delaware corporation ("Manufacturer").
RECITALS
Customer desires to have certain products manufactured by Manufacturer for
sale to Customer. Manufacturer has the capability of manufacturing such
products and desires to do so for sale to Customer.
AGREEMENT
In consideration of the foregoing and the agreements contained herein, the
parties agree as follows:
1. DEFINITIONS.
(a) "Confidential Information" of a party shall mean any information
disclosed by that party to the other pursuant to this Agreement which is in
written, graphic, machine readable or other tangible form and is marked
"Confidential," "Proprietary" or in some other manner to indicate its
confidential nature. Confidential Information may also include oral information
disclosed by one party to the other pursuant to this Agreement, provided that
such information is designated as confidential at the time of disclosure and is
reduced to writing by the disclosing party within a reasonable time (not to
exceed thirty (30) days) after its oral disclosure, and such writing is marked
in a manner to indicate its confidential nature and delivered to the receiving
party. Notwithstanding any failure to so identify it, however, all
Specifications shall be Confidential Information of Customer.
(b) "Inventory" shall mean raw materials and supplies necessary for
the manufacture of Products pursuant to this Agreement.
(c) "Long-Lead Inventory" shall mean those items of Inventory
identified in writing by Manufacturer to Customer prior to beginning manufacture
of any particular type of Product that have a lead time from Manufacturer's
supplier longer than ninety (90) days.
(d) "Products" shall mean the products manufactured by Manufacturer
in accordance with the Specifications pursuant to this Agreement, as set forth
on Exhibit A attached hereto.
(e) "Intellectual Property" shall mean (i) all rights held by
Customer in its Confidential Information, including, but not limited to,
patents, copyrights, authors' rights, trademarks, tradenames, know-how and trade
secrets, irrespective of whether such rights arise
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under U.S. or international intellectual property, unfair competition or trade
secret laws, and (ii) all rights held by Manufacturer in the Products and in its
Confidential Information, including, but not limited to, patents, copyrights,
authors' rights, trademarks, tradenames, know-how and trade secrets,
irrespective of whether such rights arise under U.S. or international
intellectual property, unfair competition or trade secret laws.
(f) "Purchase Order" shall mean a Customer Purchase Order in the form
provided by the Customer or in a form mutually agreed to by the parties.
(g) "Specifications" shall mean the specifications for the Products
as provided by Customer and accepted by Manufacturer which are set forth in
Exhibit B, and may be revised from time to time upon mutual written agreement of
the parties.
2. MANUFACTURE AND SUPPLY OF PRODUCTS.
(a) SALE AND PURCHASE. Manufacturer agrees to sell to Customer such
quantities of the Products meeting the Specifications as Customer may order in
accordance herewith. Subject to the provisions of section 10 hereof, so long as
this Agreement remains in effect, Manufacturer agrees to satisfy 100% of
Customer's requirements for the Products under this Agreement. Manufacturer
will be the sole supplier of Products to Customer which Customer purchases for
resale in its antenna systems to its cellular network operator customers
(hereinafter referred to as "Network Operators"), provided that Manufacturer
offers the Product(s) for sale. The foregoing does not preclude (i) Customer
from designing and selling to Network Operators antenna systems which use
Products of another manufacturer if Manufacturer does not offer such Product for
sale, and (ii) Network Operators from purchasing a Product directly from
Manufacturer or from purchasing or utilizing the product of another manufacturer
for use with Customer's antenna system.
(b) AGREEMENT TO MANUFACTURE. Subject to section 2(a) of this
Agreement, pursuant to Purchase Orders or changes to Purchase Orders issued by
Customer and accepted by Manufacturer, Manufacturer agrees to procure Inventory,
components and other supplies and to manufacture, test, assemble, and deliver
the Products pursuant to the Specifications for each such Product and to deliver
such Products to a location designated by Customer.. Manufacturer will not
place its name or any other marking not approved by Customer anywhere on the
exterior of the Products or their respective packaging material, except
markings, if any, which are required by law.
(c) FORECASTS. Manufacturer shall supply the quantities of Product
meeting the Specifications on the Delivery Dates requested by Customer, provided
the Delivery Dates conform to the Product lead times and Customer forecasts set
forth herein. On the tenth (10th) day of each month, Customer shall provide
Manufacturer with a rolling forecast in writing (the "Forecast") of Customer's
estimated aggregate purchase requirements of Product for the subsequent twelve-
month (12) period. Subject to section 2(d) hereof, the initial six (6) weeks of
the Forecast shall be binding. Subject to these binding Forecast requirements,
if the Forecast for any period is less than the previous Forecast supplied for
the same period, the difference will be
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considered canceled. Manufacturer shall use its best efforts to supply the
number of Products set forth in the Forecast.
(d) PURCHASE ORDERS. All orders for Product shall be submitted to
Manufacturer in writing by mail or facsimile to the address set forth on the
signature page to this Agreement, and shall conform to the binding Forecasts in
accordance with Section 2(c). Customer shall submit such Purchase Orders to
Manufacturer at least 30 business days prior to the date of requested delivery
("Delivery Date"), or such longer period of time as mutually agreed upon by the
parties for Products incorporating Long-Lead Inventory.
(e) ORDER FORECAST VARIATIONS. For each Purchase Order, Customer
shall be entitled, without penalty, to: (i) upon forty-five (45) or more days'
prior notice, reschedule the scheduled delivery date for one hundred percent
(100%) of the quantity of Product ordered pursuant to such Purchase Order and/or
(ii) upon more than forty-five (45) days prior notice, increase the quantity of
Product ordered by an amount equal to an additional one hundred percent (100%)
of the quantity of Product ordered. Such rescheduled Purchase Orders shall be
submitted in writing to Manufacturer, by mail or facsimile, and shall supersede
prior Purchase Orders to the extent such prior Purchase Orders conflict with the
rescheduled Purchase Order.
