<PAGE>
As filed with the Securities and Exchange Commission on April 25, 2000
Registration No. 333-30568
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 5
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 of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
10735 Willows Road NE
Redmond, WA 98052
(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
Redmond, WA 98052
(425) 702-5600
(Name, address including zip code and telephone number including area code, of
agent for service)
Copies to:
<TABLE>
<S> <C>
SONYA F. ERICKSON PATRICK J. SCHULTHEIS
JOHN W. ROBERTSON ROBERT G. DAY
KIRK D. SCHUMACHER ALLISON L. BERRY
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. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Proposed
Maximum
Offering Proposed
Title Of Each Class Of Amount Price Maximum
Securities To Be to be per Aggregate Amount Of
Registered Registered(1) share(2) Offering Price(2) Registration Fee(3)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.0001................ 7,187,500 $13.00 $93,437,500 $24,668
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
(1) Includes 937,500 shares of common stock issuable upon exercise of the
underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act.
(3) Previously paid.
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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
Preliminary Prospectus Dated April 25, 2000
PROSPECTUS
6,250,000 Shares
[LOGO OF METAWAVE COMMUNICATIONS CORPORATION]
Common Stock
-----------
This is Metawave Communications Corporation's initial public offering.
We expect the public offering price to be between $11.00 and $13.00 per
share. Currently, no public market exists for the shares. Our common stock has
been approved for quotation on the Nasdaq National Market under the symbol
"MTWV."
Investing in the common stock involves risks that are described in the
"Risk Factors" section beginning on page 7 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price............................... $ $
Underwriting discount............................... $ $
Proceeds, before expenses, to Metawave.............. $ $
</TABLE>
The underwriters may also purchase up to an additional 937,500 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The shares will be ready for delivery on or about , 2000.
-----------
Merrill Lynch & Co. Salomon Smith Barney
U.S. Bancorp Piper Jaffray
------------
The date of this prospectus is , 2000.
<PAGE>
Stylized Metawave logo.
Text on top: Metawave provides smart antenna solutions that
increase the capacity of wireless networks.
Line art depiction of SpotLight Smart Antenna
System
Graphic of radio frequency spectrum
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Forward-Looking Statements............................................... 18
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 28
Management............................................................... 41
Certain Relationships and Related Party Transactions..................... 51
Principal Stockholders................................................... 53
Description of Securities................................................ 55
Shares Eligible for Future Sale.......................................... 58
Underwriting............................................................. 60
Legal Matters............................................................ 63
Experts.................................................................. 63
Additional Information................................................... 63
Index to Financial Statements............................................ F-1
</TABLE>
----------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
<PAGE>
PROSPECTUS SUMMARY
The summary highlights selected information contained elsewhere in the
prospectus. You should read the entire prospectus, including "Risk Factors" and
the financial data and related notes before making an investment decision.
Metawave Communications Corporation
We provide smart antenna systems to wireless network operators facing
capacity constraints in the wireless communications industry. Our SpotLight
smart antenna systems consist of antennas that improve the reception and
transmission of radio signals dynamically through the use of our proprietary
software. We believe that wireless operators can increase overall network
capacity, improve or maintain network quality, reduce network operating costs
and better manage network infrastructure by implementing our SpotLight systems.
As the demand for wireless services continues to grow, we will develop systems
based on our proprietary technologies that address the associated network
capacity problems faced by wireless network operators.
The recent increase in demand for wireless services has been driven by an
increased number of subscribers, lower prices and expanded availability of
existing services. In addition to these factors, the emergence of new data and
Internet-oriented wireless services is expected to contribute to the continued
increase in subscriber usage. For example, wireless subscriber usage in the
United States is expected to grow at a compound annual growth rate of 20.9%
through 2003, according to The Strategis Group. The growth rate in wireless
subscriber usage, however, is not necessarily indicative of our growth rate.
This rapid growth in demand for wireless services and wireless usage has
strained the capacity of wireless networks given the fixed amount of radio
frequency spectrum allocated to wireless network operators. To address the
challenge of increasing capacity while maintaining signal quality, wireless
network operators generally have deployed more efficient digital technologies
or have built additional cell sites, which contain the transmitting and
receiving equipment used by wireless network operators to connect the wireless
network to subscribers' mobile phones. However, the high costs and technical
difficulties associated with building new cell sites, as well as the inherent
capacity limitations of digital technologies, have created the need for a cost-
effective solution to manage available spectrum.
As of March 31, 2000 we had sold a total of 149 SpotLight systems to a
variety of customers worldwide. The following customers accounted for more that
ten percent of our revenues in 1999: ALLTEL Communications Inc., which
accounted for 44.8% of our revenues; Grupo IUSACELL S.A. de C.V. of Mexico,
which accounted for 26.0% of our revenues; and Southwestco Wireless Inc., which
accounted for 20.9% of our revenues.
We have had a history of significant losses and we expect to continue
generate substantial losses in 2000 and beyond, even if our revenues increase.
Our net loss for the three months ended March 31, 2000 was $7.7 million
compared to our revenues of $9.3 million for the same period and for the year
ended December 31, 1999 our net loss was $42.4 million compared to our revenues
of $22.6 million for the same period. Our accumulated deficit was $128.4
million at March 31, 2000. In our limited operating history, we have never
achieved profitability. We anticipate that a significant portion of the
proceeds of this offering will be used to offset our operating losses.
We have developed cost-effective smart antenna systems for expanding network
capacity while improving or maintaining overall network performance. These
systems are our primary product and have accounted for substantially all of our
revenues to date. Our SpotLight systems are designed to be compatible with base
station equipment for Code Division Multiple Access, or CDMA, and Global System
for Mobile Communications, or GSM, technologies, as well as analog
technologies. We have not completed any commercial sales of our SpotLight GSM
system. Our SpotLight systems provide solutions to wireless network operators
with the following benefits:
3
<PAGE>
Cost-Effective Capacity Expansion. Our SpotLight systems enable wireless
network operators to increase the capacity of their existing networks and
therefore reduce the need to build and maintain expensive new cell sites. Our
SpotLight 2000 system has improved CDMA capacity in cell sites from 30% to 50%,
depending on network configuration. In addition, in a recent field trial, our
SpotLight GSM system demonstrated that GSM network capacity can be increased by
up to 100% without increasing the number of GSM cell sites. Adding SpotLight
systems in selected cell sites can increase overall network capacity.
Improved Network Performance. Our SpotLight systems allow wireless network
operators to increase capacity while maintaining or improving the level of
service and signal quality. Our SpotLight 2000 systems efficiently allocate
existing network resources to better match subscriber usage. We expect our
SpotLight GSM systems to provide better signal reception and reduced
interference.
Compatibility with Standards and Equipment. We design our SpotLight systems
to be compatible with most of the widely deployed wireless standards operating
at 800 MHz and 900 MHz and related installed base station equipment in order to
allow wireless network operators' to continue to use their existing equipment
and technology.
Our objective is to provide smart antenna systems to the wireless
communications market worldwide. To accomplish this objective we intend to:
. Continue to focus on delivering solutions that address the capacity
constraints of wireless network operators;
. Expand our presence and penetration of our current CDMA customers by
leveraging the performance and service of our existing system
deployments;
. Target additional large multi-system 800 MHz CDMA and 900 MHz GSM
wireless network operators around the world that serve substantial
concentrations of customers and have the greatest market share in their
respective markets; and
. Use our technology leadership and intellectual property to develop and
provide new capacity solutions to the existing and emerging wireless
communications markets, including Personal Communications System, or PCS,
operating at 1800 MHz and 1900 MHz.
Our principal executive offices are located at 10735 Willows Road NE,
Redmond, Washington 98052, and our telephone number is (425) 702-5600. We were
originally incorporated in the state of Washington in January 1995 and
reincorporated in the state of Delaware in July 1995. Our Web site is
www.metawave.com. The information on this Web site does not constitute part of
this prospectus.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Metawave........... 6,250,000 shares
Shares outstanding after the offering...... 36,844,478 shares
Use of proceeds............................ We intend to use the net
proceeds for general corporate
purposes, including working
capital and capital
expenditures. See "Use of
Proceeds."
Nasdaq National Market symbol.............. MTWV
</TABLE>
The number of shares of our common stock to be outstanding immediately after
the offering is based on the number of shares outstanding at March 31, 2000.
This number excludes outstanding or available options and outstanding warrants
to purchase an aggregate of 4,169,233 shares. See "Capitalization. "
Unless otherwise indicated, the information in this prospectus, including
the outstanding share information below is based on the number of shares
outstanding as of March 31, 2000 and assumes:
. a 2-for-3 reverse split of our common stock;
. the conversion of 32,027,203 outstanding shares of preferred stock into
an aggregate of 27,972,907 shares of common stock, for further details
please see "Capitalization";
. no exercise of the underwriters' over-allotment option;
. no exercise of outstanding warrants; and
. no exercise of outstanding options under our stock option plans.
5
<PAGE>
Summary Consolidated Financial Data
The summary consolidated financial data below should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes
included elsewhere in this prospectus. The financial results as of March 31,
2000 and for the three months ended March 31, 1999 and 2000 are unaudited.
<TABLE>
<CAPTION>
Three Months
Year ended December 31, Ended March 31,
---------------------------- -----------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- -------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues..................... $ 1,450 $ 15,991 $ 22,596 $ 6,834 $ 9,329
Gross profit (loss).......... (278) (2,037) 360 (225) 2,235
Total operating expenses..... 22,228 35,728 39,599 9,366 10,042
Loss from operations......... (22,506) (37,765) (39,239) (9,591) (7,807)
Other income (expense), net.. 402 (6,563) (3,174) (3,108) 62
-------- -------- -------- -------- -------
Net loss..................... $(22,104) $(44,328) $(42,413) $(12,699) $(7,745)
======== ======== ======== ======== =======
Basic and diluted net loss
per share................... $ (12.18) $ (21.88) $ (18.98) $ (6.00) $ (3.04)
Shares used in computation of
basic and diluted net
loss per share.............. 1,815 2,026 2,235 2,118 2,549
Pro forma basic and diluted
net loss per share.......... $ (1.90) $ (0.32)
Shares used in computation of
pro forma net
loss per share.............. 22,375 23,901
</TABLE>
The "pro forma" column below gives effect to the conversion of all
outstanding shares of preferred stock upon completion of this offering.
The "pro forma as adjusted" column below gives effect to the sale of the
shares of common stock in this offering at an assumed initial public offering
price of $12.00 per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses. Please see "Use of Proceeds" and
"Capitalization."
<TABLE>
<CAPTION>
March 31, 2000
---------------------------------
Pro Forma
Actual Pro Forma As Adjusted
--------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................... $ 14,497 $ 14,497 $ 83,247
Working capital............................. 15,821 15,821 84,571
Total assets................................ 36,418 36,418 105,168
Long-term obligations, net of current
portion.................................... 2,404 2,404 2,404
Convertible and redeemable preferred stock
and warrants............................... 144,102 -- --
Common stock................................ 6,384 150,486 219,236
Accumulated deficit......................... (128,385) (128,385) (128,385)
Stockholders' equity (deficit).............. (124,725) 19,377 88,127
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider the risks described below, as well as other
information contained in this prospectus, before making a decision to buy our
common stock.
Risks Related to Our Business
We have a limited operating history which makes it difficult for you to
evaluate our business and your investment.
We were incorporated in 1995 and were in the development stage until late
1997, when we commenced shipment for commercial sale of our first SpotLight
smart antenna system. We therefore have a limited operating history upon which
an investor may evaluate our operations and future prospects. The revenue and
profit potential of our business is unproven and our limited operating history
makes our future operating results difficult to predict because the market for
smart antenna systems is so new and wireless technologies change so rapidly.
Because our smart antenna systems were introduced relatively recently, we are
unable to predict with any degree of certainty whether our smart antenna
systems will achieve widespread market acceptance. In view of our limited
operating history, an investment in our common stock must be considered in
light of the risks and uncertainties that may be encountered by early stage
companies in the wireless communications equipment market. In addition, period-
to-period comparisons of operating results may not be meaningful and operating
results from prior periods may not be indicative of future performance.
We have incurred net losses and negative cash flow for our entire history, we
expect to incur future net losses and we may never achieve profitability.
We have never achieved profitability and as of March 31, 2000, we had an
accumulated net deficit of approximately $128.4 million. We intend to continue
to make significant investments in our operations, particularly to support
product development, to increase manufacturing capacity and to market new smart
antenna systems. Accordingly, we expect to continue to generate substantial
losses in 2000 and beyond, even if revenues increase. To achieve profitability,
we must, among other things:
. successfully scale our current operations;
. introduce new smart antenna systems;
. implement and execute our business and marketing strategies;
. develop and enhance our brand;
. adapt to changes in the marketplace;
. respond to competitive developments in the wireless communications
industry; and
. continue to attract, integrate, retain and motivate qualified personnel.
We might not be successful in achieving any or all of these objectives. Failure
to achieve any or all of these objectives could materially and adversely affect
our business, operating results and financial position causing our stock price
to decline. We cannot be certain that we can achieve sufficient revenues to
achieve profitability, or if we do, that we could remain profitable.
We expect our quarterly revenues and operating results to fluctuate and these
fluctuations may cause the price of our stock to decline.
We base our operating expenses on anticipated revenue trends and a high
percentage of our expenses are fixed in the short term. As a result, any delay
in generating or recognizing revenues could cause our operating results to fall
below the expectations of securities analysts and investors, which would likely
cause our stock price to decline. Factors that may cause our quarterly results
to fluctuate include:
. gain or loss by us of significant customers;
. our ability to increase sales to our existing customers;
7
<PAGE>
. delays in customer orders;
. delays in installing our smart antenna systems;
. our ability to reduce manufacturing costs of our smart antenna systems;
. our ability to introduce new smart antenna systems;
. market acceptance of any new smart antenna systems;
. introduction and enhancement of competitive or substitute products by our
competitors;
. limitations in our manufacturing capacity; and
. delays or changes in regulatory environments.
We depend on a limited number of wireless network operators for substantially
all of our revenues, so the loss of a customer or a delay in an order from a
customer could impair our operating results.
We derive our revenues from sales of our SpotLight 2000 system to a limited
number of wireless network operators. Due to the highly concentrated nature of
the wireless industry and industry consolidation, we believe that the number of
potential customers for future systems will be limited. Five customers have
accounted for substantially all of our system sales to date. The U.S. wireless
operations of three of our customers--AirTouch, Bell Atlantic and GTE--are
expected to be consolidated into one entity in 2000. On July 28, 1998, Bell
Atlantic and GTE announced a merger which is still awaiting final FCC approval.
On April 4, 2000, Bell Atlantic and Vodaphone AirTouch plc, the parent company
of AirTouch, completed the combination of their U.S. wireless properties into
an entity called Verizon Wireless. Bell Atlantic owns 47.2% of IUSACELL.
Finally, Southwestco has entered into an agreement with ALLTEL for the sale of
its FCC licenses and assets in Arizona, New Mexico and Texas. Failure by us to
capture a significant percentage of the wireless network operators as customers
could cause our operating results to be significantly less than anticipated and
lead to a decline in our stock price. Moreover, due to this customer
concentration, the loss, or reduced demand from, any customer could cause our
sales to fall significantly.
Because our contracts with new customers are subject to satisfying performance
criteria, the timing of purchases is difficult to predict and as a result our
revenue is unpredictable.
We believe that the purchase of our SpotLight systems 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. Our contracts with new
customers typically contain conditional acceptance provisions for the initial
system sales and we delay recognition of revenue until all conditions are
satisfied, which causes our sales cycle to last up to 18 months and to vary
substantially from customer to customer. This variability makes predicting our
revenues difficult. Typically, performance of our systems must be accepted in
an initial cell site or cluster of cell sites in a field trial prior to
completing any additional sales to a particular wireless network operator. This
makes the sales process associated with the purchase of our systems complex,
lengthy and subject to a number of significant risks. We may incur substantial
expenses and expend significant management and personnel resources in the
process of a field trial. If we do not satisfy conditions in these contracts or
if satisfaction of these conditions were delayed for any reason, revenues in
any particular period could fall significantly below our expectations.
Any delay in customer acceptance or shipment could delay our recognition of
revenues which could cause our stock price to decline.
Delays in shipment or customer acceptance of our antenna systems can happen
for a variety of reasons, including:
. an unanticipated shipment rescheduling;
. cancellation or deferral by a customer;
. competitive or economic factors;
8
<PAGE>
. unexpected manufacturing, installation or other difficulties;
. unavailability or delays in deliveries of components, subassemblies or
services by suppliers; or
. the failure to receive an anticipated order.
Our customers are typically large organizations and make equipment purchases on
their own schedules. We have no influence on their internal budgetary
decisions. Additionally, since orders must ordinarily be shipped within 90 days
of receipt of a purchase order, our inability to ship orders on a timely basis
because of our limited capacity could damage relationships with customers and
result in cancellation of orders or lost orders. Any delay in system shipment
could cause revenues and operating results in a particular period to fall below
our expectations as well as below the expectations of public market analysts or
investors. If this occurs, the trading price of our common stock would likely
decline.
Our future revenues depend on the sale of our SpotLight systems and if our
SpotLight systems fail to achieve market acceptance of our SpotLight systems,
our revenues will fail to meet expectations.
Our future success depends upon the degree to which our smart antenna
systems are accepted. We believe that substantially all of our revenues in the
foreseeable future will be derived from sales of our SpotLight systems. If our
SpotLight systems fail to achieve broad market acceptance among our customers
and potential customers, our revenues could fall below our and analysts'
expectations which could cause our stock price to decline. In light of the
relatively recent introduction of our SpotLight systems, in particular our
SpotLight GSM system which recently completed its first field trial, and the
rapidly evolving nature of the wireless communications industry, we cannot
predict with any degree of assurance whether our current or future smart
antenna systems will achieve broad market acceptance. We have not yet completed
any commercial sales of our SpotLight GSM system. We must demonstrate that our
systems provide a cost-effective spectrum management solution that expands
wireless network operators' capacity within each operator's unique network
configuration and specifications. If our smart antenna systems do not achieve
widespread acceptance with wireless network operators, we will be unable to
increase our revenues as expected.
Our smart antenna systems are complex and may have errors or defects that are
detected only after deployments in complex networks, which may lead to loss of
customers and revenues and increased costs.
Our smart antenna systems are highly complex and are designed to be deployed
in complex networks. Although our systems are tested during manufacturing and
prior to deployment, they can only be fully tested when deployed in networks.
Consequently, our customers may discover errors after the systems have been
fully deployed. If we are unable to fix errors or other problems that may be
identified in full deployment, we could experience:
. costs associated with the remediation of any problems;
. loss of or delay in revenues;
. loss of customers;
. failure to achieve market acceptance and loss of market share;
. diversion of deployment resources;
. increased service and warranty costs;
. legal actions by our customers; and
. increased insurance costs.
Our limited experience in installing our systems may result in excessive costs
and delays which could cause us to lose customers.
Because we are one of the first companies to sell and deploy smart antenna
systems, there is little, if any, established field service expertise for the
installation of smart antenna systems in general or for the SpotLight
9
<PAGE>
systems in particular. It is difficult to attract and maintain qualified field
service personnel and to train them to install our SpotLight systems. Failure
to have adequate numbers of trained field service personnel would adversely
affect our ability to competently install our systems on a timely basis, which
may adversely affect our customers and their business. In addition to our own
personnel, we have used and will continue to use subcontractors for some
installation and field service tasks. We may not be able to find sufficient
subcontractors with adequate experience and expertise and we may not be able to
retain their services on acceptable terms, if at all.
If we are unable to reduce our installation and optimization costs, we may not
be able to achieve profitability.
We charge a fixed fee to install and optimize our SpotLight systems. To
date, our costs to install and optimize our systems have significantly exceeded
the revenues associated with this work. Our smart antenna systems must be
installed, integrated and optimized with existing equipment installed in our
customers' cell sites. This process can be lengthy, causing delays in a
customer's commercial deployment of our systems. These delays may be the result
of factors outside of our control, including:
. zoning restrictions on installing additional equipment in a cell site;
. difficulties associated with the topography of the intended coverage area
of a cell site, such as the presence of water or hillsides;
. inability to easily access cell sites; and
. lack of experienced field service crews, particularly for international
deployments.
Failure to perform these field service tasks at a profit would adversely affect
our overall profitability. Additionally, our inability to correct field service
problems, whether or not in our control, may also harm our reputation and
competitive position in the industry.
We have limited manufacturing experience and facilities which may affect our
ability to expand our business.
Our manufacturing operations consist primarily of supplier and commodity
management and assembling finished goods from components and subassemblies
purchased from outside suppliers. We configure each SpotLight system to be
compatible with customer equipment, and our ability to achieve manufacturing
efficiencies by assembling systems before orders are received, therefore, is
limited. We intend to expand our manufacturing capacity, but due to our limited
experience with large scale operations, we may not be able to develop
internally the management structure or facilities needed to increase this
capacity.