(f) ACCEPTANCE OR REJECTION OF PURCHASE ORDERS. Purchase Orders that
conform to binding Forecasts delivered to Manufacturer for the relevant period
shall be deemed accepted by Manufacturer upon receipt. All other Purchase
Orders not rejected by Manufacturer within ten (10) working days of receipt by
Manufacturer shall be deemed accepted by Manufacturer effective upon receipt of
such Purchase Order.
(g) ENGINEERING CHANGES. Customer may request at any time, with at
least thirty (30) days' written notice, that Manufacturer incorporate an
engineering change into the Product. Such request will include a description of
the proposed change sufficient to permit Manufacturer to evaluate its
feasibility. Manufacturer's evaluation shall be in writing and shall state the
impact on delivery schedule and expected cost. Manufacturer will not be
obligated to proceed with the engineering change until the parties have agreed
in good faith on the changes to the Specifications, Delivery Dates and Pricing
and upon the costs to be paid by Customer, including reassembly, retooling or
cost of Inventory on-hand and on-order that becomes obsolete as a result of the
Engineering Change. Manufacturer will use all reasonable efforts to return all
unused Inventory for a full refund, to cancel pending orders and to take other
actions to reduce such costs to be paid by Customer.
3. TOOLING.
(a) TOOLING/NON-RECURRING EXPENSES. Manufacturer shall provide
tooling that is not specific to the Product at its own expense. Customer shall
pay for or obtain and consign to Manufacturer for its use any Product-specific
tooling and other reasonably necessary non-recurring expenses specific to the
Product, as set forth in Manufacturer's quotation, and approved in writing by
Customer
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4. PRODUCT SHIPMENT AND INSPECTION.
(a) SHIPMENTS. All Products delivered pursuant to the terms of this
Agreement shall be suitably packed for shipment to avoid damage, marked for
shipment to Customer's destination specified in the applicable Purchase Order,
and Manufacturer shall use its best efforts to ensure that the Products are
received by Customer 0 days late, or 5 days prior to the delivery date set forth
on the Purchase Order (the "Delivery Date"). Shipment will be F.O.B.
Manufacturer's factory, at which time risk of loss and title will pass to
Customer. All freight, insurance and other shipping expenses, as well as any
special packing expenses approved in writing by Customer and not included in the
original price quotation for the Products will be paid by Customer.
(b) CANCELLATION. Customer may not cancel any portion of an accepted
Purchase Order without Manufacturer's prior written approval, which will not be
unreasonably withheld. If the parties agree upon a cancellation, Customer will
pay Manufacturer for Products and Inventory affected by the cancellation as
follows: 100% of the cost of all Inventory in Manufacturer's possession and not
returnable to the vendor or usable for other customers, whether in raw form or
work in process.. Manufacturer will use reasonable commercial efforts,
including the mutual involvement of Customer, to return unused Inventory for a
full refund, net of restocking charges of such vendor and to cancel pending
orders. Customer will be entitled to take delivery of all Products and
Inventory to be paid for by Customer under this section, promptly following
Manufacturer's receipt of payment therefor.
5. PAYMENT TERMS, ADDITIONAL COSTS AND PRICE CHANGES.
(a) PAYMENT TERMS. Payment for any products, services or other costs
to be paid by Customer hereunder are due thirty (30) days from the later of (i)
the date of invoice for Products delivered to Customer, and (ii) the delivery of
products to the Customer, and shall be made in lawful U.S. currency.
(b) PRICING. The prices for the Products shall be as set forth on
Exhibit C hereto and will be reviewed quarterly or as requested by Customer.
Such prices are, and the price for each Product sold hereunder will be, as [***]
as the [***] for by Manufacturer to [***] of the [***] to the [***]. For
comparison purposes, Manufacturer may [***] sales.
(c) ADDITIONAL COSTS.
(i) DUTIES AND TAXES. All prices quoted are exclusive of
federal, state and local excise, sales, use and similar duties and taxes, and
Customer shall be responsible for all such items.
(ii) EXPEDITING CHARGES. Customer shall be responsible for any
expediting charges reasonably necessary because of a change in Customer's
requirements.
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Manufacturer shall obtain approval from Customer for expediting charges prior to
incurring any such charge.
(d) COST REDUCTIONS. Manufacturer may be requested by Customer to
institute a cost reduction plan which will be reviewed quarterly pursuant to
section 5(e) below.
(e) QUARTERLY BUSINESS REVIEWS. During each quarter, the parties
will have a quarterly business review to review the prices of the Products, cost
reduction plans, quality, Forecasts and Delivery performance and to agree to any
modifications that may be necessary.
6. LICENSE GRANTS; OWNERSHIP RIGHTS.
(a) INTELLECTUAL PROPERTY RIGHTS. Each party shall retain sole
ownership of, and all rights to, any Intellectual Property of any kind
previously owned by that party or created solely by that party. The parties
shall jointly own any Intellectual Property where both parties made substantial
contributions documented in writing prior to the creation of the Intellectual
Property.
(b) TRADEMARKS. In consideration of the fees set forth herein,
Customer further grants to Manufacturer a non-exclusive license to use the
Trademarks on and in connection with the manufacture of the Products, and for
this purpose to affix, subject to Customer's prior written approval, the
Trademarks to or on the Products. Such trademark license shall expire or
terminate upon the expiration or termination of this Agreement. The Trademarks
may only be used in association with the manufacture and distribution of the
Products pursuant to the terms of this Agreement. Any and all uses of the
Trademarks shall be subject to the prior written approval of Customer.
Manufacturer shall not remove trademark notices from any Product without the
prior written consent of Customer. Manufacturer shall not use the name,
Trademarks or logos associated with the Products in its business name. For
purposes of the preceding paragraph, "Trademark" shall mean the trademarks that
are associated with the Product which are approved by Customer for use by
Manufacturer in the manufacture of the Products.
7. CONFIDENTIAL INFORMATION.
(a) NONDISCLOSURE AND NONUSE. Each party shall treat as confidential
all Confidential Information of the other party, shall not use such Confidential
Information except as set forth in this Agreement, and shall use reasonable
efforts not to disclose such Confidential Information to any third party.
Without limiting the foregoing, each of the parties shall use at least the same
degree of care which it uses to prevent the disclosure of its own confidential
information of like importance to prevent the disclosure of Confidential
Information disclosed to it by the other party under this Agreement. Each party
shall disclose Confidential Information of the other party only to its
directors, officers, employees, and consultants who are required to have such
information in order for such party to carry out the transactions contemplated
by this Agreement. Each party shall promptly notify the other party of any
actual or suspected misuse or unauthorized disclosure of the other party's
Confidential Information. Each party agrees to hold
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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.
(b) EXCEPTIONS. Notwithstanding the above, neither party shall have
liability to the other with regard to any Confidential Information of the other
which the receiving party can prove:
(i) was in the public domain at the time it was disclosed or
has entered the public domain through no fault of the receiving party;
(ii) was known to the receiving party, without restriction, at
the time of disclosure, as demonstrated by files in existence at the time of
disclosure;
(iii) is disclosed with the prior written approval of the
disclosing party ;
(iv) was independently developed by the receiving party without
any use of the Confidential Information, as demonstrated by files created at the
time of such independent development;
(v) becomes known to the receiving party, without restriction,
from a source other than the disclosing party without breach of this Agreement
by the receiving party and otherwise not in violation of the disclosing party's
rights; or
(vi) is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body; provided, however,
that the receiving party shall provide prompt notice of such court order or
requirement to the disclosing party to enable the disclosing party to seek a
protective order or otherwise prevent or restrict such disclosure.
(c) RETURN OF CONFIDENTIAL INFORMATION. Upon expiration or
termination of this Agreement, each party shall promptly return all Confidential
Information of the other party. In addition, each party shall, upon written
request of the other party, return Confidential Information of such other party.
(d) REMEDIES. Any breach of the restrictions contained in this
Section is a breach of this Agreement which may cause irreparable harm to the
nonbreaching party. Any such breach shall entitle the nonbreaching party to
injunctive relief in addition to all legal remedies.
(e) CONFIDENTIALITY OF AGREEMENT. Each party shall be entitled to
disclose the existence of this Agreement, but agrees that the terms and
conditions of this Agreement shall be treated as Confidential Information and
shall not be disclosed to any third party; provided, however, that each party
may disclose the terms and conditions of this Agreement:
(i) as required by any court or other governmental body;
(ii) as otherwise required by law;
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(iii) to legal counsel of the parties;
(iv) in confidence, to accountants, banks, and financing
sources and their advisors;
(v) in connection with the enforcement of this Agreement or
rights under this Agreement; or
(vi) in confidence, in connection with an actual or proposed
merger, acquisition, or similar transaction.
8. INDEMNITY.
(a) INDEMNIFICATION BY MANUFACTURER. Manufacturer agrees, at its own
expense, to indemnify the Customer against any damages, costs (including
attorneys' fees and costs) or other liability arising from any claim brought
against them with respect to any Products manufactured by Manufacturer, and any
reasonable out-of-pocket costs to Customer of any returned or failed Products
manufactured by Manufacturer, including all costs incurred as a result of a
Product withdrawal or recall (collectively "Customer Losses") to the extent such
Customer Losses are caused by Manufacturer's failure to manufacture the Products
in conformance with the Specifications and with Manufacturer's warranties as set
forth in this Agreement, or by Manufacturer's misconduct or negligence;
provided, with respect to any claim or action, that Customer provides (i) prompt
written notice of such claim or action, (ii) sole control and authority over the
defense or settlement of such claim or action and (iii) proper and full
information and reasonable assistance to defend and/or settle any such claim or
action.
(b) INDEMNIFICATION BY THE CUSTOMER. Customer agrees, at its own
expense, to defend or at its option to settle any claim or action brought
against Manufacturer based on an allegation that the Specification provided by
Customer for a Product manufactured by Manufacturer pursuant to this Agreement
infringes any U.S. patent, or registered U.S. copyright, or registered U.S.
trademark , trade secret, or other intellectual property right of any third
party, and to indemnify Manufacturer against any and all damages and costs,
including legal fees, that a court awards against Manufacturer under any such
claim or action; provided that Manufacturer provides Customer with (i) prompt
written notice of such claim or action, (ii) sole control and authority over
the defense or settlement of such claim or action and (iii) proper and full
information and reasonable assistance to defend and/or settle any such claim or
action. Notwithstanding the foregoing, Customer assumes no liability for
infringement claims with respect to any Product that is not manufactured in
conformance with the Specifications and with Manufacturer's warranties as set
forth in this Agreement.
The foregoing states the entire liability and obligations of, and the
exclusive remedy of, the parties, with respect to any alleged or actual
infringement of patents, copyrights, trade secrets, trademarks or other
intellectual property rights.