Our current manufacturing facilities consist of a single facility in
Redmond, Washington. If our facilities or the facilities of our suppliers were
incapable of operating, even temporarily, or were unable to operate at or near
full capacity for any extended period, we would be unable to meet customers'
delivery expectations. In connection with our capacity expansion, we intend to
manufacture our SpotLight GSM systems in Taipei, Taiwan and may seek to develop
one or more additional manufacturing facilities. The addition of any facility
will likely increase the complexity of our operations and the risk of
inefficient management of our manufacturing operations. Our manufacturing
facilities are vulnerable to damage or interruption from earthquakes and other
natural disasters, power loss, sabotage, intentional acts of vandalism and
similar events. We do not have a formal disaster recovery plan, and we may not
carry sufficient business interruption insurance to compensate us for losses
that could occur.
Our inability to adequately subcontract our excess manufacturing needs may
cause delays in shipment of our systems and lost revenues.
We intend, in certain instances, to subcontract additional assembly
processes. If we are not able to successfully identify subcontractors with
adequate experience or fail to control the quality of systems produced
10
<PAGE>
by these subcontractors, it may harm our reputation or cause our customers to
decrease spending on our systems. Additionally, we may not be able to contract
with third parties for additional manufacturing capacity on acceptable terms,
which may cause us to delay shipments of systems and consequently lose revenue.
Our reliance on a limited number of suppliers for our smart antenna systems
could impair our ability to manufacture and deliver our systems on a timely
basis.
Some parts and components used in our smart antenna systems are presently
available only from sole sources including linear power amplifiers supplied by
Powerwave Technologies, Inc. and integrated duplexer low-noise amplifiers
supplied by Filtronics Comtek, Ltd. Some other parts and components used in our
systems are available from a limited number of sources. Our 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. Any reduced availability of these parts or components when required
could materially impair our ability to manufacture and deliver our systems on a
timely basis and result in the cancellation of orders, which could
significantly harm our business and operating results.
The long lead time of some of our components could impair our ability to timely
deliver our systems if we do not accurately predict future demand or maintain
an inventory.
The purchase of some key components involves long lead times and, in the
event of unanticipated increases in demand for our smart antenna systems, we
may be unable to obtain such components in sufficient quantities to meet our
customers' requirements. We do not have guaranteed supply arrangements with any
of these suppliers, do not maintain an extensive inventory of parts or
components and customarily purchase 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 us by increasing product costs, or eliminating
or delaying the availability of such parts or components. In such event, our
inability to develop alternative sources of supply quickly and on a cost-
effective basis could materially impair our ability to manufacture and deliver
our systems on a timely basis and could significantly affect our revenues.
Our success is dependent on continuing to hire and retain qualified personnel,
and if we are not successful in attracting and retaining these personnel, we
may not be able to operate our business.
The success of our business depends upon the continued contributions of each
of our key technical and senior management personnel each of whom would be
difficult to replace. We have not entered into employment agreements with any
of our employees other than severance arrangements with Robert H. Hunsberger,
Richard P. Henderson, Dr. Douglas O. Reudink, Victor K. Liang, Stuart W.
Fuhlendorf and Andrew Merrill. Except for Dr. Reudink, our founder and Chief
Technical Officer, we have not entered into any non-competition agreements with
any of our employees. We do not maintain key-man life insurance on any of our
key technical or senior management personnel. In addition, we anticipate that
we will need additional management personnel, if we are to be successful in
increasing production capacity and the scale of our operations as well as
operating as a public company.
To effectively manage our recent growth as well as any future growth, we
will need to attract and retain qualified engineering, financial,
manufacturing, quality assurance, sales, marketing and customer support
personnel. Competition for such personnel, particularly qualified engineers, is
intense in our market. We have experienced difficulties in recruiting
sufficient numbers of qualified engineers in the past and we expect to continue
to experience difficulties in the future. There may be only a limited number of
persons with the requisite skills to serve in these positions, particularly in
the market where we are located, and it may be increasingly difficult for us to
hire such personnel over time. As our product development efforts relate to
wireless standards that are widely deployed in foreign countries, such as GSM,
we may be required to recruit foreign engineers who have expertise in such
standards. Current U.S. immigration laws restrict our ability to hire foreign
employees, which could impair our product development efforts. The loss of any
key employee,
11
<PAGE>
the failure of any key employee to perform in his or her current position, our
inability to attract and retain skilled employees as needed or the inability of
our officers and key employees to expand, train and manage our employee base
could limit our ability to expand and become profitable.
Our management resources may become strained due to the rapid expansion of our
operations.
The growth of our operations has placed, and is expected to continue to
place, a significant strain on our financial and management resources as well
as our system design, manufacturing, sales and customer support capabilities.
From January 1, 1997 to March 31, 2000, we expanded from 107 to 272 employees.
Most of our executive officers have no prior experience as executive officers
of publicly traded companies. Our new employees include a number of key
managerial, technical and operations personnel who have not yet been fully
integrated into our operations, including our Chief Financial Officer, who was
hired in March 2000, and we expect to add additional key personnel in the near
future. We have sales offices in Redmond, Washington and Allen, Texas, and
overseas locations, including Taipei, Taiwan, Shanghai, China and Sao Paulo,
Brazil. As we expand our operations to multiple domestic and international
locations, management of our operations has become and will continue to become
increasingly complex, difficult and expensive. In order to manage growth
effectively and increase or maintain profitability, we must implement and
improve our operational, financial and management information systems,
procedures and controls on a timely basis.
Because we need to expand manufacturing capacity and sales, we require
substantial working capital which we may not be able to acquire.
We require substantial working capital to fund our business. Our future
capital requirements will depend upon many factors, including the success or
failure of our efforts to expand our production, sales and marketing efforts,
the status of competitive products, and the requirements of our efforts to
develop new smart antenna systems and system enhancements. We believe that
current capital resources, together with the estimated net proceeds from this
offering, are adequate to fund our operations for at least 12 months.
Thereafter, we may be required to raise additional capital to maintain growth
or expand capacity which may not be available to us on acceptable terms, if at
all. We maintain a line of credit with Imperial Bank with customary commercial
rates and restrictions, which we have recently renewed and increased. Any
inability to obtain needed financing by us could constrain our ability to meet
current obligations or continue growing.
Our substantial sales of our SpotLight systems in international markets subject
us to various risks and costs which may harm our business.
We anticipate that international sales of our SpotLight systems in Asia,
Latin America and other international markets will continue to account for a
significant portion of our revenues for the foreseeable future. Risks and
associated costs inherent in our international business activities include:
. difficulties obtaining foreign regulatory approval for our smart antenna
systems;
. unexpected changes in regulatory requirements relating to the
telecommunications industry;
. greater difficulties collecting delinquent or unpaid accounts;
. lack of suitable export financing for our SpotLight systems;
. dependence upon independent sales representatives and other indirect
channels of distribution of our SpotLight systems;
. political and economic instability in the regions where we sell our
SpotLight systems; and
. enforceability of contracts with foreign customers and distributors
governed by foreign laws.
As more of our international sales are derived from sales in Asia, an
increasing portion of our revenues could be subject to the economic and
political risks associated with that region.
We expect to begin to derive revenues from the sale of our SpotLight GSM
systems in 2000 in Asia in general and the greater China market in particular.
Changes in political or economic conditions in the region
12
<PAGE>
could adversely affect our operations, in particular any deterioration of
political relations between the United States and the People's Republic of
China or the People's Republic of China and Taiwan could negatively affect our
business. If economic growth rates decline in Asia in general or the greater
China market in particular, expenditures for telecommunications equipment and
infrastructure improvements could decrease, which would negatively affect our
business and our operating results.
We may engage in future acquisitions that dilute our stockholders, cause us to
incur debt or assume contingent liabilities and subject us to other risks.
We may make acquisitions of businesses, products or technologies in the
future. Since we have not made any material acquisitions in the past, no
assurance can be given as to our ability to successfully integrate any
businesses, products, technologies or personnel that might be acquired in the
future, and our failure to do so could significantly affect our business and
operating results. Moreover, we may not be able to locate suitable acquisition
opportunities and this inability could impair our ability to grow as quickly as
possible or obtain access to technology that may be important to the
development of our business. Further, acquisitions entail numerous operational
risks, including:
. difficulties in assimilating 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 we have no or
limited prior experience.
Our limited ability to protect our intellectual property may affect our ability
to compete and we could lose customers.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our intellectual property or
technology. If our methods of protecting our intellectual property are not
adequate, our competitors may misappropriate our technology and we could lose
customers to these competitors. In addition, third parties may develop
alternative wireless communication technologies or products that do not
infringe on any of our patents or intellectual property. Moreover, competing
dissimilar technologies, such as those using wireline communication or using
new or different protocols, may be deployed which would cause us to lose
customers.
Claims that we infringe third party intellectual property rights or changes in
wireless standards and protocols could result in significant expense and
restrictions on our ability to sell our systems in particular markets.
From time to time, third parties have asserted patents, copyrights and other
intellectual property rights with regard to wireless and other technologies
that are important to our ability to develop smart antenna systems. We expect
that we 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. Compliance with technology protocols
established by various standards bodies may require configuration or operation
of our products in a manner which would infringe third party patents or other
intellectual property. Standards may be adopted which require the use of
antenna configurations which could require licensing of third party patents or
other intellectual property. Any of this could result in costly litigation or
require us to obtain a license to intellectual property rights of third
parties. See "Business--Intellectual Property" for more information regarding
risks relating to protecting our intellectual property rights and risks
relating to claims of infringement of other intellectual property rights.
13
<PAGE>
Our systems and the business our customers are subject to significant
government regulation which may cause uncertainty in the compliance of our
systems and delay in the purchase of our systems.
Many of our smart antenna systems are required to comply with numerous
domestic and international government regulations and standards, which vary by
market. As standards for products continue to evolve, we will need to modify
our systems or develop and support new versions of our systems to meet emerging
industry standards, comply with government regulations and satisfy the
requirements necessary to obtain approvals. Compliance with government
regulations and industry standards can each be a lengthy process, taking from
several months to longer than a year. It may be difficult for us to obtain
additional necessary regulatory approvals or comply with new industry standards
in a timely manner, if at all. Our inability to obtain regulatory approval and
meet established standards in a timely manner could delay or prevent entrance
into or force our departure from markets, which would harm our sales.
In addition, our customers' operations are subject to extensive government
regulations. To the extent that our customers are delayed in deploying their
wireless systems as a result of existing or new standards or regulations, we
could experience delays in orders. Any delay could contribute to fluctuations
in our results of operations. See "Business--Government Regulation" for more
information regarding the governmental control and approval of our business.
Risks Related to the Wireless Industry
We depend on the capital spending patterns of wireless network operators, and
if capital spending is decreased or delayed it may result in lower than
expected revenues.
Since we rely on wireless network operators to purchase our smart antenna
systems, any substantial decrease or delay in capital spending patterns in the
industry would negatively affect our revenues which could cause our stock price
to decline. The demand for our smart antenna systems depends to a significant
degree upon the magnitude and timing of capital spending by these operators for
constructing, rebuilding or upgrading their systems. The capital spending
patterns of wireless network operators depend on a variety of factors outside
our control, including access to financing, the status of federal, local and
foreign government regulation and deregulation, changing standards for wireless
technology, overall demand for analog and digital wireless services,
competitive pressures and general economic conditions. In addition, capital
spending patterns in the wireless industry can be subject to some degree of
seasonality, with lower levels of spending in the first calendar quarter, based
on annual budget cycles.
We must reduce our costs and introduce new systems in order to achieve and
maintain profitability.
We anticipate that average selling prices for our smart antenna systems will
need to decrease in the future in response to competitive pricing pressures and
new product introductions by competitors. To achieve profitability we will need
to reduce our manufacturing costs. If the price of base station equipment
continues to decrease, the addition of new cell sites may be viewed as a more
cost-effective alternative for wireless network operators seeking increased
capacity. In order to compete, we must lower average selling prices. To lower
average selling prices without adversely affecting gross profits, we will have
to reduce the manufacturing costs of our smart antenna systems through
engineering improvements and economies of scale in production and purchasing.
We may not be able to achieve cost savings at a rate needed to keep pace with
competitive pricing pressures. If we are unable to reduce costs sufficiently to
offset the expected declining average selling prices, we may not achieve
profitability. Further, if we cannot provide our distribution partners with
sufficient financial incentive to distribute our systems without adversely
affecting our profitability, our distribution strategy would be harmed which
could result in the loss of current and potential customers.
If we do not respond quickly to changing customer needs and product
introductions by our competition, our sales will decline and our products may
become obsolete.
The market for our current smart antenna systems and planned future systems
is subject to rapid technological change, frequent new system introductions and
enhancements, product obsolescence, changes in
14
<PAGE>
customer requirements and evolving industry standards. To be competitive, we
must successfully develop, introduce and sell new smart antenna systems or
system enhancements that respond to changing customer requirements on a timely
and cost-effective basis.
Our future success will depend on our ability to develop new smart antenna
systems and system enhancements designed to:
. operate with different digital technologies and in some cases across
other principal manufacturers' base stations;
. achieve market acceptance of our present and future smart antenna
systems; and
. keep pace with the development and introduction of competitive products
by competitors.
We have in the past experienced and may in the future experience delays in
development and introduction of smart antenna systems and system enhancements.
We may be required to obtain licenses to intellectual property rights held by
third parties to develop new smart antenna systems or system enhancements or to
comply with evolving industry standards and there can be no assurance that such
licenses will be available on acceptable terms, if at all. If we fail to timely
and cost-effectively develop new smart antenna systems or system enhancements
that respond to new technologies and customer needs, the demand for our smart
antenna systems may fall and we could lose revenues.
If we fail to obtain cooperation from base station manufacturers, our smart
antenna systems may no longer be compatible with customers' equipment and we
may not be able to sell our smart antenna systems.
Our product strategy relies on ensuring the compatibility of our systems
with base stations sold by wireless equipment manufacturers. If base station
manufacturers change or modify their equipment so that our smart antenna
systems are no longer compatible, we would need to redesign our systems to meet
any changed technology or modified equipment. This may involve substantial
costs and potentially a prolonged development stage for new systems.
Consequently, we may need to rely on the cooperation of customers or base
station manufacturers to ensure that our smart antenna systems remain
compatible if base station equipment is modified. As our systems are designed
to reduce the need to purchase incremental base stations for capacity expansion
of wireless networks, obtaining cooperation from base station manufacturers may
prove difficult. If we are unable to obtain this cooperation and as a result
cannot make our systems compatible with base station equipment, we may not be
able to sell our smart antenna systems.
Intense competition in the wireless infrastructure equipment market may lead to
reduced prices, revenues and market shares causing the price of our stock to
decline.
The market for spectrum management solutions is relatively new but we expect
it to become increasingly competitive. This market is part of the broader
market for wireless infrastructure equipment which is dominated by a number of
large companies including Lucent, Motorola, Ericsson, Nortel, Nokia, Siemens,
Alcatel and others. Our smart antenna systems compete with other solutions to
expand network capacity. These alternative solutions include other smart
antenna systems, adding base stations for capacity, deploying efficient digital
technologies and various enhancements to digital technologies. We believe that
the principal competitive factor is the cost-effective delivery of increased
capacity to wireless network operators. If our systems are not the most cost-
effective solution, our ability to attract and retain customers would be
harmed. We believe that base station manufacturers, which provide wireless
network capacity through sales of additional base stations or the development
of competitive technologies, represent the most significant competitive threat
to us. For more information on the competitive risks facing us, please see
"Business--Competition."
15
<PAGE>
The failure of the wireless communications services industry to grow at the
rates currently anticipated would seriously harm our business, results of
operation and financial condition.
Our future operating results will depend upon the continued growth and
increased availability and acceptance of wireless communications services.
There can be no assurance that the volume and variety of wireless services or
the markets for and acceptance of such services will grow, or that such growth
will create a demand for our systems. If the wireless communications market
fails to grow, or grows more slowly than anticipated, our sales will be lower
than expected, which would seriously harm our business.
The wireless 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 wireless technologies will
continue to achieve market acceptance in the future. If a digital technology
for which we develop a smart antenna system is not widely adopted, the
potential size of the market for this system would be limited, and we may not
recover the cost of development. Further, we may not be able to redirect our
development efforts toward those digital wireless technologies that do sustain
market acceptance in a timely manner, which would impede our ability to achieve
or sustain profitability once achieved.
Risks Related to this Offering
Our existing stockholders have significant control of our management and
affairs, which they could exercise against your best interests.
Following the completion of this offering, our officers and directors,
together with entities that may be deemed affiliates of or related to such
persons or entities, will beneficially own approximately 43.0% of our
outstanding common stock. As a result, these stockholders, acting together, may
be able to control our management and affairs and matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may have the effect of
delaying or preventing a change in control of Metawave and might affect the
market price of our common stock.
Because our initial public offering price will be substantially higher than the
book value per share of our outstanding common stock, new investors will incur
immediate and substantial dilution in the amount of $9.61 per share.
Immediately after this offering, the initial public offering price will be
substantially higher than the book value per share based on the total value of
our assets less our total liabilities. Therefore, if you purchase common stock
in this offering, you will experience immediate and substantial dilution of
approximately $9.61 per share in the price you pay for the common stock as
compared to its book value. Furthermore, investors purchasing common stock in
this offering will own only 17.0% of our shares outstanding even though they
will have contributed 34.6% of the total consideration received by us in
connection with our sales of common stock. To the extent outstanding options to
purchase common stock are exercised, there will be further dilution.
16
<PAGE>
Following this offering, a substantial number of our shares of common stock
will become available for sale in the public market, which could cause the
market price of our stock to decline.
If our stockholders sell substantial amounts of our common stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market following this offering, the market price of our common stock
could fall. These sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price acceptable to
us. Upon completion of this offering, we will have 36,844,478 outstanding
shares of common stock based upon shares outstanding as of March 31, 2000,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options after March 31, 2000. Of these shares, the 6,250,000
shares sold in this offering will be freely transferable without restriction
under the Securities Act, unless held by "affiliates" of Metawave as that term
is used in the Securities Act and the Regulations promulgated thereunder. The
remaining shares of common stock outstanding after this offering will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
Number
Date of Availability of Sale of Shares
---------------------------- ----------
<S> <C>
Upon the closing of this offering............................... 469,142
91 days after the date of this prospectus....................... 439,144
181 days after the date of this prospectus...................... 29,728,779
Periodically thereafter upon the expiration of one-year holding
periods........................................................ 42,587
</TABLE>
17
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify forward-
looking statements. This prospectus also contains forward-looking statements
attributed to third parties relating to their estimates regarding the growth of
the wireless communications industry. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus. Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including the risks faced
by us and described in the preceding pages and elsewhere in this prospectus.
USE OF PROCEEDS
We estimate our net proceeds from the sale of 6,250,000 shares of our common
stock offered in this offering to be approximately $68.8 million, or
approximately $79.2 million if the underwriters' over-allotment option is
exercised in full, based on an assumed initial public offering price of $12.00
per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses.
We intend to use the net proceeds for general corporate purposes, including
working capital to fund anticipated operating losses. We expect to use
approximately $2.8 million of the net proceeds in 2000 for capital expenditures
primarily associated with expanding our manufacturing facilities and acquiring
additional testing equipment. In addition, we plan to use approximately
$22.6 million of the net proceeds in 2000 to fund research and development
activities. We may, when and if the opportunity arises, use a portion of the
proceeds to acquire or invest in complimentary businesses, products or
technologies; however, we currently have no commitments or agreements and are
not involved in any negotiations with respect to any transactions of this
nature. Pending such uses, we intend to invest such funds in short-term,
investment grade, interest-bearing obligations.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock or
other securities. We currently anticipate that we will retain all of our future
earnings for use in the expansion and operation of our business and do not
anticipate paying cash dividends in the foreseeable future. The terms of our
credit agreement with Imperial Bank restrict our ability to pay dividends and
in the future the terms of other credit agreements may impose restrictions or
limitations on the payment of dividends.
18
<PAGE>
CAPITALIZATION
The actual column in the following table sets forth our actual
capitalization as of March 31, 2000.
The pro forma column in the following table gives effect to:
. The conversion on a 0.66667-to-one basis of an aggregate of 8,240,743
outstanding shares of Series A and Series B preferred stock into
5,493,821 shares of common stock upon completion of this offering;
. The conversion on a 0.87190-to-one basis of an aggregate of 2,491,880
outstanding shares of Series C preferred stock into 2,172,677 shares of
common stock upon completion of this offering;
. The conversion on a 0.96096-to-one basis of an aggregate of 3,018,429
outstanding shares of Series D preferred stock into 2,900,577 shares of
common stock upon completion of this offering; and
. The conversion on a 0.95238-to-one basis of an aggregate of 18,276,151
outstanding shares of Series E preferred stock into 17,405,832 shares of
common stock upon completion of this offering.
The pro forma as adjusted column gives effect to the sale by us of the
6,250,000 shares of common stock offered hereby at an assumed initial public
offering price of $12.00 per share, and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us, and
the change in the authorized number of shares following completion of this
offering.
<TABLE>
<CAPTION>
March 31, 2000
---------------------------------
Pro Forma
Actual Pro Forma As Adjusted
--------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Long-term obligations........................ $ 2,404 $ 2,404 $ 2,404
Convertible and redeemable preferred stock... 143,945 -- --
Convertible and redeemable preferred stock
warrants.................................... 157 -- --
Stockholders' equity (deficit):
Preferred stock, actual--37,000,000 shares
authorized, 32,027,203 shares which have
been designated as convertible and
redeemable; pro forma and pro forma as
adjusted--10,000,000 shares authorized,
none outstanding........................... -- -- --
Common stock, actual--50,000,000 shares
authorized, 2,621,571 shares issued and
outstanding; pro forma--50,000,000 shares
authorized, 30,594,478 shares issued and
outstanding; pro forma as adjusted--
150,000,000 shares authorized, 36,844,478
shares issued and outstanding.............. 6,384 150,486 219,236
Deferred stock compensation.................. (2,676) (2,676) (2,676)
Accumulated other comprehensive income....... (48) (48) (48)
Accumulated deficit.......................... (128,385) (128,385) (128,385)
--------- --------- ---------
Total stockholders' equity (deficit)....... (124,725) 19,377 88,127
--------- --------- ---------
Total capitalization....................... $ 21,781 $ 21,781 $ 90,531
========= ========= =========
</TABLE>
The information in the table excludes as of March 31, 2000:
. 3,489,623 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $6.38 per share;
. 90,870 shares of common stock issuable upon the conversion of preferred
stock after the exercise of outstanding preferred stock warrants at a
weighted average exercise price of $6.20 per share on an as if converted
basis;
. 20,833 shares issuable upon exercise of an outstanding common stock
warrant at an exercise price of $6.75 per share; and
. an aggregate of 567,907 shares available for future issuance of stock
options under our stock plans.
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<PAGE>
DILUTION
As of March 31, 2000, we had a pro forma net tangible book value of
approximately $19.4 million, or $0.63 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 March 31, 2000, other than to give effect to the receipt by us
of the net proceeds from the sale of the 6,250,000 shares of common stock
offered hereby at an assumed initial public offering price of $12.00 per share,
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, the pro forma net tangible book
value at March 31, 2000 would have been approximately $88.1 million, or $2.39
per share. This represents an immediate increase in net tangible book value of
$1.76 per share to existing stockholders and an immediate dilution of $9.61 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................... $12.00
Pro forma net tangible book value per share as of March 31,
2000............................................................ $0.63
Increase per share attributable to new investors................. 1.76
-----
Pro forma net tangible book value per share after the offering.... 2.39
------
Dilution per share to new investors............................... $ 9.61
======
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 2000,
the number of shares of common stock purchased from us, the total consideration
paid and the average price per share paid by existing stockholders and new
investors (before deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ -------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 30,594,478 83.0% $141,469,477 65.4% $ 4.62
New investors................. 6,250,000 17.0% $ 75,000,000 34.6% $12.00
---------- ----- ------------ -----
Total..................... 36,844,478 100.0% $216,469,477 100.0%
========== ===== ============ =====
</TABLE>
The information presented with respect to existing stockholders excludes as
of March 31, 2000:
. 3,489,623 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $6.38 per share;
. 90,870 shares of common stock issuable upon the conversion of preferred
stock after the exercise of 123,880 outstanding preferred stock warrants
at a weighted average exercise price of $6.20 per share on an as if
converted basis;
. 20,833 shares issuable upon exercise of an outstanding common stock
warrant at an exercise price of $6.75 per share; and
. an aggregate of 567,907 shares available for future issuance under our
stock plans.
To the extent that any of the options or warrants are exercised, or
additional options are issued and exercised, there will be further dilution to
new investors. For additional information about our capitalization and the
options and warrants described above, see "Description of Securities" and notes
4 and 5 of Notes to Consolidated Financial Statements.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and notes to our
consolidated financial statements and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which are included
elsewhere in this prospectus. The consolidated statements of operations data
for the years ended December 31, 1997, 1998 and 1999, and the balance sheet
data at December 31, 1998 and 1999, are derived from audited consolidated
financial statements included elsewhere in this prospectus. The consolidated
statement of operations data for the period from inception to December 31, 1995
and for the year ended December 31, 1996 and the balance sheet data as of
December 31, 1995, 1996 and 1997 are derived from audited consolidated
financial statements not included in this prospectus. The consolidated
statement of operations data for the three-month periods ended March 31, 1999
and 2000, and the consolidated balance sheet data at March 31, 2000, are
derived from unaudited interim financial statements that have been prepared on
a basis consistent with our audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of the financial positions and results of
operations at those dates. See notes 1 and 9 of Notes to Consolidated Financial
Statements for an explanation of the number of shares used to compute shares
used in calculation of basic and diluted net loss per share. The "pro forma"
consolidated balance sheet data gives effect to the conversion of all
outstanding shares of preferred stock upon completion of this offering.
<TABLE>
<CAPTION>
Period from
January 19, 1995 Three Months
(inception) to Year ended December 31, Ended March 31,
December 31, -------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
---------------- -------- -------- -------- -------- -------- -------
(in thousands, except per share
data) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues................ $ -- $ 1,291 $ 1,450 $ 15,991 $ 22,596 $ 6,834 $ 9,329
Cost of revenues........ -- 1,097 1,728 18,028 22,236 7,059 7,094
------- -------- -------- -------- -------- -------- -------
Gross profit (loss)..... -- 194 (278) (2,037) 360 (225) 2,235
Operating expenses:
Research and
development............ 883 7,186 13,083 18,495 22,787 5,392 6,374
Sales and marketing..... 84 1,704 5,383 11,346 11,080 2,694 2,343
General and
administrative......... 168 2,434 3,762 5,887 5,732 1,280 1,325
------- -------- -------- -------- -------- -------- -------
Total operating
expenses............... 1,135 11,324 22,228 35,728 39,599 9,366 10,042
------- -------- -------- -------- -------- -------- -------
Loss from operations.... (1,135) (11,130) (22,506) (37,765) (39,239) (9,591) (7,807)
Other income (expense),
net.................... 135 335 402 (6,563) (3,174) (3,108) 62
------- -------- -------- -------- -------- -------- -------
Net loss................ $(1,000) $(10,795) $(22,104) $(44,328) $(42,413) $(12,699) $(7,745)
------- -------- -------- -------- -------- -------- -------
Basic and diluted net
loss per share......... $ (0.55) $ (5.89) $ (12.18) $ (21.88) $ (18.98) $ (6.00) $ (3.04)
======= ======== ======== ======== ======== ======== =======
Shares used in
computation of basic
and diluted net loss
per share.............. 1,833 1,833 1,815 2,026 2,235 2,118 2,549
======= ======== ======== ======== ======== ======== =======
Pro forma basic and
diluted net loss per
share.................. $ (1.90) $ (0.32)
======== =======
Shares used in
computation of pro
forma net loss per
share.................. 22,375 23,901
======== =======
</TABLE>
<TABLE>
<CAPTION>
March 31, March 31,
December 31, 2000 2000
------------------------------------------- --------- ---------
1995 1996 1997 1998 1999 Actual Pro forma
------ ------- ------- ------- -------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents............ $1,422 $19,092 $13,334 $10,763 $ 20,165 $ 14,497 $ 14,497
Working capital......... 4,280 17,722 15,677 (17,135) 22,759 15,821 15,821
Total assets............ 6,135 21,747 22,575 32,510 40,946 36,418 36,418
Long term obligations,
net of current
portion................ 96 1,757 2,978 4,413 2,503 2,404 2,404
Convertible and
redeemable preferred
stock and warrants..... 5,500 30,100 49,410 61,595 144,102 144,102 --
Common stock............ 10 10 1,968 2,179 3,573 6,384 150,486
Accumulated deficit..... (1,000) (11,795) (33,899) (78,227) (120,640) (128,385) (128,385)
Stockholders' equity
(deficit).............. (990) (11,785) (33,136) (76,596) (117,954) (124,725) 19,377
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We provide smart antenna systems that address the capacity constraints faced
by wireless network operators. From inception in January 1995 through December
31, 1997, our operating activities related primarily to conducting research and
development, building market awareness, recruiting management and technical
personnel and building an operating infrastructure. Shipment for commercial
sale of our initial SpotLight system began late in the fourth quarter of 1997
and we first recognized revenues for the sale of our SpotLight system in the
first quarter of 1998. Since the beginning of 1998, our operating activities
have been focused on increasing sales, new product development and expanding
manufacturing capacity. Since inception, we have incurred significant losses
and as of March 31, 2000, had an accumulated deficit of $128.4 million.
Our revenues are derived primarily from sales of our SpotLight systems,
which includes the sale of hardware and the licensing of software, and from
related installation and optimization services. We believe that substantially
all of our revenues in the foreseeable future will be derived from sales of our
SpotLight systems. Our sales cycles can be lengthy and the related contracts
typically include performance specifications and customer acceptance conditions
in connection with the sale of each system to a new customer.
Revenues. We generate revenues through the sale of our smart antenna systems
and related installation and optimization services. Our systems revenues are
recognized when title to the system and risk of loss is transferred to the
customer and all customer acceptance conditions, if any, have been satisfied,
and collection probable. Services revenues, generally for installation and
optimization, are recognized when the services have been performed and all
customer acceptance conditions, if any, have been satisfied. Our maintenance
contract revenues are recognized ratably over the term of the agreement
(typically one year). Any billings in excess of our revenues are classified as
deferred revenue and related systems are recorded as inventory.
Our contract terms including pricing and acceptance criteria, if any,
typically vary depending upon the order. Consequently, our revenues may vary
from quarter to quarter depending on the length of the sales cycle and the
applicable contract terms. To date, our international sales have been
denominated in U.S. dollars. However, in the future, a portion of our
international sales may be denominated in foreign currencies. Sales to ALLTEL,
IUSACELL, and Southwestco represent substantially all our revenues for the year
ended December 31, 1999, and we expect a limited number of customers will
account for a substantial percentage of revenues for the foreseeable future.
Cost of Revenues. Our cost of revenues typically consists of material
components, system assembly and testing, and overhead expenses. Our gross
margins are generally higher for hardware revenues than for service revenues.
We anticipate that our overall gross margins will fluctuate from period-to-
period as a result of shifts in product mix, the proportion of direct and
indirect sales, anticipated decreases in average selling prices and our ability
to reduce costs.
Research and Development. Our research and development expense consists
principally of salaries, related personnel expenses, consultant fees and
prototype expenses related to the design, development, testing and enhancement
of our SpotLight systems. As of March 31, 2000, all of our research and
development costs had been expensed as incurred. We believe that continued
investment in research and development is critical to achieving our strategic
product development and cost reduction objectives and, as a result, expect this
expense to continue to increase significantly in absolute dollars in the
future.
Sales and Marketing. Our sales and marketing expense consists of salaries,
sales commissions and related expenses for personnel engaged in marketing,
sales and field service support for new installations and installed base, as
well as promotional expenditures. We believe that these expenses will increase
in absolute dollars as the marketing campaigns for our SpotLight 2000 and
SpotLight GSM systems expand and we increase our sales personnel.
22
<PAGE>
General and Administrative. Our general and administrative expense consists
primarily of salaries and personnel related expenses, recruiting and relocation
expenses, professional and consulting fees, and other general corporate
expenses. We expect this expense to increase as we add personnel and incur
additional costs related to our operation as a public company.
Stock compensation expense. We have recorded stock-based compensation
expense of $5.6 million related to stock options granted below fair market
value for accounting purposes through March 31, 2000. Of this amount, we
amortized approximately $2.9 million through that same period. This amount
represents the difference between the exercise price of these stock option
grants and the deemed fair value of the common stock at the time of grant. The
remaining $2.7 million will be amortized over the remaining vesting period of
the options, generally four years. As a result, the amortization of stock-based
compensation will impact our reported results of operations through fiscal
2002. The stock-based compensation expense has been allocated to research and
development expense, sales and marketing expense and general and administrative
expense, as appropriate.
Results of Operations
Three Months Ended March 31, 2000 and 1999
Revenues. Revenues were $9.3 million in the three months ended March 31,
2000 and $6.8 million in the three months ended March 31, 1999, an increase of
36.5%. This increase was primarily due to increased unit sales of our CDMA
SpotLight systems and increased revenues derived from sales of optional
equipment. International sales of our systems accounted for 56.5% of revenues
in the three months ended March 31, 2000 while 100% of our revenues were
derived from sales in the United States in the three months ended March 31,
1999.
Cost of Revenues. Our cost of revenues remained constant at $7.1 million in
the three months ended March 31, 2000 and 1999. In 1999 we began to include in
cost of revenues the personnel expenses related to field installation and
engineering services. This change was made to properly align direct costs and
overhead with revenues.
Our cost of revenues and gross profit may be affected by the mix of systems
sold, the mix of distribution channels used by us, the mix of services
provided, and the average order size. We expect to realize higher gross margins
on direct channel sales relative to indirect channel sales. If sales through
indirect channels increase as a percentage of total revenues our gross margins
will likely decrease.
Research and Development. Research and development expense was $6.4 million
in the three months ended March 31, 2000 and $5.4 million in the three months
ended March 31, 1999, an increase of 18.2%. The increase was primarily due to
increased personnel related to the development and testing of our SpotLight GSM
system and our SpotLight 2000 CDMA system.
Sales and Marketing. Sales and marketing expense was $2.3 million in the
three months ended March 31, 2000 and $2.7 million in the three months ended
March 31, 1999, a decrease of 13.0%. The decrease was primarily due to
headcount reductions made in sales, marketing, and service support in August
1999, and a realignment of our commission plan reducing the basic rate paid and
increased quotas.
General and Administrative. General and administrative expense remained
constant at $1.3 million in the three months ended March 31, 2000 and 1999.
Other Income (Expense), Net. Our total other income (expense), net amounted
to an income of $62,000 in the three months ended March 31, 2000 compared to an
expense of $3.1 million in the three months ended March 31, 1999. The decreased
expense was primarily the result of reduced interest expense as a result of the
repayment of our $29.0 million Senior Secured Bridge Notes bearing interest at
13.75% in April 1999.
23
<PAGE>
We invest cash in highly secure short-term investments. We received interest
income from short-term investments of $210,000 in the three months ended March
31, 2000, and received $119,000 in the three months ended March 31, 1999.
Years Ended December 31, 1999 and 1998
Revenues. Revenues were $22.6 million in 1999 and $16.0 million in 1998, an
increase of 41.3%. This increase was primarily due to increased unit sales of
our SpotLight systems, increased revenues per unit sold and the introduction of
a new version of our SpotLight 2000 CDMA system in July 1999. International
sales of our systems accounted for 26.0% of revenues in 1999 and 23.5% in 1998.
Cost of Revenues. Our cost of revenues was $22.2 million in 1999 and $18.0
million in 1998, an increase of 23.3%. The increase in cost of revenues was
primarily the result of increased units sold and change in product mix from
analog systems to our SpotLight 2000 CDMA system. Also, in 1999 we began to
include in cost of revenues the personnel expenses related to field
installation and engineering services. This change was made to properly align
direct costs and overhead with revenues.
Research and Development. Research and development expense was $22.8 million
in 1999 and $18.5 million in 1998, an increase of 23.2%. The increase was
primarily due to increased personnel related to the development and testing of
our SpotLight GSM system and our SpotLight 2000 CDMA system.
Sales and Marketing. Sales and marketing expense was $11.1 million in 1999
and $11.3 million in 1998, a decrease of 2.3%. The decrease was primarily due
to including in cost of revenues the personnel of expenses associated with
field installation and engineering services.
General and Administrative. General and administrative expense was $5.7
million in 1999 and $5.9 million in 1998, a decrease of 2.6%. The decrease was
primarily due to the reduction of administrative personnel and reductions in
outside professional services.
Other Income (Expense), Net. Our total other income (expense), net amounted
to an expense of $3.2 million in 1999 compared to an expense of $6.6 million in
1998. The decreased expense was primarily the result of reduced interest
expense as a result of the repayment of our $29.0 million Senior Secured Bridge
Notes bearing interest at 13.75% in April 1999. Gross other income increased by
$271,000 from 1998 to 1999 due to income from short-term investments in 1999
made with the proceeds from the Series E preferred stock financing.
Years Ended December 31, 1998 and 1997
Revenues. Revenues were $16.0 million in 1998 and $1.5 million in 1997. This
increase reflected our first full year of revenues resulting from the
commercial deployment of our SpotLight systems. Our revenues for 1997 consisted
primarily of services provided by the Network Services division which was
discontinued and sold in March 1998.
Cost of Revenues. Our cost of revenues was $18.0 million in 1998 and $1.7
million in 1997. The increase was primarily related to costs associated with
introducing our analog system and the first version of our SpotLight CDMA
system.
Research and Development. Research and development expense was $18.5 in 1998
and $13.1 million in 1997, an increase of 41.4%. The increase was primarily
attributable to increased personnel related to the introduction of our analog
system, development of the first version of our SpotLight CDMA system, and
start up costs related to the development of our GSM system.
Sales and Marketing. Sales and marketing expense was $11.3 million in 1998
and $5.4 million in 1997, an increase of 110.8%. The increase was primarily
attributable to expansion of our direct sales force, marketing
24
<PAGE>
and service support staff. Also in 1998, we increased expenses associated with
initial field trials, marketing communications, and training and documentation.
General and Administrative. General and administrative expense was $5.9
million in 1998 and $3.8 million in 1998, an increase of 56.5%. The increase
reflected the addition of administrative staff, new facilities in Redmond,
Washington and Allen, Texas, increased outside professional services associated
with financings and expenses associated with the implementation of our
enterprise resource planning system.
Other Income (Expense), Net. Our total other income (expense), net amounted
to an expense of $6.6 million in 1998 compared to income of $402,000 in 1997.
The increased interest expense was primarily the result of issuing the $29.0
million Senior Secured Bridge Notes in May 1998, bearing interest at 13.75% per
annum.
Selected Quarterly Results of Operations
The following table sets forth certain unaudited quarterly consolidated
statement of operations data for the nine quarters ended March 31, 2000. This
unaudited information has been prepared substantially on the same basis as the
annual audited financial statements appearing elsewhere in this prospectus, and
includes all necessary adjustments that we consider necessary to present fairly
the financial information for the periods presented. The quarterly data should
be read in conjunction with the audited consolidated financial statements and
the notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Quarter ended
-------------------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31,
1998 1998 1998 1998 1999 1999 1999 1999 2000
--------- -------- --------- -------- --------- -------- --------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues................ $ 2,538 $ 3,963 $ 6,557 $ 2,933 $ 6,834 $ 1,553 $ 5,725 $ 8,484 $ 9,329
Cost of revenues........ 2,910 3,486 6,374 5,258 7,059 1,860 5,768 7,549 7,094
------- ------- -------- -------- -------- -------- ------- -------- -------
Gross profit............ (372) 477 183 (2,325) (225) (307) (43) 935 2,235
Operating expenses:
Research and
development........... 3,575 4,450 5,525 4,945 5,392 5,651 5,301 6,443 6,374
Sales and marketing.... 1,996 2,091 3,347 3,912 2,694 2,722 2,434 3,230 2,343
General and
administrative........ 1,044 1,385 1,177 2,281 1,280 1,654 1,360 1,438 1,325
------- ------- -------- -------- -------- -------- ------- -------- -------
Total operating
expenses.............. 6,615 7,926 10,049 11,138 9,366 10,027 9,095 11,111 10,042
------- ------- -------- -------- -------- -------- ------- -------- -------
Loss from operations.... (6,987) (7,449) (9,866) (13,463) (9,591) (10,334) (9,138) (10,176) (7,807)
Other income (expense),
net.................... 54 (1,719) (2,202) (2,696) (3,108) (614) 293 255 62
------- ------- -------- -------- -------- -------- ------- -------- -------
Net loss................ $(6,933) $(9,168) $(12,068) $(16,159) $(12,699) $(10,948) $(8,845) $ (9,921) $(7,745)
======= ======= ======== ======== ======== ======== ======= ======== =======
</TABLE>
Our revenues increased significantly over the last three quarters primarily
as a result of increased unit sales of our SpotLight systems and expanding
customer base. Our revenues in the last quarter of 1998 decreased compared to
the previous quarter due to delays in receiving orders from a significant
customer. Our revenues in the second quarter of 1999 declined compared to the
previous quarter primarily due to delays in orders associated with the
transition from analog to CDMA systems.
Research and development expense has generally remained constant on a
quarterly basis but increased in the last quarter of 1999 and the first quarter
of 2000 due to expenses associated with costs of prototype systems and write
off of certain capital assets associated with research and development. Sales
and marketing expense has fluctuated with the number of personnel in sales,
marketing and customer support in 1999. General and administrative expense has
fluctuated with the number of personnel. The increase in the fourth quarter of
1998 was the result of the establishment of a bad debt reserve and expenses
associated with the cancellation of a public offering. As a result of our
reduction in force in the third quarter of 1999, general and administrative
expense declined.