(c) NO OTHER LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, NEITHER PARTY NOR ITS AGENT(S), REPRESENTATIVE(S) OR
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EMPLOYEE(S) SHALL BE LIABLE TO THE OTHER PURSUANT TO THIS AGREEMENT FOR AMOUNTS
REPRESENTING LOSS OF REVENUES, LOSS OF PROFITS, LOSS OF BUSINESS OR INDIRECT,
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF THE OTHER PARTY, HOWEVER CAUSED
AND ON ANY THEORY OF LIABILITY, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THE LIABILITY OF CUSTOMER, ITS AGENT(S),
REPRESENTATIVE(S) AND EMPLOYEE(S) TO THE MANUFACTURER FOR DAMAGES OR ALLEGED
DAMAGES WHETHER IN CONTRACT OR TORT (INCLUDING STRICT LIABILITY AND NEGLIGENCE)
WITH RESPECT TO THIS AGREEMENT IS LIMITED TO AND SHALL NOT EXCEED THE AMOUNTS
PAID BY CUSTOMER TO MANUFACTURER UNDER THIS AGREEMENT DURING THE TWELVE (12)
MONTHS IMMEDIATELY PRECEDING THE EVENT AND/OR PRODUCT GIVING RISE TO THE
DAMAGES.
9. WARRANTY AND DISCLAIMER.
Manufacturer warrants that all Products will conform to the
Specifications set forth herein (or as may otherwise be mutually agreed upon in
writing), and will be free from defects in material and workmanship for a period
of fifteen (15) months from date of shipment to Customer. In the case of
shipments directly to a customer site, the warranty period shall also begin on
the date of shipment from the Manufacturer. In the event of a failure under
warranty, Manufacturer will repair or replace the Product(s), at it's option,
within thirty (30) days notice of such non-compliance. Manufacturer shall bear
the transportation charges for Products returned under these warranty
conditions. If the Product is not found defective by Manufacturer, then
Customer will bear the expense to return the Product to its facility. Except
for the foregoing expressly stated warranties, manufacturer makes no express or
implied warranties relating to the products covered by this agreement.
Manufacturer expressly disclaims any implied warranties of merchantability or
fitness for a particular purpose.
10. TERM AND TERMINATION.
(a) TERM. This Agreement shall become effective on the date of this
Agreement and shall continue for a period of eighteen (18) months; this
Agreement shall be extended automatically at the end of the initial term or
subsequent terms for an additional 18 month term, unless within thirty (30) days
prior to the end of the initial term or a renewal term, a party gives written
notice to the other party of its intention to terminate the Agreement.
(b) TERMINATION FOR CONVENIENCE. This Agreement may be terminated at
any time with or without cause by either party upon the giving of not less than
one hundred eighty (180) days' written notice by registered mail to the other
party.
(c) TERMINATION FOR CAUSE. Either party may cancel this Agreement at
any time if the other party breaches any term hereof and fails to cure such
breach within ten (10) business days after notice of such breach or if the other
party shall be or becomes insolvent, or if either party makes an assignment for
the benefit of creditors, or if there are instituted by or against either party
proceedings in bankruptcy or under any insolvency or similar law or for
reorganization, receivership or dissolution.
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(d) TERMINATION LIABILITY. Neither party shall be liable in any
manner on account of the termination or cancellation of this Agreement. The
rights of termination and cancellation as set forth herein are absolute. Both
Customer and Manufacturer are aware of the possibility of expenditures necessary
in preparing for performance hereunder and the possible losses and damages which
may occur to each in the event of termination or cancellation. Both parties
clearly understand that neither shall be liable for damages of any kind
(including but not limited to special, incidental or consequential damages) by
reason of the termination or cancellation of this Agreement.
(e) OBLIGATIONS UPON TERMINATION. The termination or expiration of
this Agreement shall in no way relieve either party from its obligations to pay
the other any sums accrued hereunder prior to such termination or expiration.
(f) SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding anything to the
contrary in this Agreement, the following sections shall survive termination of
this Agreement: 1, 5, 6, 7, 8, 9, 10, and 11.
11. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the parties or their
respective successors and assigns. Any amendment or waiver effected in
accordance with this Section 11(a) shall be binding upon the parties and their
respective successors and assigns.
(b) SUCCESSORS AND ASSIGNS. Manufacturer or Customer shall not
assign any of its rights, obligations or privileges (by operation of law or
otherwise) hereunder without the prior written consent of the other party, which
shall not be unreasonably withheld, except to a successor entity into which
either party shall have sold or transferred all or substantially all its assets.
Subject to the foregoing, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective permitted successors and
assigns of the parties. 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.
(c) 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
Washington, without giving effect to principles of conflicts of law.
(d) 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.
(e) 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.
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(f) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
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Customer: Metawave Communications Corporation
PO Box 97069
10735 Willows Road NE
Redmond, WA 98073
fax: (425) 702-5971
Attention: VP, Operations
Copy to: General Counsel
Manufacturer: Powerwave Technologies, Inc.
2026 McGaw Avenue
Irvine, CA 92614
fax: (949) 757-6670
Attention: President and Chief Executive Officer
Copy to: Chief Financial Officer
(g) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(h) ENTIRE AGREEMENT. This Agreement is the product of both of the
parties hereto, and constitutes the entire agreement between such parties
pertaining to the subject matter hereof, and merges all prior negotiations and
drafts of the parties with regard to the transactions contemplated herein. Any
and all other written or oral agreements existing between the parties hereto
regarding such transactions are expressly canceled.
(i) INDEPENDENT CONTRACTORS. The relationship of Manufacturer and
Customer established by this Agreement is that of independent contractors, and
nothing contained in this Agreement will be construed (i) to give either party
the power to direct and control the day-to-day activities of the other, (ii) to
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) to allow either party to
create or assume any obligation on behalf of the other for any purpose
whatsoever.
(j) FORCE MAJEURE. If the performance of this Agreement or any
obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, strikes or labor disputes, war or other
violence, any law, order, proclamation, regulation, ordinance, demand or
requirement of any government agency, or any other act or condition beyond the
reasonable control of the parties hereto, the party so affected upon giving
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prompt notice to the other parties shall be excused from such performance during
such prevention, restriction or interference.
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The parties have executed this Agreement as of the date first set
forth above.
CUSTOMER: MANUFACTURER:
METAWAVE COMMUNICATIONS POWERWAVE TECHNOLOGIES, INC.
CORPORATION
By: /s/ Robert H. Hunsberger By: /s/ Bruce C. Edwards
----------------------------- -----------------------------
Name: Robert H. Hunsberger Name: Bruce C. Edwards
--------------------------- ---------------------------
Title: Chief Executive Officer Title: President and Chief
-------------------------- --------------------------
Executive Officer
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EXHIBIT 10.17
Certain information in this Exhibit has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential treatment
request.
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EXHIBIT 10.17
METAWAVE COMMUNICATIONS CORPORATION/
GTE Wireless Inc.
Purchase Agreement
Document Number #1003-PA
Metawave Communications Corporation
10735 Willows Road NE
Redmond, WA 98073-9769 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
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TABLE OF CONTENTS
1. AGREEMENT.............................................................. 3
2. DEFINITIONS............................................................ 3
3. PURCHASE ORDERS / CANCELLATIONS........................................ 5
4. SHIPPING, TITLE, RISK OF LOSS.......................................... 6
5. INVOICES AND PAYMENT................................................... 6
6. WARRANTY............................................................... 8
7. OBLIGATIONS OF CUSTOMER................................................ 9
8. INFRINGEMENT INDEMNITY................................................. 10
9. INDEMNIFICATION........................................................ 11
10. TERM AND TERMINATION................................................... 11
11. ASSIGNMENT............................................................. 11
12. NOTICES................................................................ 12
13. COMPLIANCE WITH LAWS................................................... 12
14. FORCE MAJEURE.......................................................... 12
15. GOVERNING LAW; DISPUTE RESOLUTION...................................... 13
16. CONFIDENTIALITY........................................................ 13
17. GENERAL PROVISIONS..................................................... 14
EXHIBIT A: PRODUCTS AND SERVICES PRICING
EXHIBIT B: PRODUCT SPECIFICATIONS
EXHIBIT C: PERFORMANCE ACCEPTANCE PROCEDURE
EXHIBIT D: PRODUCT MAINTENANCE PROGRAM
EXHIBIT E: SOFTWARE LICENSE
EXHIBIT F: COMMISSIONING CERTIFICATE
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METAWAVE COMMUNICATIONS CORPORATION
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of this eighth
day of September, 1998 (the "Effective Date") between Metawave
Communications Corporation, a Delaware corporation ("Seller"), and GTE
Mobilnet of California Limited Partnership, by GTE Wireless Incorporated,
its General Partner on its behalf and its Affiliates ("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 by
submitting a Customer 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 different or
inconsistent 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:
"Affiliate" shall mean any partnership, corporation or other entity
which is incorporated in the United States and in which GTE Wireless
Incorporated, directly or indirectly, owns more than fifty percent (50%) of
the voting shares, or owns a controlling interest.
"Change Order" shall mean any subsequent change to a Purchase Order
initiated by either party and mutually agreed to by both parties, including
but not limited to, changes in Site configuration and Products and Services
needed at the Site.
"Commissioning" shall mean the procedures required to place the
Product into commercial service at a particular Site as described in the
Product system manual and the
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completion of which for Follow-on Orders is shown by evidence of Customer's
signature on the Commissioning Certificate attached hereto as Exhibit F.
"Follow-on Order" shall mean any Purchase Order in excess of the
Initial Order submitted by Customer.
"Initial Order" shall mean Customer's initial purchase of one or more
Products (and any associated Services) for deployment in the Customer's
California market and ordered as a part of this Purchase Agreement and as
described in Exhibit A.
"Performance Acceptance" shall mean, for the Initial Order,
Customer's written notification to Seller of the Certificate of Performance
Acceptance specified in Exhibit C, that the Products satisfy the
Performance Criteria set forth in Exhibit C.
"Performance Acceptance Procedure" shall mean, for the Initial Order,
the testing procedures and protocols used to determine Product performance
levels as described in Exhibit C.
"Performance Criteria" shall mean the [**] set forth in Exhibit C,
Section 3.7.3. to be [**] for the [**] Products [**] Initial Order [**]
Performance Evaluation Period.
"Performance Evaluation Period" shall mean the [**] in Exhibit C
3.7.2.1. [**] Products will [**] in [**] Performance Criteria.
"Products" shall mean the SpotLight(TM) 2000 spectrum management
systems, consisting of hardware and Software, listed in Exhibit A hereto or
any additional products set forth in any amendments thereto 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/or 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 in 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 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.
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"Site Survey" shall mean the survey of a Site performed by Seller to
determine the Product configuration and scope of services required for the
proper installation and Commissioning of the Product.
"Software" shall mean the (i) object-code computer programs embedded
in the Product which control and monitor the operation of the Product
("Embedded System Software"), and (ii) the Lamplighter/TM/ 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 D), other updates and modifications to such
Software (the "Software Updates") and any documentation in support thereof.
"Software License" shall mean the software license set forth in
Exhibit E.
"Specifications" shall mean the specifications for the Products set
forth in Exhibit B and incorporated herein.