25
<PAGE>
Our limited operating history makes the prediction of future operating
results difficult. Our business prospects must be considered in light of the
risks and uncertainties often encountered by early-stage companies in the
wireless communications market. We may not be successful in addressing these
risks and uncertainties. We have experienced significant percentage growth in
revenues in recent periods; however, we do not believe that prior growth rates
are indicative of future growth rates. It is likely that in some future quarter
our operating results may fall below the expectations of securities analysts
and investors. In this event, the trading price of our common stock may fall
significantly.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
sales of preferred stock and common stock and the issuance of debt instruments,
and to a lesser extent, capital leases arrangements and borrowings under
various lines of credit. Net proceeds from these transactions totaled $182.9
million as of March 31, 2000.
For the three months ended March 31, 2000 we used net cash in operating
activities of $4.7 million. Our operating activities included major uses of
cash to fund our net loss of $7.7 million, increased inventories of $1.7
million and decreasing deferred revenues by $1.2 million. We partially offset
cash uses with increases in accounts payable and accrued liabilities of
$3.8 million. For the twelve months ended December 31, 1999, we used net cash
in operating activities of $37.8 million. Our operating activities included
major uses of cash to fund our net loss of $42.4 million. We also used cash by
increasing accounts receivable by $5.8 million and reduced accounts payable and
accrued liabilities by $1.4 million. We partially offset cash uses by lowering
inventories by $3.8 million, increasing deferred revenues by $1.6 million. Our
net cash used in the fourth quarter 1999 amounted to $3.8 million. Our net cash
used in operating activities in 1998 amounted to $34.9 million.
Our net cash used for investing activities for the first three months ended
March 31, 2000 amounted to $790,000. Our net cash used in investing activities
in 1999 was $1.3 million. Our 1998 net cash used in investing activities was
$2.5 million.
Our net cash provided by financing activities for the three months ended
March 31, 2000 amounted to $75,000. This primarily was the result of purchases
of common stock of $279,000, proceeds from capital lease financing of $455,000,
partially off set with payments made to notes payable and equipment leases of
$659,000. Net cash provided by financing activities was $48.5 million for year
ended December 31, 1999. This primarily consisted of net proceeds from the sale
of Series E preferred stock of $82.5 million. In April 1999, we repaid $29.0
million in Senior Secured Bridge Notes plus interest of $4.1 million. Our 1998
net cash from financing activities was $34.8 million consisting of $29.0
million from the sale of Senior Secured Bridge Notes at 13.75% interest and
$7.2 million from the sale of Series E preferred stock.
As of March 31, 2000, we had $14.5 million in cash and cash equivalents,
$10.0 million under a revolving line of credit with Imperial Bank and $3.0
million under a equipment lease arrangement with Transamerica, of which $1.3
million remained available. No amount is presently outstanding under the
Imperial Bank facility other than a $2.5 million standby letter of credit to
support our obligations under the lease for our Redmond, Washington facility.
The renewed revolving line of credit agreement has a maturity rate of one year
from the initial draw date with interest at the prime rate on the date of draw,
payable monthly and the principal amount payable at maturity. Borrowings under
the Transamerica equipment lease are secured by the equipment financed
thereunder. The Transamerica equipment lease terms vary from 24 to 36 months
with an effective interest rate of 12.26% per annum for domestic equipment
leases and 12.86% for foreign equipment leases, and interest is payable
monthly. We have several capital leases with terms ranging from 24 to 48
months. At March 31, 2000, our outstanding capital lease obligations were $4.9
million, accruing interest at rates ranging from 7.25% to 14.50%. Please see
note 5 to the financial statements for a more complete description of the
credit facilities. We anticipate an increase in our capital expenditures and
lease commitments consistent with anticipated growth in operations,
infrastructure and personnel. We expect to use approximately $2.8 million of
26
<PAGE>
the net proceeds from this offering for capital expenditures primarily
associated with expanding our manufacturing facilities and acquiring additional
testing equipment. In addition, we plan to use approximately $22.6 million of
the net proceeds in 2000 to fund research and development activities.
We believe that current capital resources, together with the estimated net
proceeds from this offering, are adequate to fund our operations for at least
12 months. Thereafter, we may be required to raise additional capital which may
not be available to us on acceptable terms, if at all. Any inability to obtain
needed financing by us could have a material adverse effect on our business and
operating results.
Market Risk
We do not use derivative financial instruments. We generally place our
marketable security investments in high credit quality instruments, primarily
U.S. Government obligations and corporate obligations with contractual
maturities of less than one year. We do not expect any material loss from our
marketable security investments and therefore believe that our potential
interest rate exposure is not material; however, these investments are subject
to interest rate risk.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivatives and
Hedging Activities, which requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designed as part of a hedge
transaction and, if it is, the type of hedge transaction. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. We do not anticipate
that the adoption of this new standard will have a material effect on our
earnings or our financial position, but we continue to evaluate the impact of
SFAS No. 133.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin Number 101, or SAB 101. This summarized certain areas of
the staff's views in applying generally accepted accounting principles as it
applies to revenue recognition. We believe that our revenue recognition
principles comply with SAB 101. We will continue to evaluate interpretations of
SAB 101.
27
<PAGE>
BUSINESS
Overview
We provide smart antenna systems for the wireless communications industry.
We believe that our SpotLight systems enable wireless network operators to
increase overall network capacity, improve or maintain network quality, reduce
network operating costs and better manage their network infrastructure. As the
demand for wireless services has grown in recent years, we have developed
products based on our proprietary technologies that address the associated
network capacity problems faced by wireless network operators.
Our SpotLight systems can reduce the need for more costly infrastructure
upgrades and additional cell site deployments, allowing wireless network
operators to more cost-effectively keep pace with subscriber growth and
increased demand for digital services. These smart antenna systems utilize
proprietary hardware and software to enable a more efficient utilization of the
finite amount of radio frequency spectrum, or "wireless bandwidth." Our
technology is designed to be implemented in a variety of market segments in the
wireless communications industry and currently supports CDMA, GSM and analog
standards. Our customers include AirTouch Communications, Inc., ALLTEL, Bell
Atlantic Mobile, GTE Wireless Inc., IUSACELL, Southwestco and Telefonica
Servicios Moviles S.A.C. of Peru. As of March 31, 2000, we had sold an
aggregate of 149 SpotLight systems worldwide.
Industry Background
Growth in Wireless Usage
The demand for wireless communications services has grown significantly in
recent years. According to The Strategis Group, U.S. subscriber usage was
expected to increase from approximately 174 billion minutes of use in 1999 to
approximately 372 billion minutes of use by 2003, representing an expected
compound annual growth rate of 20.9%. This increase in usage has been driven by
an increased number of subscribers, lower prices and expanded availability of
existing services. In addition to these factors, the emergence of new data and
Internet-oriented wireless services is expected to contribute to the increase
in subscriber usage in the future.
Increased Subscribers. The number of wireless subscribers has increased
significantly in recent years. According to International Data Corporation, or
IDC, there were approximately 303 million wireless subscribers around the world
in 1998 and that number was expected to reach approximately 1.1 billion
subscribers in 2003, representing an expected compound annual growth rate of
28.9%. According to IDC, in 1998, there were approximately 64 million wireless
subscribers in the United States and that number was expected to grow to
approximately 118 million by 2003, representing an expected compound annual
growth rate of 12.9%.
Lower Price. The price of wireless services has decreased significantly in
recent years. According to data provided by The Strategis Group, the average
price per wireless minute in the United States was expected to decline from
$0.25 per minute in 1999 to $0.12 per minute in 2003. With multiple wireless
network operators competing in most U.S. markets, competitive pricing
strategies, such as discounting and fixed rate plans, have resulted in a
greater number of wireless subscribers, as well as a substantial increase in
subscriber usage. In addition, the greater supply of commercially available
wireless frequency due to increased government allocation of spectrum to
wireless network operators has resulted in increased competition among existing
and new wireless network operators, further reducing costs to subscribers.
Expanded Availability of Existing Services. Due to the high initial fixed
costs involved, early wireless deployments were limited to urban centers and
major traffic corridors. However, to meet increased demands for ubiquitous
wireless services, wireless network operators accelerated the buildout and
upgrade of their networks. This increased coverage has enabled these wireless
network operators to reach new subscribers and provide a higher level of
service to existing subscribers.
New Wireless Services. Consumer demand for "any time, anywhere" access to
the Internet and data services, such as email and instant messaging, has
created a demand for delivery of these services over a
28
<PAGE>
wireless network. Devices with wireless access, such as mobile phones, palm
computers and laptop computers with wireless modems, continue to evolve,
providing applications and ease of use that increase wireless data usage.
Additionally, standard protocols such as Wireless Application Protocol, or WAP,
have emerged and are designed to create interoperability of wireless equipment
and Internet-based products. These protocols are expected to further drive
consumer demand for wireless access to the Internet and data services.
Strains on Wireless Network Capacity
Increased subscriber usage and the demand for ubiquitous wireless access
place a significant strain on wireless network operators given the fixed amount
of radio frequency spectrum that is available. Wireless spectrum is allocated
to individual wireless network operators in fixed amounts by governments in the
U.S. and foreign markets. Thus, the fundamental challenge for wireless network
operators is to increase capacity, while maintaining signal quality, within a
fixed amount of wireless bandwidth. Wireless network operators generally have
used two alternatives to address capacity problems: building additional cell
sites or deploying more efficient digital technologies.
Additional cell sites. Operators of wireless networks often address capacity
problems by building new cell sites. This alternative has three major
disadvantages. First, we believe the cost of constructing a new standard 800
MHz CDMA cell site, including land, building and equipment, can be
approximately $500,000. Second, building cell sites closer together increases
signal interference in the network, which can reduce capacity and call quality,
exacerbating the very problems that the additional cell sites were built to
resolve. Third, wireless network operators face significant community
resistance arising from environmental and zoning concerns and objections to the
appearance of additional cell site towers.
More efficient digital technologies. In addition to building more cell
sites, wireless network operators have deployed more spectrum-efficient digital
technologies such as CDMA, GSM and TDMA to increase capacity. These digital
technologies offer many improvements to wireless network operators and their
customers, including more cost-effective infrastructure, smaller phones with
improved battery life and value-added features, such as the capability to
support data services. According to IDC, 69.2% of subscribers worldwide were
using digital handsets in 1998 and this number was expected to increase to
96.8% by 2003. Despite the improvement offered by digital technologies,
wireless network operators continue to find that portions of their networks
still face capacity limitations. For instance, CDMA lacks the ability to
efficiently add incremental capacity in localized heavy traffic areas of a
network. Consequently, wireless network operators must either deploy new cells,
or dedicate more spectrum to CDMA in significant portions of their network to
resolve isolated capacity constraints. In GSM networks, the capacity is limited
by interference between cell sites within the network. This interference
prevents GSM network operators from adding additional capacity to the network.
The growing demand for wireless services, coupled with the high costs and
technical difficulties associated with increasing network capacity, create the
need for more cost-effective solutions. As wireless network operators seek to
provide ubiquitous wireless service and support increased subscriber usage,
they must address the fundamental challenge of achieving maximum capacity from
the finite spectrum they have been allocated.
The Metawave Solution
We provide smart antenna systems to wireless network operators. Our
SpotLight systems are a cost-effective solution to expanding network capacity
while improving or maintaining overall network performance. Our SpotLight
systems are compatible with CDMA, GSM and analog base station equipment. Our
smart antenna systems provide wireless network operators with the following
benefits:
Cost-Effective Capacity Expansion. Our SpotLight systems enable wireless
network operators to increase the capacity of their existing networks and
reduce the need to build and maintain costly new cell sites. Our SpotLight
systems can be deployed selectively within a network in either a single cell
site or multiple cell sites. Based on customer data, current versions of our
SpotLight 2000 system improved CDMA capacity in cell sites from 30% to 50%,
depending on network configuration. Additionally, in a recent field trial, our
SpotLight GSM
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system demonstrated that, when deployed in a network of cell sites, GSM network
capacity can be increased by 100% without increasing the number of GSM cell
sites. By applying our SpotLight solutions in these targeted capacity
constrained cell sites, overall network capacity can be correspondingly
increased.
Improved Network Performance. Our SpotLight systems allow wireless network
operators to increase capacity while maintaining or improving the level of
service and signal quality. Our SpotLight 2000 systems increase CDMA network
performance by efficiently distributing existing network resources to better
match subscriber usage. We believe our SpotLight GSM systems will provide
wireless network operators with better signal reception and reduced
interference thereby improving network performance.
Compatibility with Standards and Equipment. Our SpotLight systems are
designed to be compatible with most existing wireless standards and currently
installed cell site equipment thereby preserving the wireless network
operators' existing investment in equipment and technology. Our smart antenna
systems have been independently developed by us to be compatible with the
Motorola, Lucent and Nortel 800 MHz CDMA base stations, which we believe
represent substantially all of the 800 MHz CDMA base stations deployed in North
America. We believe our SpotLight GSM systems are also compatible with most 900
MHz GSM base stations deployed worldwide.
Strategy
Our objective is to provide smart antenna systems to the worldwide wireless
communications market. Key elements of our strategy include:
Deliver Solutions to Capacity Constrained Wireless Network Operators. We
will continue to focus on developing solutions to increase capacity for those
wireless network operators facing capacity constraints. To date, we have
developed SpotLight systems to address the capacity and system quality problems
facing 800 MHz CDMA and 900 MHz GSM wireless network operators. According to
IDC, as of 1998, U.S. wireless network operators at these frequencies serviced
more than 75% of wireless subscribers. As capacity issues emerge in wireless
networks using different frequencies, we intend to develop smart antenna
systems that address capacity problems in these wireless networks.
Further Penetrate Existing CDMA Customers. We believe that the 800 MHz CDMA
market will continue to represent a significant opportunity for us. Over the
last two years we have sold SpotLight 2000 systems to the four largest 800 MHz
CDMA wireless network operators in North America, as measured by subscriber
market share data provided by the Radio Communications Review. We intend to
leverage the performance and service of our existing system deployments to
expand our presence and penetration within these wireless network operators.
Target Additional Strategic Customers. With our products today, we are able
to target additional large multi-system 800 MHz CDMA and 900 MHz GSM wireless
network operators around the world that serve substantial concentrations of
customers and have the greatest market share in their respective markets. We
intend to target these markets by expanding our manufacturing, installation,
sales and service capabilities in the regions served by these wireless network
operators.
Leverage Technology Leadership To Expand Markets. We intend to use our
technology leadership and intellectual property to develop and provide new
capacity solutions to the existing and emerging wireless communications
markets. Our core technology can be used to address spectrum management issues
in many large wireless networks. Currently, the principal areas of our product
development are the following:
. Integrating our technology into equipment provided by wireless base
station manufacturers;
. Developing smart antenna products for use by wireless network operators
at 1800 MHz and 1900 MHz PCS spectrum;
. Exploring the development of products for the TDMA wireless standard; and
. Exploring the development of products for the broadband wireless market.
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Markets
In wireless communications networks, there are several wireless standards
that use different technologies to process calls and divide allocated spectrum.
These wireless standards fall into two broad categories, analog and digital.
Advanced Mobile Phone System, or AMPS, is the leading analog standard. Digital
standards are further subdivided into two general schemes, time division and
code division. Time Division Multiple Access, or TDMA, and Global Systems for
Mobile Communications, or GSM, are the leading time division standards. Code
Division Multiple Access, or CDMA, is the leading code division standard. We
have developed smart antenna systems that increase capacity for CDMA, GSM and
analog based networks.
The terms cellular and PCS are often used interchangeably by the popular
press when discussing wireless communications networks. However, within the
wireless industry the distinction between the two is important. Cellular
describes networks operating in the 800 MHz and 900 MHz frequency bands, using
both analog and digital standards. Analog, CDMA, GSM and TDMA are the most
widely deployed cellular standards across the globe. PCS typically describes
networks operating in the 1800 MHz and 1900 MHz frequency bands. CDMA, GSM and
TDMA the most widely deployed PCS standards.
CDMA Market. The CDMA wireless market consists of wireless network operators
at both cellular and PCS frequencies. We believe that approximately half of the
cellular networks in North America have adopted CDMA as their digital
technology. Wireless network operators are overlaying CDMA networks on top of
existing analog networks thereby allocating spectrum between CDMA and analog.
We also believe that CDMA is the most widely deployed PCS digital technology in
North America.
The CDMA Development Group, a trade association, estimated there were 50
million CDMA subscribers worldwide at year end 1999, accessing both the 800 MHz
and 1900 MHz networks. Roughly 90% of these are in North America and Asia.
Frost and Sullivan estimated there were 46,716 CDMA 800 MHz base stations in
operation in 1999, up from 26,200 in 1998. These base stations represent the
target market for our CDMA systems. Frost and Sullivan also estimated 38,082
CDMA PCS base stations were in operation in 1999, up from 20,730 in 1998.
GSM Market. The GSM market consists of wireless network operators at both
cellular and PCS frequencies. According to the GSM Association, GSM is the most
widely deployed digital standard worldwide and has been deployed in 142
countries, with more than 250 million subscribers, predominantly in Europe and
Asia, at year end 1999. According to Frost and Sullivan, there were 98,133 GSM
base stations in operation at 900 MHz in 1999, up from 46,515 in 1998. These
base stations represent the market for our GSM systems. Frost and Sullivan also
estimated there were 55,711 PCS base stations using GSM were in operation in
1999, up from 31,690 in the prior year.
TDMA Wireless Market. The TDMA market consists of wireless network operators
at both cellular and PCS frequencies. According to the Universal Wireless
Communication Consortium, there were an estimated 30 million TDMA wireless and
PCS subscribers worldwide as of September 30, 1999.
Third Generation Standards. Over the next several years, CDMA, GSM and TDMA
wireless network operators may begin to migrate their systems to third
generation, or 3G, standards. Although the specifications for 3G are not
complete, we believe that they will be based on CDMA technologies and that our
smart antenna systems will be applicable to the evolving 3G technologies. We
intend to develop 3G compatible products.
Broadband Fixed Wireless In fixed, broadband wireless networks, no
predominant standards currently exist. This market is often described under the
umbrella term, broadband wireless access, or BWA. The BWA market services both
mobile and fixed end users. Services range from high speed internet access, to
combined high capacity data and voice offerings.
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Metawave Products
We have developed spectrum management solutions, consisting of smart antenna
systems, applications software and engineering services, that enable wireless
network operators to increase overall network capacity, improve or maintain
network quality, reduce network operating costs and better manage their network
infrastructure.
SpotLight 2000 Platform. Our SpotLight smart antenna system was initially
designed for use in analog networks and was first shipped for commercial sale
in November 1997. The second generation SpotLight 2000 system was designed to
support both analog and CDMA wireless standards. Our SpotLight 2000 connects to
Motorola HDII, SC2400, SC4812 and SC9600 base stations, Lucent Series II base
stations, and Nortel Metrocell base stations.
We have analyzed data from numerous CDMA networks and have found that the
distribution of traffic within a network and even within a cell varies
considerably. Thus, wireless network operators are faced with the challenge of
allocating spectrum resources to uneven and varied subscriber traffic. CDMA
lacks the ability to efficiently add incremental capacity in localized areas.
Consequently, to resolve isolated capacity constraints, wireless network
operators must either deploy new cells or dedicate more spectrum to CDMA in
significant portions of their network.
Cells are most often divided into three sectors. Because of imbalanced
traffic, one sector is often utilized to its maximum capacity, while the
neighboring sectors have unused or excess capacity. When a sector's capacity is
fully utilized, new calls cannot be originated within the sector without
negatively affecting network performance despite call servicing capability
remaining unused in adjacent sectors. In addition, subscriber calls cannot be
transferred into the overloaded sector when moving from an adjacent cell or
sector. This results in either calls being blocked or calls being terminated.
Our proprietary SpotLight 2000 system balances the traffic load within a
cell, reducing the problem of having one sector overloaded while the other
sectors are underutilized. As traffic varies throughout the day, our SpotLight
System can accommodate these variations and balance the traffic accordingly.
This load balancing increases network efficiency and capacity.
Load Balancing Through Sector Synthesis
Load Balancing Through Sector Synthesis
Graphical depiction with 2 cell sites demonstrating the load balancing
capability of the SpotLight 2000 CDMA system through sector synthesis.
Language under the cell site graphic on the left states:
Before SpotLight 2000
Peak traffic loading strains capacity in one sector, while capacity remains
idle in others.
Language under the cell site graphic on the right states:
After SpotLight 2000
Load balancing by reorienting and resizing sectors increases cell site
capacity.
As illustrated above, our SpotLight 2000 system addresses traffic loading by
controlling the transmission and reception of CDMA radio signals by base
stations through a process called sector synthesis. Our SpotLight 2000 system
adapts the sector coverage of the base stations' CDMA radios to the local
traffic patterns around
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cell sites. The system's phased-array antenna makes it possible to dynamically
adjust sector antenna patterns through a software-driven process. As a result,
wireless network operators can optimize their CDMA networks with increased
flexibility and precision, thereby enhancing network capacity and performance
in response to changing traffic patterns taking into account local terrain and
variable radio frequency conditions.
The SpotLight 2000 system can be deployed in three different configurations
depending on customer network requirements. The CDMA-only configuration uses
our SpotLight system to support only the CDMA interface. This is the baseline
SpotLight system for customers who are interested in improving the capacity of
their CDMA system without changing their analog network. The second available
configuration is CDMA with Analog Pass Through, or CDMA/APT. This system
provides capacity benefits to the CDMA interface while "passing" the analog
signals through our SpotLight system without changing the analog network. The
CDMA/APT system allows the service provider to support both CDMA and analog
networks with a single antenna and set of power amplifiers. The third system
configuration is the dual mode system which provides capacity improvements to
both the CDMA and analog wireless standards, configuring and optimizing each
wireless standard separately, while using only a single set of antennas.
Each of the three configurations described above can be deployed in three-
sector cell sites or can be used to increase the sectorization of a CDMA cell
site from three sectors to four, five or six sectors. In cell sites where more
than a single sector is heavily loaded, the wireless network operator may use
the SpotLight 2000 system to increase the sectorization of the cell site and
gain additional capacity over the original three-sector cell site. The
SpotLight system enables wireless network operators to use our software-
controlled antenna patterns to reduce handoff overhead and optimization
problems normally associated with four, five or six sector deployments. At the
same time, the SpotLight system provides an efficient way to increase the
sectorization of the cell site without having to add additional antennas,
cables, duplexers, filters or power amplifiers.
Our SpotLight 2000 system can be administered and monitored locally or
remotely through our Windows-based software application called SiteSculptor.
SiteSculptor allows real time monitoring of system performance through
graphical displays. Further, we offer networked access to our SpotLight 2000
system with our SiteNet network application. SiteNet utilizes our SiteSculptor
software package to provide a means for remote SpotLight configuration and
centralized collection of performance statistics in analog and CDMA networks.
SpotLight for GSM. Our SpotLight GSM system is designed to increase GSM
network capacity by reducing cell site and network interference levels using a
beam-switching technology. Currently the capacity of dense urban GSM networks
is limited by interference between cell sites within the network. This
interference prevents wireless network operators from adding additional
capacity to the network.
Our SpotLight system segments the normal three sector coverage area into
twelve narrow beam patterns. Our SpotLight GSM system tracks the location of
each subscriber within the sector coverage area and then assigns a single
narrow beam to them. As the subscriber moves through the sector coverage area,
our SpotLight GSM system continues to track the position of the subscriber and
switches the correct narrow beam to them. As illustrated below, the
interference received by and transmitted from the host cell site can be
significantly reduced, allowing the wireless network operator to increase
capacity while maintaining signal quality.
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Interference Reduction Through Switched Beam Technology
Graphical depiction with two cell sites demonstrating the switched beam
capability of the SpotLight GSM system.
Language under the cell site on the left states:
Before SpotLight GSM
Conventional sectors cause interference to be received by and transmitted for
the cell site over a large area
Language under the cell site on the right states:
After SpotLight 2000
Narrow beams reduce the interference received by and transmitted from the cell
site
Our SpotLight GSM system is designed to be compatible with most existing 900
MHz GSM base station equipment. We intend to develop systems to be compatible
with 1800 MHz base station equipment. Our SpotLight GSM system can be
configured to support one, two or three sectors within the cell site, allowing
the wireless network operator to use our SpotLight GSM system to reduce
interference only in the capacity limited sectors. Based on a recent field
trial, our SpotLight GSM system, when deployed in a network of cell sites, can
increase GSM network capacity by up to 100% without increasing the number of
cell sites. To date, we have not completed any commercial sales of our
SpotLight GSM system.
Core Technology
We believe that one of our key competitive advantages is our investment and
expertise in the core technologies that enable efficient spectrum management of
wireless networks. Spectrum management encompasses a number of technical
components, including advanced antenna concepts, radiowave propagation models,
network performance monitoring tools, wireless standards knowledge and
communications systems hardware implementations. These core competencies, when
applied in combination, allow wireless network operators to optimize capacity,
coverage and quality across their networks. We have developed, and continue to
expand upon, the following fundamental technical elements:
Phased-Array Antenna Systems. We have 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. We have designed antennas to
synthesize multiple narrow fixed-beams, which can be used to track individual
users within a cell site. In addition, we have 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 wireless standard
independent, and can therefore be applied to many wireless environments,
including cellular, PCS, enhanced specialized mobile radio, two-way paging,
multi-channel multipoint distribution service, or MMDS, other broadband
wireless markets, and emerging satellite-based wireless services. We continue
to develop and focus on improving the functionality and quality of our antenna
systems as well as reducing the costs and time associated with manufacturing
and deploying our antennas in the field.
Multibeam Hardware Architectures. We have 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.
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Our beam-switching technology allows us to effectively switch the call from
beam to beam within a cell while maintaining call quality. It is adaptable to
GSM, TDMA and analog wireless standards, where rapid beam switching is
required. Additionally, we have developed proprietary hardware techniques to
dynamically adjust CDMA sector patterns and maintain call quality by
calibrating phased-array antenna configurations. To monitor the radio
environment and adjust the sector coverage patterns for both our CDMA and GSM
systems, we have developed scanning receivers designed to accurately operate
over various channel bandwidths. Our spatial technology allows the simultaneous
operation of multiple wireless standards, currently CDMA/analog, through the
same physical antenna structure, while maintaining independent optimization of
the performance for each wireless standard.
Real Time Network Control Algorithms. We have developed algorithms to
control beam switching hardware in 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. In addition, we have developed
expertise in the optimization of wireless network performance for CDMA, GSM and
analog wireless standards. This expertise allows network control algorithms to
be customized based on the specific wireless standard and network deployment
scenario. We have also developed internal software tools for performance
modeling wireless networks, allowing us to further customize systems for
wireless network operators based on their specific needs.
Adaptive Beam-Forming Techniques. We design and build antenna systems with a
broad range of standard and custom beam types and shapes using adaptive beam-
forming technology. 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. With respect to CDMA, our
system makes use of phased-array antennas to create custom sector antenna
patterns through a software-driven process known as sector synthesis.
Applications Software. We develop applications software that allow wireless
network operators to analyze network performance and make appropriate
modifications to manage their spectrum more efficiently. We have designed the
SiteSculptor application software to allow users of our SpotLight system to
quickly and easily simulate antenna patterns and implement those patterns
through software configuration of our SpotLight systems. The antenna pattern
editor allows the wireless network operator to load per-sector traffic data
into our SpotLight system for analysis. SiteSculptor analyzes the data and
provides the operator with suggested sectorization patterns. SiteSculptor also
allows the user to modify the antenna pattern as required, view a simulation of
the pattern, and then load the pattern directly into our SpotLight system.
Research and Development
Our success depends on a number of factors, which include our ability to
identify and respond to emerging technological trends in our target markets,
develop and maintain competitive systems, enhance our existing systems by
adding features and functionality that differentiate them from those of our
direct and indirect competitors and bring systems to market on a timely basis
and at competitive prices. As a result, we have made, and we intend to continue
to make, significant investments in research and product development. Our
research and development expenses amounted to $6.4 million in the three months
ended March 31, 2000. Our research and development expenses were $22.8 million
in 1999, and $18.5 million in 1998. As of March 31, 2000, we had 146 employees
engaged in research and product development, 106 of whom are engineers, and we
continue to recruit additional skilled personnel to enhance our research and
development department.
Our development efforts in the near term will be focused on using our
technology to develop capacity solutions to the existing and emerging wireless
communications markets. Our core technology can be used to address spectrum
management issues in many large wireless networks. Principal areas of focus
include the following: integrating our technology into wireless base station
equipment; developing smart antenna systems for use by wireless network
operators at 1800 MHz and 1900 MHz PCS spectrum; exploring the development of
systems for TDMA wireless standard technology; and exploring the development of
systems for the broadband wireless market.
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Customers
Our customers are wireless network operators worldwide who face network
capacity constraints. As of March 31, 2000, we had sold 149 SpotLight systems.
These sales have been to customers located in the United States, Mexico, Russia
and Paraguay.
We have master supply agreements with five of the six largest 800 MHz CDMA
wireless network operators in North America, as measured by subscriber market
share. These customers are AirTouch, ALLTEL, Bell Atlantic, GTE, and IUSACELL.
We have also sold systems to Millicom-St. Petersburg Telecom and Millicom-
Telefonica Celular. The wireless operations of three of our customers--
AirTouch, Bell Atlantic and GTE--are expected to be consolidated into one
entity in 2000. On July 28, 1998, Bell Atlantic and GTE announced a merger
which is still awaiting final FCC approval. On April 4, 2000, Bell Atlantic and
Vodaphone AirTouch plc, the parent company of AirTouch, completed the
combination of their U.S. wireless properties into an entity called Verizon
Wireless. Bell Atlantic owns 47.2% of IUSACELL. Finally, Southwestco has
entered into an agreement with ALLTEL for the sale of its FCC licenses and
assets in Arizona, New Mexico and Texas.
We completed a field trial of our SpotLight GSM system with Shanghai Telecom
in the fourth quarter of 1999 and we have entered into a conditional sales
agreement with Telefonica Peru, under which the purchase of two SpotLight 2000
systems is subject to the achievement of certain performance criteria.
During the quarter ended March 31, 2000, sales to IUSACELL and AirTouch
accounted for 56.5% and 29.1% of revenues, respectively. During the twelve
months ended December 31, 1999, sales to ALLTEL, IUSACELL and Southwestco
accounted for 44.8%, 26.0% and 20.9% of revenues, respectively. Sales to these
customers are expected to continue to account for a significant amount of our
revenues in 2000. During the twelve months ended December 31, 1998, sales to
Millicom-St. Petersburg Telecom, Millicom-Telefonica Celular, ALLTEL and GTE
accounted for 13.4%, 10.1%, 61.8% and 13.4% of revenues, respectively.
International sales of our systems accounted for 56.5% of revenues for the
three months ended March 31, 2000 and 26.0% and 23.5% of revenues for the
fiscal years ended December 31, 1999 and 1998, respectively. We expect sales to
foreign customers, such as IUSACELL and others to continue to account for a
significant proportion of our revenues in fiscal year 2000.
The terms of our master supply agreements with our customers specify pricing
terms, delivery terms, ordering lead times, invoicing terms and warranty and
extended maintenance terms and procedures. In addition, pursuant to the
agreements, we are generally obligated to indemnify our customers for certain
third party claims and other losses. The agreements generally run for between
one and two years and are generally terminable by either party at any time in
their discretion.
As of December 31, 1999, our backlog of orders was approximately $12.8
million, compared to backlog of $2.6 million as of December 31, 1998. We only
include in backlog customer commitments which are scheduled to be shipped in
the next six months. System orders in our 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 internal
scheduling of production resources, backlog as of any particular date may not
be a reliable measure of sales for any future period.
Sales, Marketing and Customer Support
We sell our smart antenna systems in the United States through a direct
sales force supported by systems engineers. Our international sales and
marketing efforts are conducted through distributors, our direct sales force
and agents. Sales personnel are assigned on a customer account basis and are
responsible for generating system sales, providing system and customer support
and soliciting customer feedback for system development. In addition, sales
personnel receive support from our marketing communications organization which
is responsible for the branding and marketing of our products and services.
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Our sales and marketing efforts are primarily focused on establishing and
developing long-term relationships with potential customers. A relationship
with a new customer typically begins with a field trial or conditional sale in
a particular market of a customer. These are designed to satisfy performance
conditions prior to the completion of the sale. We generally only have one
field trial or conditional sale per customer and the results of the field trial
or conditional performance period must be approved at the senior level of our
customers' management. Consequently, the sales process associated with the
initial purchase of our systems is typically complex and lengthy, lasting in
some cases up to 18 months. However, once the system successfully meets the
applicable performance criteria, we typically negotiate and enter into
corporate-wide master supply agreements. After this agreement is in place,
purchasing decisions are generally made on a market-by-market basis pursuant to
purchase orders placed under the master supply agreement which are not subject
to the satisfaction of performance criteria. Consequently, the sales cycle for
subsequent purchases by individual markets or regions is generally much
shorter.
Our customer support organization performs network design, system
installation, network optimization, training, consulting and repair and
maintenance services to support our SpotLight systems. Recent improvements to
our pre-shipment integration and testing processes at our manufacturing
facility in Redmond, Washington, combined with the integration of experienced
subcontractors into our installation teams, has significantly reduced
installation times for our systems.
Our customer services organization also offers services to optimize the
network following the installation of a SpotLight system. These services
utilize our expertise in radio frequency network design, knowledge of
individual network configurations and knowledge of our SpotLight system
capabilities.
We generally warranty our systems for 12 months. Warranty support and
extended maintenance services for our CDMA/analog systems are performed at our
headquarters in Redmond, Washington and will be performed for GSM systems at
our offices in Taipei, Taiwan.
Manufacturing
We rely to a substantial extent on outside suppliers to manufacture many of
the components and subassemblies used in our SpotLight systems. Our
manufacturing operations at our Redmond, Washington facility consist primarily
of supplier and commodity management and the assembling and testing of finished
systems from the components and subassemblies purchased from these outside
suppliers. We monitor 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. We have been certified as ISO 9001
compliant since September 1998. We expect to begin manufacturing the SpotLight
GSM systems in Taipei, Taiwan beginning in late fiscal year 2000.
We rely on detailed sales forecasts to determine our production requirements
and manage our inventory. Our assembly and testing processes have been designed
to facilitate configuration of our systems tailored to the specific needs of
our customers. We have programs focusing on material cost reduction and supply
base management designed to reduce costs and reduce inventory exposures.
Certain parts and components used in our smart antenna systems, including
linear power amplifiers supplied by Powerwave Technologies, Inc. and integrated
duplexer low noise amplifiers and filters supplied by Filtronic Comtek Ltd.,
are presently only available from a single source. We have a supply agreement
with Powerwave Technologies, Inc. pursuant to which they have agreed to supply
all linear power amplifiers ordered by us. Certain other parts and components
are available from a limited number of sources. For a more detailed discussion
of the risks associated with having a limited source of suppliers see the risk
factor titled "Our reliance on a limited number of suppliers and the long lead
time of our systems could impair our ability to manufacture and deliver our
systems on a timely basis."
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Competition
The market for spectrum management solutions is part of the broader market
for wireless infrastructure equipment which is dominated by a number of large
companies including Lucent, Motorola, Ericsson, Nortel, Nokia, Siemens, Alcatel
and others. Our smart antenna systems compete with other solutions to expand
network capacity. These alternative solutions include other smart antenna
systems, additional base stations for capacity, deploying efficient digital
technologies and various enhancements to digital technologies.
Other smart antenna systems are offered by various competitors. Alcatel,
Hazeltine, E-Systems, Boeing and Raytheon have offered smart antenna systems
for analog networks. Adaptive Telecom has offered a CDMA smart antenna product
that is integrated into a CDMA base station in cooperation with the base
station manufacturer. Arraycomm has offered a smart antenna product that is
integrated into a Personal Handyphone System standard base station in Japan.
Ericsson has announced a GSM smart antenna system called GSM Capacity Booster
that includes an Ericsson base station as well as the smart antenna system.
Nortel has offered a smart antenna equipped GSM base station in the past. Most
of the large wireless infrastructure equipment providers, including Lucent,
Motorola, Nortel, Ericsson, Nokia, Siemens, Alcatel, Samsung and NEC have large
development organizations and have either announced their intention to examine
smart antenna technologies, or have the core technology competence to do so for
the CDMA, GSM, TDMA and 3G standards. If base station manufacturers
successfully develop and integrate smart antenna solutions into their product
offerings, it may materially and adversely affect our business.
The addition of more cell sites often will provide more capacity to wireless
networks and therefore is a substitute for our systems and, therefore, the cost
of base station equipment contained in these cell sites has decreased in recent
years and affects our ability to compete effectively. Other related costs for
new cell sites including real estate, towers, and building construction
generally have not declined. Base stations are sold by wireless infrastructure
equipment manufacturers such as the companies listed above.
Efficient digital technologies and enhancements to these technologies will
provide more capacity to wireless networks and, therefore, are substitutes for
our systems. These digital technologies include existing technologies, such as
CDMA, GSM and TDMA, as well as emerging 3G standards, such as CDMA 2000 and
WCDMA. There are enhancements to the existing CDMA and GSM standards, commonly
referred to as 2.5G standards, which provide additional capacity. There are
also various enhancements, such as improved voice coding for CDMA and various
frequency hopping techniques for GSM, which are designed to increase the
capacity of these standards. These digital technologies and various
enhancements are also offered by the large wireless infrastructure equipment
providers listed above. We believe that our smart antenna technology can be
compatible with these digital technologies and their various enhancements. Our
technology, and its ability to enhance capacity, is additive to the capacity
enhancement provided by these digital technologies. Customers, however, may
delay or cancel deployment of our smart antenna systems while they deploy these
more efficient digital technologies and other enhancements which would harm our
business.
We believe the principal competitive factors in the spectrum management
solutions market include:
. expertise in the core technologies needed for radio frequency
communication systems;
. system performance, features and reliability;
. price and performance characteristics;
. timeliness of new system introductions;
. customer service and support;
. established customer relationships; and
. size of installed customer base.
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We believe we will be competitive with respect to many of these factors;
however most of our existing and potential competitors have longer operating
histories, greater name recognition, larger installed customer bases, greater
financial, technical, sales, marketing and other resources, and more
established customer relationships. To be competitive we must invest
significant resources to address these competitive factors and achieve customer
satisfaction. If we fail to do so our smart antenna systems will not compete
favorably with our competitors which will materially and adversely affect our
business.
Intellectual Property
We rely on patent, copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. We
currently have 19 issued U.S. patents, 7 allowed U.S. patents and 29 pending
U.S. patent applications. In addition, we are seeking patent protection for our
inventions in foreign countries. The patent positions of companies in the
worldwide wireless communications industry are generally uncertain and involve
complex legal and factual questions. We cannot be certain that patents will be
issued with respect to pending or future patent applications or that our
patents will be upheld as valid or will be sufficient to prevent the
development of competitive products. While we believe that our patents will
make it more difficult for competitors to develop and market similar products,
our patents may be invalidated, circumvented or challenged. Our patent rights
may fail to provide us with competitive advantages.
We have received two registered federal copyrights for our software and four
more copyright applications are pending. The source code for our proprietary
software is also protected as a trade secret. In addition, we enter into
confidentiality agreements with our employees, customers, vendors and strategic
partners, and control access to, and the distribution of our software,
documentation and other confidential and proprietary information. Our primary
trademarks are registered with the U.S. Patent and Trademark Office and certain
other foreign jurisdictions. We have applied for trademark protection for a
number of other marks which are pending in the United States and in foreign
countries.
Despite these efforts, it may be possible for unauthorized third parties to
copy certain portions of our intellectual property contained in our systems,
design around our patents, or to reverse-engineer or otherwise obtain and use
our proprietary information. In addition, the laws of some countries do not
protect our proprietary rights to the same extent as the laws of the United
States. Accordingly, we may not be able to protect our proprietary rights
against unauthorized third-party copying or use, which could significantly harm
our business. We may have to pursue litigation in the future to enforce our
proprietary rights or to defend against claims of infringement. These claims,
regardless of their merits, may require us to enter into license arrangements
or may result in protracted and costly litigation.
In addition, we cannot be certain that others will not develop substantially
equivalent or superceding proprietary technology, or that equivalent products
will not be marketed in competition with our smart antenna systems, thereby
substantially reducing the value of our proprietary rights.
Patents and patent applications relating to products used in the wireless
communications industry are numerous. Current and potential competitors and
other third parties 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 us. We may not be aware of all patents or patent
applications that may materially affect our 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 us. We expect that we 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 us in the future, and such
assertions could result in costly litigation, the diversion of management and
engineering resources and require us to obtain a license to intellectual
property rights of such parties. There can be no assurance that these licenses
would be available on terms acceptable to us, 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 materially and adversely affect our business and
operating results.
39
<PAGE>
Government Regulation
Our smart antenna systems must obtain regulatory approval to be used. In the
United States, our systems must be certified by the Federal Communications
Commission before sales to customers may commence. Smart antenna systems must
be certified by the FCC to ensure that they will not cause wireless base
stations to exceed the prescribed technical standards. In addition, these
systems are required to comply with electrical safety standards to ensure that
the base station operators will be in compliance with relevant Occupational
Safety and Health Administration's regulations.
Other countries have similar regulations that must be complied with before
our systems can be used. Foreign countries' regulatory programs are generally
similar to those in the United States. In most jurisdictions, smart antenna
systems must be of a type approved for use with cellular base stations under
national standards specific to each country. Smart antennas are also required
to demonstrate compliance with electrical safety standards that may be national
or international in scope. These governmental approval processes frequently
involve substantial delay, which could result in the cancellation, postponement
or rescheduling of systems by our customers. Any event like this in turn may
adversely affect our ability to sell systems to these customers. Because of the
expenses associated with government approvals of our systems in some countries,
we only plan to seek product approval in those countries once we have a
customer who intends to purchase our systems. This practice may take several
months and may deter customers or contribute to delays in receiving or filling
orders.