3. PURCHASE ORDERS/CANCELLATIONS
a. When Customer wishes to purchase Products and Services pursuant to this
Agreement, Customer shall notify the Designated Representative of
Seller specified in Section 12 hereof. Seller's Designated
Representative (or his agents) shall, with a representative of
Customer, conduct a Site Survey for each Site to determine the
configuration, Products, scope of Services and any other ancillary
equipment required for each Site. The Designated Representative shall
then develop an equipment list and price sheet for the Products and
Services required for each Site using the prices set forth in Exhibit A
(the "Quotation").
b. Following receipt of the Quotation, Customer shall order Products and
Services by submitting a Purchase Order to which the Quotation shall be
attached and made a part thereof. The Purchase Order shall also include
the desired delivery date and whether partial deliveries are
acceptable. Purchase Orders should be submitted by Customer to Seller
at least 90 days prior to date of delivery for such Products and
Services. Upon receipt of the Purchase Order, Seller shall have five
(5) business days to accept or reject the Purchase Order in writing.
c. In the event that the Customer submits a Purchase Order without a
Quotation, such Purchase Order shall be subject to completion of a Site
Survey by Seller. If following the completion of the Site Survey,
Seller determines that Product configurations and or the Services set
forth in the Purchase Order must be changed, Seller shall, within ten
(10) days of completion of the Site Survey, notify Customer with a
written proposal for changes to the Purchase Order. Upon receipt,
Customer shall have five (5) business days to accept or reject the
written proposal for changes. If accepted, Customer shall execute a
written Change Order to reflect the required changes identified by the
Site Survey. If Customer rejects the Change Order Customer may cancel
the Purchase Order subject to Section 3(d) below.
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d. Customer may cancel or delay delivery of a Product contained in any
Purchase or Change Order prior to Seller's shipment of the Product
subject to the terms herein. Any such cancellation or delay must be
made by written notification. If Customer directs such cancellation or
delay with less than 30 days written notice from the delivery date
specified in Purchase Order or Change Order, Customer shall pay to
Seller any reasonable costs associated with such cancellation or delay
provided, however, that any such costs shall not exceed in the
aggregate ten percent (10%) of the Purchase Price of each canceled or
delayed Product. Customer shall not be obligated to pay any such costs
if Customer timely exercises its cancellation rights under section 3(c)
hereof.
e. Within thirty days following execution of this Agreement, Customer
shall give Seller a non binding forecast of Customer's estimated
requirements for the Products and Services for the forthcoming twelve
(12) months such forecast shall be updated by Customer on a monthly
basis.
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 5 below.
Customer is responsible for the payment of all reasonable shipping
charges, except as noted in Section 4(b) below.
b. Products shall be packed by Seller, at no additional charge to
Customer, in containers adequate to prevent damage during reasonable
shipping, handling and storage. Customer shall be responsible for
payment of any warehousing or storage charges for the Products
following delivery of the Products to Customer.
c. For the Initial Order, title to and risk of loss or damage to Products
sold by Seller to Customer hereunder shall pass to Customer upon
Performance Acceptance. For all Follow-on Orders title to and risk of
loss or damage to Products sold by Seller to Customer hereunder shall
pass to Customer upon shipment of Products to Customer. Title to
Software shall remain with Seller in all cases pursuant to the terms of
the Software License attached as Exhibit E hereto.
5. INVOICES AND PAYMENT
a. For the Products in the Initial Order only, the payment schedule shall
be as follows:
1. Seller shall render an invoice for one hundred percent (100%) of
the Purchase Price of the Products and one hundred percent (100%)
of the Purchase Price of the Services associated with such Products
upon Performance Acceptance.
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2. In the event that Performance Acceptance for the Products in the
Initial Order does not occur and Seller has indicated in writing
that it will no longer pursue Performance Acceptance, Customer
shall have the option of either (i) completing the purchase of the
Products in which case Seller shall render an invoice for the
balance due or (ii) returning the Products to the Seller. If
Customer chooses to return the Products to Seller, Seller shall de-
install such Products at Seller's expense and repair any damage to
or reverse any modifications to the Customer's equipment at the
Site caused by Seller during installation of the Products and
during the Performance Evaluation Period. Seller shall arrange for
and pay the costs of shipping and assumes the risk of loss and
damage to Products during shipment of the Products back to its
headquarters in Redmond, Washington.
b. For Follow-on Orders for Products, to be installed by Seller, Seller
shall render invoices as follows: (i) [**] of the Purchase Price of
each Product upon shipment of a Product to Customer, and (ii) [**] of
the Purchase Price of each Product and one hundred percent (100%) of
any associated Services promptly following the Commissioning of a
Product. For Follow-on Orders, to be installed by Customer, Seller
shall invoice Customer for one hundred percent (100%) of the Purchase
Price of each Product upon shipment of Product to Customer.
c. For Follow-on-Orders for Services only, Seller shall render invoices
for 100% of the Purchase Price upon the completion of the Services, or
on alternative milestones based upon mutual agreement of the parties.
d. All invoices shall be computed on the basis of the prices set forth
in Exhibit A (including any applicable discounts) and shall identify
and show separately quantities of Products, type of Services, total
amounts for each item, shipping charges, insurance charges, applicable
sales or use taxes and total amount due. Customer shall promptly pay
Seller the amount due within thirty (30) days of the date of receipt of
the invoice, except for the Initial Order only which shall be due
ninety (90) days of the date of receipt 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.
e. Excluding income, business and licensing taxes, Customer shall be
responsible for the payment of all sales, use and any other taxes
applicable specifically to the sale of 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.
f. 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
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RESPECT TO THE OMITTED PORTIONS.
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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.
6. WARRANTY
a. Seller warrants, for the Initial Order, for a period of [***] from the
date of Performance Acceptance and for all Follow-on Orders, for a
period of [***] from the shipment of a Product to Customer (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 lieu of all other warranties
express or implied which are specifically excluded, including, without
limitation, implied warranties of merchantability and fitness for a
particular purpose.
b. Seller represents that, in connection with Calendar-Related data and
Calendar-Related processing of Date Data or of any System Date, the
Product will not malfunction, will not cease to function, will not
generate incorrect data, and will not produce incorrect results. Seller
further represents that, in connection with providing Calendar-Related
data to and accepting Calendar-Related data from other automated,
computerized, and/or software systems and users via user interfaces,
electronic interfaces, and data storage, the Product represents dates
without ambiguity as to century. Seller further represents that Seller
has verified through testing that the Products are century compliant
and that testing included, without limitation, each of the following
specific dates and the transition to and from each date: December 31,
1998; January 1, 1999; September 9, 1999; September 10, 1999; December
31, 1999; January 1, 2000; February 28, 2000; February 29, 2000; March
1, 2000; December 31, 2000; January 1, 2001; December 31, 2004; and
January 1, 2005. These representations survive the expiration or
earlier termination of this Agreement. For purposes of this section,
"Calendar-Related" refers to date values based on the Gregorian
calendar, as defined in Encyclopedia Britannica, 15th edition, 1982,
page 602, and to all uses in any manner of those date values, including
without limitation manipulations, calculations, conversions,
comparisons, and presentations; "Date Data" means any Calendar-Related
data value in the inclusive range January 1, 1900 through December 31,
2094, which the Product uses in any manner; and "System Date" means any
Calendar-Related data value in the inclusive range January 1, 1985
through December 31, 2094 (including the natural transition between
such values), which the Product shall be able to use as its current
date while operating.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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c. Customer and Seller shall handle all warranty claims in accordance with
the procedures set forth in Exhibit D hereto (Product Maintenance). The
actions taken by Seller under the Product Maintenance Program
procedures set forth in Exhibit D shall be the full extent of Seller's
liability and Customer's exclusive remedy with respect to a claim under
this Section 6.
d. This warranty does not apply to any claim which arises out of any 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, Commissioned, 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; (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; (vi) an event of Force Majeure has occurred; (vii) the
failure of third party antennas, antenna lines or interconnection
facilities not provided by Seller at the Site.
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 zoning approvals,
necessary permits and station licenses as may be required to install
and operate Customer's wireless system incorporating the Products prior
to the date agreed by the parties for the commencement of installation
of those Products;
b. Prepare the Site for the installation of the Product and performance of
the Services as specified in the Scope of Work to be mutually agreed by
both parties for each Site prior to the date agreed by the parties for
the commencement of installation of those Products;
c. Agree with Seller on a date for the commencement of Services and in the
event that the commencement of Services is delayed due to the failure
of Customer to comply with the foregoing obligations, Seller shall be
entitled to recover reasonable costs and expenses associated with
mobilizing and compensating Seller personnel during the delay.
d. Provide safe and secure access to the Sites for Sellers employees
during the performance of Services.
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8. INFRINGEMENT INDEMNITY
a. Seller shall indemnify and hold harmless Customer 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
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 Seller's 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 straight-line 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 with which the Products are not intended to
be used or for which the Products are not designed, (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 subsequent unaltered release of the Software
that is provided to the Customer.
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9. 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. Customer shall, at its
discretion, have the right to reasonably participate in the defense and
settlement of any claim asserted against Customer, including, but not
limited to, choice of counsel and any settlement, but Seller shall have
final authority to choose counsel and determine whether or not to settle a
claim. Neither Seller nor Customer shall not be liable to the other for
indirect or consequential damages, including but not limited to lost
profits or revenue.
10. TERM AND TERMINATION
The term of this Agreement shall be three (3) years 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.
11. ASSIGNMENT
a. Any assignment by either party to 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 Seller, whether by
sale, merger or otherwise.
b. Customer shall not (i) assign, sublicense or otherwise transfer the
Software License set forth in Exhibit E, to any third party other than
an Affiliate without the prior consent of the Seller, (ii) purchase a
Product solely for the purpose of reselling or distributing it to
another party, (iii) transport, relocate, or otherwise transfer the
Products or the Software outside the United States, or (iv) permit its
directors, officers, employees, agents or any other third person to
modify, copy, decompile, disassemble or reverse engineer the Products or
the Software.
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.
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12. 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 GTE Mobilnet of California
Corporation 12677 Alcosta Blvd
10735 Willows Road NE Dept. 500, PO Box 5011
Redmond, WA 98073 San Ramon, CA 94583-0811
Attn.: Richard Henderson Attn.: Hal Horton, Manager
VP, Sales Area Programs
Copy to: Kathy Surace-Smith Copy to: Randy Golden
General Counsel Regional Counsel
Fax: 425 702 5976 Fax: 925 904 3624
Seller's Designated Representative for Section 3 shall be Mike
Kavanagh or Mike Lewandowski.
The address to which notices or communications may be given to either
party or the names of the Designated Representatives may be changed by
written notice given by such party to the other pursuant to this Section
12.
13. 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.
14. 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
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such delay continues for 45 days, either party may terminate the Purchase
Order affected by the event by providing written notice.
15. GOVERNING LAW; DISPUTE RESOLUTION
a. This Agreement and each Purchase Order shall be construed in accordance
with the internal laws of the State of California, 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. If
compliance with this section would result in expiration of any statute
of limitations for the filing of a court action, the statute of
limitations shall be tolled for the period of time required to comply
with this section.