In addition, our customers' operations are subject to extensive government
regulations. To the extent that our customers are delayed in deploying their
wireless networks as a result of existing or new standards or regulations, we
could experience delays in orders. These delays could materially and adversely
affect on our business and operating results.
We are also subject to U.S. government export controls. Our sales and
distributorship agreements require that the export or resale of our systems to
end users located in other countries must be in compliance with U.S. export
controls.
Employees
As of March 31, 2000, we had 272 employees, of which, 146 were primarily
engaged in research, development and product management, 33 in manufacturing,
59 in sales, marketing and customer support and 34 in general and
administration. We have no collective bargaining agreement with our employees
and we have never experienced a work stoppage. We believe that our employee
relations are good.
Facilities
We are headquartered in Redmond, Washington, where we lease an aggregate of
approximately 96,000 square feet, housing our principal administrative, sales
and marketing, customer support and manufacturing facilities. Our lease for
this facility expires on May 31, 2005 and we have an option to renew this lease
for two additional five year terms. We sublease approximately 13,000 square
feet of this space. We have a three-year lease for sales, service and
manufacturing facilities totaling approximately 6,500 square feet in Taipei,
Taiwan and a five-year lease for a sales and engineering support office in
Dallas, Texas. We also have representative offices in Sao Paulo, Brazil and
Shanghai, China that are subject to short-term leases.
Legal Proceedings
We may become involved in legal proceedings from time to time in the
ordinary course of business. As of the date of this prospectus, we are not
involved in any pending material legal proceedings.
40
<PAGE>
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors and their ages as of March 31, 2000 are
as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Douglas O. Reudink.............. 60 Chairman of the Board and Chief
Technical Officer
Robert H. Hunsberger............ 53 President, Chief Executive Officer and
Director
Stuart W. Fuhlendorf............ 37 Senior Vice President and Chief
Financial Officer
Victor K. Liang................. 48 Senior Vice President, GSM Products
Group
Ray K. Butler................... 41 Vice President, International Operations
Martin J. Feuerstein............ 37 Vice President, Product Development
Richard P. Henderson............ 38 Vice President, Sales and Marketing
Andrew Merrill.................. 40 Vice President, Customer Operations
Bandel L. Carano(1)............. 38 Director
Bruce C. Edwards................ 46 Director
David R. Hathaway(1)............ 55 Director
Scot B. Jarvis(1)(2)............ 39 Director
Jennifer Gill Roberts(2)........ 37 Director
David A. Twyver(2).............. 53 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Douglas O. Reudink, a co-founder, has served as our chief technical officer
since our inception and as chairman of the board of directors since April 1997.
From 1991 to 1995, Dr. Reudink served as director of wireless planning at US
WEST NewVector Group, Inc., a wireless telecommunications company. From 1986 to
1991, he served as the 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, in various research and management positions.
Dr. Reudink holds a B.S. from Linfield College and a Ph.D. from Oregon State
University.
Robert H. Hunsberger has served as our president and chief executive officer
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 Nortel, a
telecommunications company, including vice president of sales and marketing of
its wireless networks division from 1993 to 1995 and vice president of market
development of its wireless networks division and vice president of cellular
systems from 1991 to 1993. Mr. Hunsberger holds a B.S. from the University of
Virginia and an M.B.A. from Arizona State University.
Stuart W. Fuhlendorf has served as our senior vice president and chief
financial officer since March 2000. From 1992 to March 2000, Mr. Fuhlendorf
served as chief financial officer of EFTC Corporation, formerly Electronic Fab
Technology Corporation, an electronic component manufacturing company. Mr.
Fuhlendorf holds a B.A. from the University of Northern Colorado and an M.B.A.
from the University of San Diego.
41
<PAGE>
Victor K. Liang has served as our senior vice president, GSM products group
since July 1998 and general manager of Metawave Communications Taiwan Ltd., a
subsidiary since October 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 China,
Siemens Shanghai Mobile Communications and Siemens Shanghai Communication
Terminals. From 1995 to 1998, 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 holds a B.S. from Chiao Tung University in Taiwan and a
degree in Business Administration from Cheng Chih University.
Ray K. Butler has served as our vice president of international operations
since August 1999, vice president of engineering from December 1997 to August
1999 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 holds a B.S. from Brigham Young
University and an M.S. from Polytechnic University.
Martin J. Feuerstein has served as our vice president of product development
since August 1998 and director of research from March 1997 to July 1998. From
1995 to March 1997, Dr. Feuerstein served as technical manager at Lucent. From
1992 to 1995, he served as a senior member technical staff at US WEST. Mr.
Feuerstein holds a B.E. from Vanderbilt University, an M.S. from Northwestern
University and a Ph.D. from Virginia Polytechnic Institute.
Richard P. Henderson has served as our vice president of sales and marketing
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 holds a B.S. from Texas A&M University and an M.B.A. from
the University of Dallas.
Andrew Merrill has served as our vice president of customer operations since
August 1999. From 1984 to August 1999, Mr. Merrill worked at Motorola, Inc., an
electronics company, in several positions, most recently serving as engineering
manager from 1994 to 1999, program manager from 1992 to 1994 and international
cellular infrastructure manufacturing manager from 1984 to 1992. Mr. Merrill
studied communications electronics and nuclear power in the U.S. Navy.
Bandel L. Carano has served as one of our directors since 1995. Mr. Carano
has been a general partner of Oak Investment Partners, a venture capital firm,
since 1987. Mr. Carano 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 Wireless Facilities, Inc., a systems
integrator for wireless service providers and Virata Corporation, a
manufacturer of digital subscriber line chip sets. Mr. Carano holds a B.S. and
an M.S. from Stanford University.
Bruce C. Edwards has served as one of our directors since May 1998. Mr.
Edwards has served as president, chief executive officer and a director of
Powerwave Technologies, Inc., a telecommunications equipment company, since
February 1996. Mr. Edwards was executive vice president, chief financial
officer and a director of AST Research, Inc., a personal computer company, from
1994 to December 1995 and senior vice president of finance and chief financial
officer of AST from 1988 to 1994. Mr. Edwards also serves as a director of HMT
Technology Corporation, a computer equipment company. Mr. Edwards holds a B.S.
from Rider University and an M.B.A. from the New York Institute of Technology.
David R. Hathaway has served as one of our directors since 1995. Mr.
Hathaway has been a general partner of the venture capital firms Venrock
Associates and Venrock Associates II, L.P. since 1980 and 1995, respectively.
Mr. Hathaway serves as a director of several private companies. Mr. Hathaway
holds a B.A. from Yale University.
42
<PAGE>
Scot B. Jarvis has served as one of our directors 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 co-
founder and executive vice president of NEXTLINK Communications, Inc., a
wireless service operator. Mr. Jarvis serves as a director of Wireless
Facilities, Inc., a wireless telecommunications company, Point.com, Inc., an
internet services company, Leap Wireless International, Inc., a wireless
communications company and Cricket Communications, Inc. a wireless
communications company. Mr. Jarvis holds a B.A. from the University of
Washington.
Jennifer Gill Roberts has served as one of our directors since 1995. Ms.
Roberts has been a general partner of Sevin Rosen Funds, a venture capital
firm, since 1994. Ms. Roberts serves as a director of several private
companies. Ms. Roberts holds a B.S. and an M.B.A. from Stanford University and
an M.S. from the University of Texas.
David A. Twyver has served as one of our directors since May 1998. He is
currently chief executive officer of Ensemble Communications Inc, a wireless
communications equipment company. From 1996 to 1997, Mr. Twyver served as chief
executive officer of Teledesic Corporation, a satellite telecommunications
company. From 1974 to 1996, Mr. Twyver served in several management positions
at Nortel, most recently serving as president of the wireless networks group
from 1993 to 1996. Mr. Twyver serves as a director of several private
companies. Mr. Twyver holds a B.S. from the University of Saskatchewan.
Board Composition
Our bylaws currently provide for a board of directors consisting of nine
members. All directors hold office until the next annual meeting of our
stockholders and until their successors have been duly elected and qualified.
Our officers 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 Scot Jarvis, Jennifer Gill Roberts
and David Twyver. The audit committee reviews the results and scope of the
audit and other services provided by our independent auditors.
The members of the compensation committee are Bandel Carano, David Hathaway
and Scot Jarvis. The compensation committee reviews and approves the
compensation and benefits for our executive officers, administers our stock
purchase and stock option plans and makes recommendations to the board of
directors regarding such matters.
Board Compensation
Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors, except for Bruce Edwards, Scot
Jarvis and David Twyver who each receive $1,000 for each board meeting attended
and $500 for each committee meeting attended. Directors who are our employees
are eligible to participate in the 1995 Stock Option Plan, the 1998 Stock
Option Plan, the 2000 Stock Option Plan and the 2000 Employee Stock Purchase
Plan. Directors who are not our employees are eligible to participate in the
1998 Amended and Restated Directors' Stock Option Plan. See "Stock Plans."
Compensation Committee Interlocks and Insider Participation
No member of the compensation committee has at any time been an officer or
employee of ours or any subsidiary of ours. See "Certain Relationships and
Related Transactions" for a description of certain transactions and
relationships between us and Bandel Carano, Bruce Edwards, David Hathaway,
Jennifer Gill Roberts and Scot Jarvis and entities affiliated with them.
43
<PAGE>
Executive Compensation
The following table sets forth information concerning compensation awarded
to, earned by or paid to our chief executive officer and our four other most
highly compensated executive officers whose total cash compensation exceeded
$100,000 during the year ended December 31, 1999 (collectively, our "Named
Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation Long-Term Compensation
------------------ ---------------------------
Securities
Underlying All Other
Name and Principal Position Salary Bonus (1) Options Compensation (2)
- --------------------------- -------- --------- ---------- ----------------
<S> <C> <C> <C> <C>
Robert H. Hunsberger, President
and Chief Executive Officer... $270,766 $12,150 66,666 $ 912
Richard P. Henderson, Vice
President of Sales
and Marketing................. 159,539 80,686 10,000 262
Victor K. Liang, Senior Vice
President, GSM
Products Group................ 190,263 4,309 86,666 567
Douglas O. Reudink, Chairman
and Chief Technology Officer.. 175,488 7,875 33,333 2,364
Martin J. Feuerstein, Vice
President of
Product Development........... 139,604 21,075 30,000 251
</TABLE>
- --------
(1) Bonus represents the amount earned by the employee in 1999 and includes
commissions.
(2) Consists of life insurance premiums paid by us.
The following table sets forth information for each of our Named Executive
Officers concerning stock options granted to them during the fiscal year ended
December 31, 1999.
Option Grants in Fiscal Year 1999
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percentage of Potential Realizable Annual Rates of Stock
Shares Total Options Value at Midrange of Price Appreciation for
Underlying Granted to Exercise Assumed Initial Option Term(5)
Options Employees Price per Expiration Offering Price -----------------------
Name Granted(1) in 1999(2) Share(3) Date(4) of $12.00 5% 10%
- ---- ---------- ------------- --------- ---------- -------------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert H. Hunsberger.... 66,666 4.8% $6.75 6/22/09 $349,997 $ 853,107 $ 1,624,978
Richard P. Henderson.... 10,000 0.7% 6.75 6/22/09 52,500 127,967 243,749
Victor K. Liang......... 26,666 1.9% 6.75 6/22/09 139,997 341,238 649,981
60,000 4.2% 6.75 5/19/09 315,000 767,804 1,462,494
Douglas O. Reudink...... 33,333 2.4% 6.75 6/22/09 174,998 426,554 812,489
Martin J. Feuerstein.... 10,000 0.7% 6.75 5/19/09 52,500 127,967 243,749
20,000 1.4% 6.75 6/22/09 105,000 255,935 487,498
</TABLE>
- --------
(1) Each of the above options was granted pursuant to our 1998 Stock Option
Plan.
(2) In the last fiscal year, we granted options to employees to purchase an
aggregate of 1,386,736 shares.
(3) In determining the fair market value of our common stock, our board of
directors considered factors such as our financial condition and business
prospects, our operating results, the absence of a market for our common
stock and the risks normally associated with companies comparable to us.
(4) Options granted on June 22, 1999 and expiring on June 22, 2009 vest 50%
upon the effectiveness of this offering and the remaining 50% vests one
year from the effective date of this offering. Those options granted on
May 19, 1999 vest 25% one year from date of grant and the remaining 75%
vest monthly over three years.
44
<PAGE>
(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices.
These figures are based on an assumed public offering price of $12.00 per
share.
Option Grants in the First Quarter of 2000
The following table provides certain information concerning the number and
value of options granted to our Named Executive Officers and Stuart W.
Fuhlendorf in the first quarter of 2000.
<TABLE>
<CAPTION>
Percentage of Potential Realizable
Total Options Value at Assumed
Number of Granted to Potential Realizable Annual Rates of Stock
Shares Employees in Exercise Value at Midrange of Price Appreciation
Underlying the First Price Assumed Initial for Option Term(4)
Options Quarter of Per Expiration Offering Price ---------------------
Name Granted(1) 2000(2) Share(3) Date of $12.00 5% 10%
- ---- ---------- ------------- -------- ---------- -------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert H. Hunsberger.... 166,666 18% $ 6.00 1/20/10 $999,996 $2,257,780 $4,187,468
Richard P. Henderson.... 10,000 1% 6.00 1/20/10 60,000 135,467 251,249
Victor K. Liang......... -- -- -- -- -- -- --
Douglas O. Reudink...... -- -- -- -- -- -- --
Martin J. Feuerstein.... 13,333 1% 6.00 1/20/10 80,000 180,617 334,988
Stuart W. Fuhlendorf.... 310,000 33% 12.00 3/27/10 0 2,339,488 5,928,722
</TABLE>
- --------
(1) Each of the above options was granted pursuant to our 1998 Stock Option
Plan.
(2) In the first quarter of 2000, we granted options to employees to purchase
an aggregate of 928,825 shares.
(3) In determining the fair market value of our common stock, our board of
directors considered factors such as our financial condition and business
prospects, our operating results, the absence of a market for our common
stock and the risks normally associated with companies comparable to us.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices.
These figures are based on an assumed public offering price of $12.00 per
share.
Option Exercises in Last Fiscal Year and Year-End Option Values
There were no option exercises by our Named Executive Officers in 1999. The
following table provides information concerning the number and value of
unexercised options held by each of our Named Executive Officers as of December
31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money Options
Unexercised Options at at
December 31, 1999(1) December 31, 1999(2)
------------------------ ---------------------
Name Vested Unvested Vested Unvested
- ---- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Robert H. Hunsberger.............. 356,500 304,166 $4,012,875 $2,979,125
Richard P. Henderson.............. 55,554 61,112 499,992 512,508
Victor K. Liang................... 46,040 240,626 399,221 55,780
Douglas O. Reudink................ -- 33,333 -- 175,000
Martin J. Feuerstein.............. 35,110 61,556 221,620 255,560
</TABLE>
- --------
(1) Certain options granted under the 1998 Stock Option Plan and 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 us with respect to any unvested shares. The
unvested shares are subject to a right of first refusal in favor of
Metawave which lapses over time.
45
<PAGE>
(2) Based on an assumed initial public offering price of $12.00 per share,
minus the exercise price, multiplied by the number of shares underlying the
option.
Severance Arrangements
We have entered into severance arrangements with Douglas O. Reudink, chief
technical officer, Robert H. Hunsberger, president and chief executive officer,
Stuart W. Fuhlendorf, senior vice president and chief financial officer,
Richard P. Henderson, vice president of sales and marketing, Victor K. Liang,
senior vice president, GSM products group, and Andrew Merrill, vice president
of customer operations.
On July 7, 1995, in connection with the Series A preferred stock financing,
we entered into an agreement with Dr. Reudink which provides that if we were to
terminate his employment without cause after July 7, 1996, we 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 us.
On June 27, 1997, in connection with the employment of Mr. Hunsberger, we
entered into an arrangement with Mr. Hunsberger which provides that if we were
to terminate his employment without cause, we 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 October 29, 1997, in connection with the employment of Mr. Henderson, we
entered into an arrangement with Mr. Henderson which provides that if we were
to terminate his employment without cause, we 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, we entered
into an arrangement with Mr. Liang that provides that if we were to terminate
his employment without cause within the first two years of his employment, we
would be obligated to make a lump-sum payment to Mr. Liang equal to six months
of his then-current base salary.
On July 12, 1999, in connection with the employment of Mr. Merrill, we
entered into an agreement with Mr. Merrill that provides that if we were to
terminate his employment without cause, we would be obligated to pay Mr.
Merrill six months of his then-current base salary.
On March 10, 2000, in connection with the employment of Mr. Fuhlendorf, we
entered into an agreement with Mr. Fuhlendorf that provides that if we were to
terminate his employment without cause, we would be obligated to make a lump
sum payment to Mr. Fuhlendorf equal to six months of his then-current base
salary.
Stock Plans
2000 Stock Plan. Our 2000 stock option plan provides for the grant of
incentive stock options to employees, including employee directors, and of
nonstatutory stock options and stock purchase rights to employees, directors
and consultants. The purposes of the 2000 stock plan are to attract and retain
the best available personnel, to provide additional incentives to our employees
and consultants and to promote the success of our business. The 2000 plan was
originally adopted by our board of directors in February 2000 and was approved
by our stockholders in April 2000. The 2000 plan provides for this issuance of
options and rights to purchase up to 1,333,333 shares of our common stock, plus
an automatic annual increase on the first day of each of our fiscal years
beginning in 2001 through 2009 equal to the lesser of 2,000,000 shares, 5% of
our outstanding common stock on the last day of the immediately preceding
fiscal year, or a lesser number of shares as our board of directors determines.
Unless terminated earlier by the board of directors, the 2000 plan will
terminate ten years following its effective date.
46
<PAGE>
The 2000 plan may be administered by the board of directors or a committee
of the board, each known as the administrator. The administrator determines the
terms of options and stock purchase rights granted under the 2000 plan,
including the number of shares subject to the award, the exercise or purchase
price, and the vesting and/or exercisability of the award and any other
conditions to which the award is subject. No employee may receive awards for
more than 1,333,333 shares under the 2000 plan in any fiscal year. Incentive
stock options granted under the 2000 plan must have an exercise price of at
least 100% of the fair market value of the common stock on the date of grant.
The plan does not impose restrictions on the exercise or purchase price
applicable to nonstatutory stock options and stock purchase rights, although we
expect that nonstatutory stock options and stock purchase rights granted to our
Chief Executive Officer and our four other most highly compensated officers
will generally equal at least 100% of the grant date fair market value. Payment
of the exercise or purchase price may be made in cash or any other
consideration allowed by the administrator.
With respect to options granted under the 2000 plan, the administrator
determines the term of options, which may not exceed 10 years. Generally, an
option is nontransferable other than by will or the laws of descent and
distribution, and may be exercised during the lifetime of the optionee only by
such optionee. In certain circumstances, the administrator has the discretion
to grant nonstatutory stock options with limited transferability rights. Stock
options are generally subject to vesting, meaning that the optionee earns the
right to exercise the option over a specified period of time only if he or she
continues to provide services to Metawave over that period. Shares of stock
issued pursuant to stock purchase rights granted under the 2000 plan are
generally subject to a repurchase right exercisable by Metawave upon the
termination of the holder's employment or consulting relationship with us for
any reason (which lapses in accordance with the terms of the stock purchase
right determined by the administrator at the time of grant). In addition, the
2000 stock plan provides that options to purchase vested shares will terminate,
and we will have the right to repurchase vested shares issued under the plan,
if we terminate a participant's employment or consulting relationship with us
for cause.
If we are acquired, we would expect that options and stock purchase rights
outstanding under the 2000 plan at the time of the transaction would be assumed
or replaced with substitute options by our acquiror. If our acquiror did not
assume or replace outstanding awards, then the vesting of these awards would
accelerate so that the holder of an outstanding award would be able to exercise
and retain the number of shares that he or she would have vested in had he or
she continued working for us for another 12 months (if the holder had been
employed by us for less than 2 years at the time of the acquisition) or for
another 24 months (if the holder had been employed for us for 2 years or more
at the time of the acquisition) from the acquisition date. In addition, if our
acquiror assumed or replaced outstanding awards at the time of the acquisition
and a plan participant holding assumed or replaced awards experienced an
involuntary termination of his or her employment or consulting relationship
within six months following the transaction, then the vesting of outstanding
options or stock held by any such person who is not a Section 16 reporting
person at the time of the acquisition would accelerate as to 12 or 24 months
(depending upon the duration of the person's service relationship with us and
our acquiror as described above), and as to all the shares underlying an award
held by a person who is a Section 16 reporting officer at the time of the
acquisition. Outstanding awards, the number of shares remaining available for
issuance under the 2000 plan, the maximum number of shares subject to awards
that may be granted to an employee during a year and the fixed number in the
plan's evergreen formula will adjust in the event of a stock split, stock
dividend or other similar change in our capital stock. The administrator has
the authority to amend or terminate the 2000 plan, but no action may be taken
that impairs the rights of any holder of an outstanding option or stock
purchase right without the holder's consent. In addition, we must obtain
stockholder approval of amendments to the plan as required by applicable law.
1995 and 1998 Stock Option Plans. In addition to our 2000 stock plan, we
have two prior employee stock plans, our Third Amended and Restated 1995 Stock
Option Plan and our 1998 Stock Option Plan. These plans provide for the grant
of incentive stock options to employees, including employee directors, and the
grant of nonstatutory stock options to employees, consultants and directors.
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<PAGE>
Our 1995 stock plan was originally adopted by our board of directors in
August 1995 and approved by our stockholders in January 1996. It has been
amended several times since its adoption such that there are currently
2,766,666 shares of common stock reserved for issuance under this plan. As of
March 31, 2000, options to purchase 1,794,284 shares of common stock at a
weighted average exercise price of $4.69 were outstanding, 919,023 shares with
a weighted average purchase price of $0.49 have been issued upon exercise of
options and 53,359 shares remain available for issuance under our 1995 plan.
Unless terminated earlier, the 1995 plan will terminate in August 2005.
Our 1998 stock option plan was originally adopted by our board of directors
in May 1998 and approved by our stockholders in September 1998. An aggregate of
1,763,369 shares of common stock has been reserved for issuance under the 1998
plan. As of March 31, 2000, options to purchase 1,562,005 shares of common
stock at a weighted average exercise price of $8.33 were outstanding, 3,482
shares with a weighted average exercise price of $6.66 have been issued upon
exercise of options and 197,882 shares remain available for future grant.
Unless terminated earlier, this plan will terminate in May 2008.
The terms of awards issued under our 1995 and 1998 plans are generally the
same as those that may be issued under our 2000 stock plan, except with respect
to the following features. Neither the 1995 plan nor the 1998 plan provides for
the issuance of stock purchase rights to employees and consultants. The 1998
plan provides that, as of our first stockholders meeting following the third
calendar year after the year in which this offering takes place, the maximum
number of shares that may be granted to any individual employee during a fiscal
year is 566,666 shares. The 1995 plan does not impose an annual limitation on
the number of shares of stock subject to options that may be granted to any
individual employee during a fiscal year. Under both plans, generally an option
is nontransferable other than by will or the laws or descent or distribution.
In addition, the 1995 Stock Option Plan does not provide for forfeiture of
vested options or stock upon a termination of the holder's service relationship
with us for cause.
2000 Employee Stock Purchase Plan. Our 2000 employee stock purchase plan was
adopted by the board of directors in February 2000 and was approved by our
stockholders in April 2000. A total of 233,333 shares of common stock has been
reserved for issuance under the 2000 purchase plan, none of which have been
issued as of the date of this offering. The number of shares reserved for
issuance under the 2000 purchase plan will be subject to an automatic annual
increase on the first day of each of our fiscal years beginning in 2001 through
2010 equal to the lesser of 266,666 shares, 1% of our outstanding common stock
on the last day of the immediately preceding fiscal year or a lesser number of
shares as the board of directors determines. The 2000 purchase plan becomes
effective upon the date of this offering. Unless terminated earlier by the
board of directors, this plan will terminate in February 2020.
The 2000 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, will be implemented by a series of overlapping
offering periods of approximately 24 months' duration, with new offering
periods (other than the first offering period) commencing on May 1 and November
1 of each year. Each offering period will generally consist of four consecutive
purchase periods of six months' duration, at the end of which an automatic
purchase will be made for participants. The initial offering period is expected
to commence on the date of this offering and end on April 30, 2002; the initial
purchase period is expected to begin on the date of this offering and end on
October 31, 2000, with subsequent purchase periods ending on April 30, 2001,
October 31, 2001 and April 30, 2002. The 2000 purchase plan will be
administered by the board of directors or by a committee appointed by the
board. Our employees (including officers and employee directors), or of any
majority-owned subsidiary designated by the board, are eligible to participate
in the 2000 purchase plan if they are employed by us or a designated subsidiary
for at least 20 hours per week and more than five months per year. The 2000
purchase plan permits eligible employees to purchase common stock through
payroll deductions at a rate of not more than 15% of an employee's
compensation. The purchase price is equal to the lower of 85% of the fair
market value of the common stock at the beginning of each offering period or at
the end of each purchase period, subject to certain adjustments as provided in
the plan. Employees may end their participation in the 2000 purchase plan at
any time during an offering period, and participation
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<PAGE>
ends automatically on termination of employment. No employee may purchase more
than 1,333 shares of common stock under the 2000 Purchase Plan in any one
purchase period.
If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the 2000
purchase plan will be assumed or an equivalent right substituted by our
acquiror. If our acquiror did not agree to assume or substitute stock purchase
rights, any offering period and purchase period then in progress would be
shortened and a new exercise date occurring prior to the closing of the
transaction would be set. Outstanding awards, shares remaining available for
issuance under the plan, the fixed number in the plan's evergreen formula, and
the maximum number of shares that may be purchased during a six-month purchase
period will each adjust in the event of a stock split, stock dividend or other
similar change in our capital stock. Our board of directors has the power to
amend or terminate the 2000 purchase plan and to change or terminate offering
periods as long as such action does not adversely affect any outstanding rights
to purchase stock thereunder. However, the board of directors may amend or
terminate the 2000 purchase plan or an offering period even if it would
adversely affect outstanding options in order to avoid our incurring adverse
accounting charges.
Amended and Restated 1998 Directors' Stock Option Plan. The 1998 directors'
stock option was adopted by the board of directors in February 1998 and
approved by our stockholders in April 1998. It was amended in February 2000 by
our board of directors to increase the total number of shares of common stock
reserved for issuance under the plan to 466,666 shares. This amendment will be
submitted to our stockholders for approval prior to the date of this offering.
As of March 31, 2000, options to purchase 133,334 shares of common stock with a
weighted average exercise price of $6.50 were outstanding and 16,666 shares had
been purchased upon exercise of options issued under the plan with a weighted
average price of $7.50 and 316,666 shares remain available for future grant.
The directors' plan provides for the grant of nonstatutory stock options to
our nonemployee directors. Prior to the date of this offering, option grants
made under the 1998 directors' plan were made on a discretionary basis by our
board of directors. Following this offering, the plan provides for automatic
formula grants to our nonemployee directors. The directors' plan is designed to
work after the date of this offering automatically without administration;
however, to the extent administration is necessary, it will be performed by our
board of directors. To the extent they arise, it is expected that conflicts of
interest will be addressed by abstention of any interested director from both
deliberations and voting regarding matters in which a director has a personal
interest. Unless terminated earlier, the directors' plan will terminate in
February 2008.
The directors' plan provides that each person who becomes a nonemployee
director after the completion of this offering will be granted a nonstatutory
stock option to purchase 16,666 shares of common stock on the date on which
such individual first becomes a member of our board of directors. In addition,
on the date of each annual stockholders meeting, each nonemployee director who
will continue serving on the board following the meeting and who has been a
director of Metawave for at least six months prior to the meeting date will be
granted an option to purchase 6,666 shares of common stock.
All options granted under the directors' plan will have a term of ten years
and an exercise price equal to the fair market value of on the date of grant
and will be transferable only to members of a directors' immediate family and
to trusts and other entities for the benefit their family members. Options
granted under the directors' plan to new nonemployee directors following this
offering will vest as to 25% of the shares underlying the option on the first
anniversary of the date of the option grant and as to 1/48th of the shares each
month after the first anniversary so that these options will be fully vested on
the fourth anniversary of the grant date. Options granted to our nonemployee
directors at the time of each annual stockholders meeting following this
offering will vest as to 1/36th of the shares underlying the option so that
these options will be fully vested on the third anniversary of the grant date.
If Metawave determines that a director has engaged in fraud, embezzlement or
similar acts against us, or if a director has disclosed information that is
confidential to Metawave or engaged in any conduct constituting unfair
competition against us, we have the right to suspend or terminate that
director's right to exercise an option under the directors' plan.
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<PAGE>
If we are acquired by another corporation, we would expect each option
outstanding under our 1998 directors' plan to be assumed or replaced with
equivalent options by our acquiror. If our acquiror did not assume or replace
outstanding options, then the vesting of outstanding awards would accelerate so
that nonemployee directors holding options would be able to exercise and retain
the number of shares that he or she would have vested in had he or she
continued serving as a member of our board of directors for us for another 12
months (if the director had been a member of our board us for less than 2 years
at the time of the acquisition) or for another 24 months (if he or she had been
a member of our board for 2 years or more at the time of the acquisition)
following the acquisition date. Outstanding awards, the number of shares
remaining available for grant under the plan, and the number of shares subject
to the automatic director grants described above will each adjust in the event
of a stock split, stock dividend or other similar change in our capital stock.
Our board of directors may amend or terminate the directors' plan as long as
such action does not adversely affect any outstanding option. We will obtain
stockholder approval for any amendment to the plan to the extent required by
applicable law.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by the Delaware General Corporation Law. Delaware law
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 for:
. any breach of the director's duty of loyalty to us or to our
stockholders,
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
. unlawful payments of dividends or unlawful stock repurchases or
redemptions, or
. any transaction from which a director derives an improper personal
benefit.
Our bylaws provide that we shall indemnify our directors and officers and
may indemnify our other employees and agents to the fullest extent permitted by
law. We believe that indemnification under our bylaws covers at least
negligence and gross negligence on the part of an indemnified party. Our bylaws
also permit us 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
Metawave upon an undertaking by such party to repay such advances if it is
ultimately determined that such party is not entitled to indemnification. This
advancement of expenses is subject to authorization by the board of directors
in the case of non-executive officers, employees and agents.
We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us, among other things, to
indemnify the director or officer against expenses, including attorney's fees,
judgments, fines and settlements paid by the individual in connection with any
action, suit or proceeding arising out of his or her status or service as one
of our directors or officers 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 us. We believe that our certificate of
incorporation and bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers. We also
maintain directors' and officers' liability insurance.
At present we are not aware of any pending litigation or proceeding
involving any of our directors, officers, employees or agents where
indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Sales of Equity Securities
Certain stock option grants to our directors and executive officers are
described herein under the caption "Management--Executive Compensation."
Since July 1995, we have issued, in private placement transactions, shares
of preferred stock as follows:
. an aggregate of 5,500,000 shares of Series A preferred stock at $1.00 per
share in July 1995,
. an aggregate of 2,711,113 shares of Series B preferred stock at $3.375
per share in May 1996,
. an aggregate of 2,491,880 shares of Series C preferred stock at $6.16 per
share in October and November 1996,
. an aggregate of 2,397,727 shares of Series D preferred stock at $8.00 per
share in August 1997, and
. an aggregate of 18,276,151 shares of Series E preferred stock at $5.00
per share in December 1998, January, April and June 1999.
Upon completion of this offering, each share of Series A and Series B
preferred stock will convert into 0.66667 shares of our common stock, each
share of Series C preferred stock will convert into 0.87190 shares of our
common stock, each share of Series D preferred stock will convert into 0.96096
shares of our common stock and each share of Series E preferred stock will
convert into 0.95238 shares of our common stock.
Listed below are those directors, executive officers and five percent
stockholders who have made equity investments in Metawave during the last
three fiscal years. We believe 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 we could have obtained from
unaffiliated third parties.
<TABLE>
<CAPTION>
Series A Series B Series C Series D Series E
Common Preferred Preferred Preferred Preferred Preferred
Investor(1) Stock Stock(2) Stock(2) Stock(2) Stock(2) Stock(2)
- ----------- ------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Entities affiliated with
Venrock Associates(3).. -- 1,222,222 592,592 283,086 175,654 589,164
Entities affiliated with
Oak Investment
Partners(4)............ -- 1,222,222 592,592 283,086 175,654 5,351,064
Entities affiliated with
The Sevin Rosen
Funds(5)............... -- 1,218,888 583,704 283,086 175,654 589,164
Entities affiliated with
MeriTech Capital
Partners L.P........... -- -- -- -- -- 4,761,900
General Motors
Investment Management
Corporation............ -- -- -- -- -- 3,333,330
Entities associated with
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated........... -- -- -- -- -- 2,380,950
Douglas O. Reudink...... 906,153 -- -- -- -- --
Jennifer Gill
Roberts(5)............. -- 3,333 4,986 -- -- --
</TABLE>
- --------
(1) Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."
(2) Shown on an as-converted basis.
(3) David R. Hathaway, a director, is a general partner of Venrock Associates.
(4) Bandel L. Carano, a director, is a general partner of Oak Investment
Partners.
(5) Jennifer Gill Roberts, a director, is a general partner of the Sevin Rosen
Funds. In addition to the equity investment made by entities affiliated
with Sevin Rosen Funds, (i) Ms. Roberts purchased shares of Series A and
Series B preferred stock for her own account which convert to 3,333 and
4,986 shares of common stock, respectively, and (ii) Steven L. Domenik, a
general partner of Sevin Rosen, purchased shares of Series B
preferred stock for his own account which convert to 3,950 shares of
common stock.
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<PAGE>
On April 3, 1998, Dr. Reudink sold 20,513 shares of common stock at a price
of $9.75 per share to Cedar Grove Investment L.L.C., a limited liability
corporation which is managed by Mr. Scot Jarvis, one of our directors. On April
17, 1998, Dr. Reudink sold 13,333 shares of common stock at a price of $9.75
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, we 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 Technologies, Inc. of which Bruce Edwards, one
of our directors, is president and chief executive officer. In addition, we
issued warrants to purchase an aggregate of 537,500 shares of our Series D
preferred stock at a purchase price of $0.01 per share. The number of shares of
Series D preferred stock issuable upon exercise of these warrants was adjusted
in December 1998 in connection with our sale of Series E preferred stock. On
April 28, 1999 all outstanding principal and accrued interest on these notes
were repaid in full. On April 26, 1999 all of the warrants issued in connection
with these notes were exercised and 620,702 shares of Series D preferred stock
were issued. Powerwave purchased $2,500,000 in aggregate principal amount of
the 13.75% Senior Secured Bridge Notes and was issued a warrant to purchase up
to an aggregate of 46,336 shares of Series D preferred stock at an exercise
price of $0.01 per share which was exercised in full in April 1999 for 53,509
shares of Series D preferred stock as a result of certain adjustments.
Powerwave Technologies, Inc. is currently our sole supplier of linear power
amplifiers, a component in our smart antenna systems. From January 1, 2000 to
March 31, 2000 and from January 1, 1999 to December 31, 1999, we purchased a
total of $2.8 million and $6.4 million, respectively of linear power amplifiers
and related components from Powerwave. Pursuant to a manufacturing agreement,
Powerwave will manufacture and sell to us 100% of our requirements for linear
power amplifiers that Powerwave manufactures.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us regarding beneficial
ownership of our common stock as of March 31, 2000, after giving effect to the
conversion of all outstanding shares of preferred stock, and as adjusted to
reflect the sale of common stock offered by this prospectus, as to:
. each person, or group of affiliated or associated persons, who owns
beneficially more than 5% of the outstanding shares of our common stock,
. each of our directors,
. each of our Named Executive Officers, and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the address of each stockholder is: c/o Metawave
Communications Corporation, 10735 Willows Road NE, P.O. Box 97069, Redmond, WA
98073-9769.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after March
31, 2000 are deemed outstanding, while such shares are not deemed outstanding
for purposes of computing percentage ownership of any other person. The percent
of beneficial ownership for each stockholder is based on 30,594,478 shares of
common stock outstanding prior to this offering, on an as converted basis, plus
an additional 6,250,000 shares of common stock outstanding after this offering.
Unless otherwise indicated in the footnotes below, the persons and entities
named in the table have sole voting and investment power with respect to all
shares beneficially owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Percent of Shares
Outstanding
Shares -----------------
Beneficially Prior to After
Name and Address Owned Offering Offering
- ---------------- ------------ -------- --------
<S> <C> <C> <C>
Oak Investment Partners(1)................... 7,705,730 25.2% 20.9%
525 University Avenue, Suite 1300
Palo Alto, CA 94301-1902
Venrock Associates(2)........................ 2,937,823 9.6 8.0
30 Rockefeller Plaza
New York, NY 10112-0184
The Sevin Rosen Funds(3)..................... 2,931,602 9.6 8.0
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301-1542
MeriTech Capital Partners(4)................. 4,761,899 15.6 12.9
90 Middlefield Road, Suite 200
Menlo Park, CA 94025
General Motors Investment Management
Corporation................................. 3,333,330 10.9 9.0
767 Fifth Avenue(5)
New York, New York 10153
Merrill Lynch, Pierce, Fenner & Smith
Incorporated(6)............................. 2,380,948 7.8 6.5
World Financial Center, South Tower
New York, New York 10080-6123
Douglas O. Reudink(7)........................ 851,484 2.8 2.3
Robert H. Hunsberger(8)...................... 642,592 2.1 1.7
Victor K. Liang(9)........................... 75,832 * *
Richard Henderson(10)........................ 112,222 * *
Martin J. Feuerstein(11)..................... 59,269 * *
Bandel L. Carano(1).......................... 7,705,730 25.2 20.9
Jennifer Gill Roberts(12).................... 2,944,010 9.6 8.0
David R. Hathaway(2)......................... 2,937,823 9.6 8.0
Scot B. Jarvis(13)........................... 70,512 * *
Bruce C. Edwards(14)......................... 16,666 * *
David A. Twyver(15).......................... 16,666 * *
All directors and executive officers as a
group (14 persons)(16)...................... 16,730,838 51.3 43.0
</TABLE>
- --------
* Represents less than 1% ownership.
Footnotes continued on following page.
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<PAGE>
(1) Includes 2,876,710 shares held by Oak Investment Partners VI, L.P.,
4,671,424 shares held by Oak Investment Partners VIII, L.P., 67,120
shares held by Oak VI Affiliates Fund, L.P. and 90,476 shares held by
Oak VIII Affiliates Fund, L.P. Bandel L. Carano, one of our directors,
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.
(2) Includes 1,715,298 shares held by Venrock Associates and 1,222,531
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.
(3) Includes 10,146 shares held by Sevin Rosen Bayless Management Co.,
1,998,944 shares held by Sevin Rosen Fund IV L.P., 884,694 shares held
by Sevin Rosen Fund V L.P., 37,822 shares held by Sevin Rosen V
Affiliates Fund L.P.
(4) Includes 4,685,709 shares held by MeriTech Capital Partners and 76,190
shares held by MeriTech Capital Affiliates, L.P.
(5) Includes 3,333,330 shares held by Chase Manhattan Bank, as trustee for
First Plaza Group Trust, General Motors Investment Management
Corporation.
(6) Includes 952,380 shares held by ML IBK Positions, Inc, 599,999 shares
held by Merrill Lynch KECALP L.P. 1997, 657,142 shares held by Merrill
Lynch KECALP L.P. 1999, 114,285 shares held by Merrill Lynch KECALP
International L.P. 1997 and 57,142 shares held by Merrill Lynch KECALP
International L.P. 1999.
(7) Includes 16,665 shares issuable upon the exercise of immediately
exercisable options held by Dr. Reudink within 60 days of March 31,
2000, none of which are subject to our right of repurchase that lapses
over time and includes 16,666 shares held in trust for Dr. Reudink's
son.
(8) Includes 642,592 shares issuable upon the exercise of immediately
exercisable options held by Mr. Hunsberger within 60 days of March 31,
2000, 200,001 shares of which are subject to our right of repurchase
that lapses over time.
(9) Includes 75,966 shares issuable upon the exercise of immediately
exercisable options held by Mr. Liang within 60 days of March 31, 2000,
8,333 shares of which are subject to our right of repurchase that lapses
over time.
(10) Includes 112,222 shares issuable upon the exercise of immediately
exercisable options held by Mr. Henderson within 60 days of March 31,
2000, 44,446 shares of which are subject to our right of repurchase that
lapses over time.
(11) Includes 53,936 shares issuable upon the exercise of immediately
exercisable options held by Mr. Feuerstein within 60 days of March 31,
2000, 3,294 shares of which are subject to our right of repurchase that
lapses over time.
(12) Includes the shares referenced in footnote (3) and 8,272 shares held by
Ms. Roberts. Jennifer Gill Roberts, one of our directors, 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 the shares referenced in footnote (3), except to
the extent of her pecuniary interest in such shares.
(13) Includes 70,511 shares owned by Cedar Grove Investments, LLC and Cedar
Grove Partners LLC, 8,333 shares of which are subject to our right of
repurchase that lapses over time. Mr. Jarvis, a managing member of each
Cedar Grove entity, disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interest in such shares.
(14) Includes 16,666 shares issuable upon the exercise of immediately
exercisable options held by Mr. Edwards within 60 days of March 31,
2000.
(15) Includes 16,666 shares issuable upon the exercise of immediately
exercisable options held by Mr. Twyver within 60 days of March 31, 2000.
(16) Includes shares referred to in footnotes (7)-(15) and 1,072,226 shares
issuable upon exercise of outstanding options exercisable within 60 days
of March 31, 2000 held by other officers.