16. CONFIDENTIALITY
a. During the term of this Agreement and thereafter it may be necessary for
Seller and Customer to mutually exchange certain information, data and
proprietary material relating to marketing, sales, technical, financial
and other matters involving the Products, this Agreement or the
relationship between the Seller and Customer. In order to be treated as
confidential hereunder ("Confidential Information"), information
disclosed in writing shall be marked as confidential or proprietary, and
the disclosing party shall indicate the confidential nature of oral
information at the time of disclosure and provide written confirmation
thereof within fifteen (15) days following such disclosure. All
Confidential Information shall:
1. Be received and retained in the strictest confidence by the parties
and will be deemed to be proprietary information of the disclosing
party and the recipient(s) agree(s) that it will not disclose it to
third parties and further will treat such information, data or
material as proprietary using the same degree of care that it (or
they) would normally use in protecting its (or their) own proprietary
information; and
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2. Be used by the parties hereto solely for the purpose of implementing
this Agreement.
b. This provision shall not apply to any Confidential Information which:
(i) is known by the receiving party prior to the date of disclosure by
the disclosing party, and is not subject to or in violation of an
obligation of confidentiality; (ii) is or become public knowledge other
than by default of the receiving party; (iii) is obtained by the
receiving party from a bona-fide third party having free right of
disposal of such information; (iv) is wholly and independently developed
by receiving party without reference to the Confidential Information; or
(v) the receiving party is required to disclose pursuant to any law,
regulation or a valid order of a court or other governmental body or any
political subdivision thereof, provided, however, that the recipient of
the information shall first have given notice to the disclosing party
and made a reasonable effort to obtain a protective order requiring that
the information and/or documents so disclosed be used only for the
purposes for which the order was issued.
c. Subject to the foregoing, this Agreement shall also be treated
confidentially by all parties hereto.
d. This section shall survive any termination of the Agreement for a period
of three (3) years.
17. GENERAL PROVISIONS
a. 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.
b. Any waiver by any party of any breach or failure to comply with any
provision of this Agreement by the other party must be in writing and
shall not be construed as, or constitute, a continuing waiver or such
provision, or a waiver of any other provision of this Agreement.
c. 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.
d. This Agreement, including all Exhibits which are attached to and hereby
incorporated into this Agreement, shall constitute the entire agreement
between Customer and Seller with respect to the subject matter hereof
and supersedes all prior agreements, covenants, arrangements,
communications, representations or warranties, whether oral or written,
by any party or any officer, employee or representative of any party
with respect to the subject matter hereof.
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e. Any amendment or modification of this Agreement or any Exhibit must be
in writing and signed by a duly authorized representative of each of the
parties.
f. This Agreement applies only to sales of Products and Services in the
United States.
g. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
Metawave Communications Corporation GTE Mobilnet of California Limited
Partnership by GTE Wireless, Inc., its
General Partner
By:/S/ Richard Henderson By: /S/ Annette M. Jacobs
Name: Richard Henderson Name: Annette M. Jacobs
Title: Vice President Sales Title: Area President, California
and Marketing
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SOFTWARE LICENSE AGREEMENT
EXHIBIT E
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORPORATION ("SELLER")
AND
GTE ("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 System which control the operation of the SpotLight System
("Embedded System Software"), and (ii) the LampLighter PC-based graphical
user interface computer program used to monitor the operation of a
SpotLight System and all Features, Major Releases, Point Releases, Software
Patches (as such terms are defined in Exhibit D Product Maintenance
Program), updates and modifications ("Software Updates") and any
documentation in support thereof.
"SpotLight System" shall mean a single SpotLight(TM) 2000 spectrum
management system as 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 System 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 to routinely operate and monitor the SpotLight System with
which the Software was delivered.
3.2 The Software licensing fees for the most current versions of the
Embedded System Software and LampLighter Software (available at the
time of purchase of a
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SpotLight System) are included in the Purchase Price of a SpotLight
System. Software Updates are available under the Software Maintenance
Program described in Exhibit D or for additional licensing fees.
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 System delivered
to Customer under the terms of the Agreement.
4.2 The license granted to Customer in Section 3 is personal and may only
be transferred to another SpotLight or site or another entity in
accordance with Section 11(b) of the Agreement.
4.3 The Software is subject to laws protecting patents, trade secrets,
know-how, confidentiality and copyright.
4.4 Customer shall not translate, modify, adapt, decompile, disassemble,
or reverse engineer the Software or any portion thereof.
4.5 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).
4.6 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.
4.7 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
three (3) printed copies and three (3) machine-readable copies shall
be in existence at any one time without the prior written consent of
Seller, other than copies electronically resident in SpotLight
Systems.
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.
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
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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, 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, the term of the
license granted pursuant to Section 3 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 E
and such termination shall be effective if Customer fails to correct
such default within thirty (30) days after written notice thereof by
Seller, provided, however, that if such default cannot reasonably be
cured within thirty (30) days after written notice by Seller, and
Customer diligently commences to correct such default within such
thirty (30) days of written notice, the termination by Seller shall
become effective if Customer fails to correct such default within
ninety (90) days of such written notice. The provisions of Sections 4
and 5 herein shall survive termination of any such license.
8.3 In the event that Customer is required to return the Software,
pursuant to Section 8(b) of the Purchase Agreement, or in the event
that Customer returns a SpotLight System pursuant to Section 5(a)(2)
of the Purchase Agreement, this license shall terminate immediately
upon such return of the Software or Product to Seller.
8.4 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.
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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 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 3 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 reasonable 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 6 of the Purchase
Agreement.
11. SOFTWARE OBJECT CODE AND DOCUMENTATION
In the event Seller becomes insolvent, ceases to carry on business on a
regular basis or fails to perform its maintenance obligations herein and
Customer purchases Seller's annual Hardware and Software Product
Maintenance Program, then Seller shall immediately furnish to Customer the
latest version of Product object code and documentation, training materials
and any necessary information to enable Customer to maintain such Products
or contract with others for such work.
12. ENTIRE UNDERSTANDING
12.1 This Exhibit E 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 E set forth
the entire understanding and obligations regarding use of Software,
implied or expressed.
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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 and
paragraphs 1 and 2 of Note 6 as to which the date is October , 1998, in
Amendment No. 2 to Registration Statement (Form S-1 No. 333-59621) and related
Prospectus of Metawave Communications Corporation.
Seattle, Washington
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The foregoing consent is in the form that will be signed upon the completion
of the reverse stock split described in paragraph 2 of Note 6 to the financial
statements.
ERNST & YOUNG LLP
Seattle, Washington
October 14, 1998