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<PAGE>
DESCRIPTION OF SECURITIES
Following the closing of this offering, our authorized capital stock will
consist of 150,000,000 shares of common stock, $0.0001 par value, and
10,000,000 shares of preferred stock, $0.0001 par value. As of March 31, 2000,
there were 2,621,571 shares of common stock outstanding that were held of
record by approximately 136 stockholders. There will be 36,844,478 shares of
common stock outstanding (assuming no exercise of outstanding options after
March 31, 2000) after giving effect to this offering and conversion of all
outstanding preferred shares.
Common Stock
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.
In the event of a liquidation, dissolution or winding up of Metawave, 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.
Preferred Stock
Upon the closing of this offering, the board of directors is authorized to
issue up to 10,000,000 shares of preferred stock in one or more series and to
determine the powers, preferences and rights and the qualifications,
limitations or restrictions granted to or imposed upon any wholly unissued
series of undesignated preferred stock, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any
series or the designation of such series, without any further vote or action by
the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring
or preventing a change in control of Metawave 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 we
currently have no plans to issue any shares of preferred stock.
Warrants
As of March 31, 2000, we had warrants outstanding to purchase an aggregate
of 20,833 shares of common stock, 65,416 shares of Series A preferred stock,
convertible into 43,610 shares of common stock, 19,999 shares of Series B
preferred stock, convertible into 13,332 shares of common stock, 34,090 shares
of Series C preferred stock, convertible into 29,723 shares of common stock and
4,375 shares of Series D preferred stock, convertible into 4,205 shares of
common stock.
In connection with a equipment lease line entered into with Transamerica
Business Credit Corporation in May 1999, we issued a warrant to purchase up to
an aggregate of 20,833 shares of common stock at an exercise price of $6.75 per
share. The warrant expires on May 19, 2004.
In connection with an equipment lease line entered into in December 1995, we
issued a warrant to purchase up to an aggregate of 48,750 shares of Series A
preferred stock to Comdisco, Inc. at an exercise price of $2.1875 per share,
convertible into 32,500 shares of common stock. The warrant expires on December
13, 2002. In connection with a second equipment lease line entered into in
April 1996, we issued a warrant to purchase up to an aggregate of 16,666 shares
of Series A preferred stock to Comdisco at an exercise price of $2.1875 per
share, convertible into 11,110 shares of common stock. The warrant expires on
April 9, 2003. In connection with a third equipment lease line entered into in
August 1996, we issued a warrant to purchase up to an aggregate of 19,999
shares of Series B preferred stock to Comdisco at an exercise price of
55
<PAGE>
$4.7675 per share, convertible into 13,332 shares of common stock. The warrant
and the extension expire on the later of August 20, 2003 or three years
following the effective date of this offering. In connection with a fourth
equipment lease line entered into in June 1997, we issued a warrant to purchase
up to an aggregate of 34,090 shares of Series C preferred stock to Comdisco at
an exercise price of $6.16 per share convertible into 29,723 shares of common
stock. The warrant expires on the later of June 9, 2004 or 18 months following
the effective date of this offering.
Registration Rights of Certain Holders
The holders of 28,924,774 shares of common stock or certain of their
transferees are entitled to rights with respect to the registration of such
shares under the Securities Act. These rights are provided under the terms of
an agreement between us 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 we use our best efforts to register the
registrable securities for public resale, provided that the proposed aggregate
offering price is at least $7,500,000. No shares of common stock are being
registered on behalf of these holders in this offering. Furthermore, in the
event we elect to register any of our common stock for purposes of effecting
any public offering, the holders of registrable securities are entitled to
include their shares of common stock 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 us 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. In addition, we have agreed to indemnify the holders of
registration rights against liabilities under the Securities Act.
Anti-Takeover Provisions of Delaware and Washington Law and Charter Documents
We are subject to the provisions of Section 203 of the Delaware General
Corporate Law. 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 Metawave without further action by the
stockholders.
The laws of the State of Washington, where our principal executive offices
are located, impose restrictions on certain transactions between certain
foreign corporations and significant stockholders. Chapter 23B.19 of the
Washington Business Corporation Act, or 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:
. the corporation has a class of voting stock registered pursuant to
Section 12 or 15 of the Exchange Act,
56
<PAGE>
. the corporation's principal executive office is located in Washington,
and
. 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, we
anticipate this statute will apply to us. Depending upon whether we meet 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 Metawave.
In addition, upon completion of this offering, certain provisions of our
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 Metawave, which
could have an adverse effect on the market price of our common stock. Our 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 Metawave
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
10,000,000 shares of preferred stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of these shares without
any further vote or action by the stockholders. The rights of the holders of
the common stock will be subject to, and may be adversely affected by, the
rights of the holders of any preferred stock that may be issued in the future.
The issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of our outstanding voting stock, thereby delaying, deferring or preventing a
change in control of Metawave. 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. We have no present plan to issue shares
of preferred stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services L.L.C. and their number is (206) 674-3030.
Listing
Our common stock has been approved for listing on the Nasdaq National Market
under the trading symbol "MTWV."
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have outstanding 36,844,478 shares
of common stock, assuming no exercise of options after March 31, 2000. Of these
shares, the 6,250,000 shares sold in this offering will be eligible for resale
in transactions on the Nasdaq National Market without restriction pursuant to
exemptions under the Securities Act unless purchased by our "affiliates" as
that term is defined in Rule 144 of the Securities Act.
The remaining 30,594,478 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144 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 of our
directors and executive officers and certain other stockholders, holding in the
aggregate 16,730,838 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 without the prior written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated or us. 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 us or by Merrill Lynch, Pierce, Fenner & Smith Incorporated,
469,142 shares in addition to the 6,250,000 shares offered hereby will be
eligible for sale in the public market. Beginning 90 days after the effective
date of this offering, approximately 439,144 restricted shares will be eligible
for sale in the public market. Beginning 180 days after the effective date of
this offering, approximately 29,728,779 restricted shares, 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
42,587 shares will be eligible for sale.
<TABLE>
<CAPTION>
Days after Date Shares Eligible
of this Prospectus for Sale Comment
-------------------- --------------- -----------------------------------------
<C> <C> <S>
Upon effectiveness.. 6,250,000 Shares sold in offering
Upon effectiveness.. 469,142 Freely tradable shares salable under Rule
144(k) that are not subject to the lockup
91 days............. 439,144 Shares salable under Rules 701 and 144
and not subject to the lockup
181 days............ 29,728,779 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 our "affiliates", 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 us. In
addition, a person who is not deemed to have been an affiliate of us at any
time during the 90 days preceding a sale, and who has beneficially owned for at
least two years the shares proposed to be sold, would be entitled to sell such
shares under Rule 144(k) without regard to the requirements described above.
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,
we intend to file a registration statement under the Securities Act to register
shares to be issued pursuant to our employee benefit plans. As a result, any
options exercised under the 1995 stock option plan, the 1998 stock option plan,
the 2000 stock option plan, the 2000 director option plan, the 2000 employee
stock purchase plan or any other benefit plan after the effectiveness of such
registration statement will also be freely tradable in the public market,
except that shares
58
<PAGE>
held by affiliates will still be subject to the volume limitation, manner of
sale, notice and public information requirements of Rule 144 unless otherwise
resalable under Rule 701. As of March 31, 2000, there were outstanding options
for the purchase of 3,489,623 shares of our common stock under our employee
benefit plans.
Prior to this offering, there has been no public market for our securities.
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 our common
stock in the public market after the lapse of the restrictions described above
could adversely affect the prevailing market price and our ability to raise
equity capital in the future at a time and price which we deem 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 their shares under the Securities Act. Registration of those shares under
the Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for shares purchased by our
affiliates) immediately upon the effectiveness of such registration. 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 our common stock. If we were to
include in a registration initiated by us, any registrable securities pursuant
to the exercise of piggyback registration rights, such sales may have an
adverse effect on our ability to raise needed capital.
59
<PAGE>
UNDERWRITING
General
We intend to offer our common stock through a number of underwriters.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney and
U.S. Bancorp Piper Jaffray are acting as representatives of the underwriters
named below. Subject to the terms and conditions described in a purchase
agreement among us and the underwriters, we have agreed to sell to the
underwriters, and each of the underwriters severally and not jointly has agreed
to purchase from our company, the number of shares of common stock set forth
opposite its name below.
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................
Salomon Smith Barney...............................................
U.S. Bancorp Piper Jaffray Inc.....................................
Total............................................................
====
</TABLE>
The underwriters have agreed to purchase all of the shares sold under the
purchase agreement if any of these shares are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated. The closings for the sales of shares to be purchased by the
underwriters are conditioned on one another.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreements, such as the receipt by the underwriters
of officer's certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the public and to reject orders
in whole or in part.
Commissions and Discounts
The representatives have advised us that the underwriters propose initially
to offer the shares of common stock to the public at the initial public
offering price set forth on the cover page of this prospectus, and to certain
dealers at a price less a concession not in excess of $ per share of common
stock. The underwriters may allow, and such dealers may reallow, a discount not
in excess of $ per share of common stock to certain other dealers. After
the initial public offering, the public offering price, concession and discount
may change.
The following table shows the per share and total public offering price, the
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. The information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- ------
<S> <C> <C> <C>
Public offering price............................... $ $ $
Underwriting discount............................... $ $ $
Proceeds, before expenses, to Metawave.............. $ $ $
</TABLE>
The expenses of the offering, not including the underwriting discount, are
estimated at $1,000,000 and are payable by Metawave.
60
<PAGE>
Over-allotment Option
We have 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
937,500 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 we 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 6,250,000 shares are being offered.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 7% of the shares offered by this prospectus for
sale to some of our employees, distributors, suppliers, business associates and
related persons. If these persons purchase reserved shares, this will reduce
the number of shares available for sale to the general public. Any reserved
shares that are not orally confirmed for purchase within one day of the pricing
of this offering will be offered by the underwriters to the general public on
the same terms as the other shares offered by this prospectus.
No Sales of Similar Securities
We, our executive officers and directors and most of our existing
stockholders have agreed not to directly or indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend or otherwise dispose of or
transfer any shares of our common stock or securities convertible into
or exchangeable or exercisable for or repayable with our common stock,
whether now owned or later acquired by the person executing the
agreement or with respect to which the person executing the agreement
later acquires the power of disposition, or file any registration
statement under the Securities Act relating to any shares of our common
stock (other than shares sold in this offering or hereafter acquired in
the public market), or
. enter into any swap or other agreement or any other agreement that
transfers, in whole or in part, the economic consequence of ownership of
our common stock whether any such swap or transaction is to be settled
by delivery of our common stock or other securities, in cash or
otherwise,
without the prior written consent of Merrill Lynch Pierce, Fenner & Smith
Incorporated on behalf of the underwriters for a period of 180 days after the
date of the prospectus. See "Shares Eligible for Future Sale."
Quotation on the Nasdaq National Market
We have been approved for quotation of our common stock on the Nasdaq
National Market under the symbol "MTWV."
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations among
us and the representatives and the lead managers. In addition to prevailing
market conditions, the factors to be considered in determining the initial
public offering price are:
. the valuation multiples of publicly traded comparisons that the
representatives and the lead managers believe to be comparable to us,
. our financial information,
61
<PAGE>
. the history of, and the prospects for, our company and the industry in
which we compete,
. an assessment of our management, its past and present operations, and
the prospects for, and timing of, our future revenues,
. the present state of our development and
. the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
Other Relationships
ML IBK Positions, Inc. and other investment funds which are associated with
Merrill Lynch, Pierce, Fenner & Smith Incorporated purchased an aggregate of
2,380,948 shares of our Series E preferred stock. Merrill Lynch, Pierce, Fenner
& Smith Incorporated has in the past provided and may in the future provide,
investment banking services for which they have received, and may receive,
customary fees.
Price Stabilization and Short Positions
Until the distribution of our common stock is completed, rules of the
Commission may limit the ability of the underwriters to bid for and purchase
our common stock. As an exception to these rules, the underwriters are
permitted to engage in transactions that stabilize the price of our common
stock. Stock transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of our common stock.
The underwriters may create a short position in our common stock in
connection with the offering. This means that if they sell more shares of our
common stock than are set forth on the cover page of this prospectus, the
underwriters may reduce that short position by purchasing our common stock in
the open market. The underwriters may also elect to reduce any short position
by exercising all or part of the over-allotment option described above.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the underwriters
will engage in such transactions or that such transactions, once commenced,
will not be discontinued without notice.
Electronic Distribution of Prospectus
Merrill Lynch will be facilitating Internet distribution for this offering
to certain of its Internet subscription customers. Merrill Lynch intends to
allocate a limited number of shares for sale to its online brokerage customers.
An electronic prospectus is available on the Website maintained by Merrill
Lynch. Other than the prospectus in electronic format, the information on the
Merrill Lynch Website relating to this offering is not a part of this
prospectus.
62
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by our counsel, Venture Law Group, a Professional Corporation, Kirkland,
Washington. Certain legal matters will be passed upon for the underwriters by
Wilson Sonsini Goodrich & Rosati, a Professional Corporation, Palo Alto,
California.
EXPERTS
The financial statements and schedule of Metawave Communications Corporation
as of December 31, 1997, 1998 and 1999 and the related statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended 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
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act. This prospectus, which is a
part of the registration statement, does not contain all of the information set
forth in the registration statement, including items contained in the exhibits
to the registration statement. For further information about our company and
the common stock being offered by this prospectus, you should see the
registration statement and the exhibits, financial statements and notes filed
with the registration statement. Copies of the registration statement,
including exhibits, financial statements and notes, may be inspected without
charge at the SEC principal office in Washington, D.C. or obtained at
prescribed rates from the public reference room of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information regarding the
public reference Room by calling the SEC at 1-800-SEC-0330. The SEC 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 SEC. We have filed the registration
statement, including the exhibits and schedules, electronically with the SEC
via the SEC EDGAR system.
63
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................... F-2
Consolidated Balance Sheets........................................... F-3
Consolidated Statements of Operations................................. F-4
Consolidated Statements of Stockholders' Deficit...................... F-5
Consolidated Statements of Cash Flows................................. F-6
Notes to Consolidated Financial Statements............................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Metawave Communications Corporation
We have audited the accompanying consolidated balance sheets of Metawave
Communications Corporation as of December 31, 1998 and 1999, and the related
consolidated statements of operations, stockholders' deficit, and cash flows
for each of the three years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. 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 consolidated financial position of Metawave
Communications Corporation at December 31, 1998 and 1999, and the consolidated
results of its operations and its cash flows for the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Seattle, Washington
February 11, 2000, except Note 14,
as to which the date is April 20, 2000.
F-2
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
------------------- March 31, March 31,
1998 1999 2000 2000
-------- --------- ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents..... $ 10,763 $ 20,165 $ 14,497
Accounts receivable, less
allowances of $908 in 1999
and March 31, 2000 ($693 in
1998)........................ 4,329 10,127 9,548
Inventories................... 7,929 4,149 5,861
Debt issuance costs, net of
amortization of $6,491 in
1999 and March 31, 2000
($4,170 in 1998)............. 2,321 -- --
Prepaid expenses and other
assets....................... 621 613 552
-------- --------- ---------
Total current assets........ 25,963 35,054 30,458
Property and equipment, net..... 6,355 5,701 5,775
Other noncurrent assets......... 192 191 185
-------- --------- ---------
Total assets................ $ 32,510 $ 40,946 $ 36,418
======== ========= =========
LIABILITIES AND STOCKHOLDERS'
DEFICIT
- -----------------------------
Current liabilities:
Accounts payable.............. $ 5,412 $ 3,758 $ 6,897
Accrued liabilities........... 2,334 2,493 2,908
Accrued compensation.......... 1,461 1,511 1,802
Senior secured notes.......... 31,704 -- --
Current portion of notes
payable...................... 134 75 3
Current portion of capital
lease obligations............ 1,908 2,692 2,510
Deferred revenues............. 145 1,766 517
-------- --------- ---------
Total current liabilities... 43,098 12,295 14,637
Capital lease obligations, less
current portion................ 4,326 2,479 2,380
Notes payable, less current
portion........................ 87 8 8
Other long-term liabilities..... -- 16 16
Commitments:
Convertible and redeemable
preferred stock, issued and
outstanding shares--14,029,088,
32,027,203 and 32,027,203 in
1998, 1999 and March 31, 2000,
respectively at liquidation
value (none pro forma)......... 56,472 143,945 143,945
Convertible and redeemable
preferred stock warrants....... 5,123 157 157
Stockholders' equity (deficit):
Preferred stock, $.0001 par
value:
Authorized shares--
37,000,000, of which
32,027,203 have been
designated as convertible and
redeemable at December 31,
1999 and March 31, 2000......
Common stock, $.0001 par
value:
Authorized shares--
50,000,000; issued and
outstanding shares--
2,112,229, 2,390,910 and
2,621,571 in 1998, 1999 and
March 31, 2000, respectively
and 30,594,478 pro forma..... 2,179 3,573 6,384 $ 150,486
Deferred stock compensation... (554) (906) (2,676) (2,676)
Accumulated other
comprehensive income ........ 6 19 (48) (48)
Accumulated deficit........... (78,227) (120,640) (128,385) (128,385)
-------- --------- --------- ---------
Total stockholders' equity
(deficit).................. (76,596) (117,954) (124,725) $ 19,377
-------- --------- --------- =========
Total liabilities and
stockholders' equity....... $ 32,510 $ 40,946 $ 36,418
======== ========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------- --------------------
1997 1998 1999 1999 2000
--------- --------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 1,450 $ 15,991 $ 22,596 $ 6,834 $ 9,329
Cost of revenues........ 1,728 18,028 22,236 7,059 7,094
--------- --------- --------- --------- ---------
Gross profit (loss)..... (278) (2,037) 360 (225) 2,235
Operating expenses:
Research and
development.......... 13,083 18,495 22,787 5,392 6,374
Sales and marketing... 5,383 11,346 11,080 2,694 2,343
General and
administrative....... 3,762 5,887 5,732 1,280 1,325
--------- --------- --------- --------- ---------
Total operating
expenses........... 22,228 35,728 39,599 9,366 10,042
--------- --------- --------- --------- ---------
Operating loss.......... (22,506) (37,765) (39,239) (9,591) (7,807)
Other income, net....... 851 790 1,165 129 216
Interest expense........ (449) (7,353) (4,339) (3,237) (154)
--------- --------- --------- --------- ---------
Other income
(expense), net..... 402 (6,563) (3,174) (3,108) 62
--------- --------- --------- --------- ---------
Net loss................ $ (22,104) $ (44,328) $ (42,413) $ (12,699) $ (7,745)
========= ========= ========= ========= =========
Basic and diluted net
loss per share......... $ (12.18) $ (21.88) $ (18.98) $ (6.00) $ (3.04)
========= ========= ========= ========= =========
Shares used in
computation of basic
and diluted net loss
per share.............. 1,815,000 2,025,741 2,234,798 2,117,631 2,549,089
========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Years Ended December 31, 1997, 1998 and 1999
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Deferred Other Total
----------------- Stock Comprehensive Accumulated Stockholders'
Shares Amount Compensation Income Deficit Deficit
--------- ------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... 1,767,335 $ 10 $ 0 $ 0 $ (11,795) $ (11,785)
Exercise of stock
options............... 188,061 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 at December 31,
1997................... 1,955,396 1,968 (1,205) 0 (33,899) (33,136)
Repurchased restricted
stock................. (92,266) (5) -- -- -- (5)
Exercise of stock
options............... 241,766 106 -- -- -- 106
Issuance and exercise
of common stock
warrants.............. 7,333 110 -- -- -- 110
Stock compensation
expense............... -- -- 651 -- -- 651
Comprehensive income
(loss):
Foreign exchange
translation gain...... -- -- -- 6 -- 6
Net loss for the year
ended December 31,
1998.................. -- -- -- -- (44,328) (44,328)
---------
Comprehensive loss..... (44,322)
--------- ------ ------- ---- --------- ---------
Balance at December 31,
1998................... 2,112,229 2,179 (554) 6 (78,227) (76,596)
Exercise of stock
options............... 278,681 137 -- -- -- 137
Issuance of common
stock warrants........ -- 88 -- -- -- 88
Deferred stock
compensation.......... -- 1,169 (1,169) -- -- --
Stock compensation
expense............... -- -- 817 -- -- 817
Comprehensive income
(loss):
Foreign exchange
translation gain...... -- -- -- 13 -- 13
Net loss for the year
ended December 31,
1999.................. -- -- -- -- (42,413) (42,413)
---------
Comprehensive loss..... (42,400)
--------- ------ ------- ---- --------- ---------
Balance at December 31,
1999................... 2,390,910 $3,573 $ (906) $ 19 $(120,640) $(117,954)
Exercise of stock
options (unaudited)... 230,661 279 -- -- -- 279
Deferred stock
compensation
(unaudited)........... -- 2,532 (2,532) -- -- --
Stock compensation
expense (unaudited)... -- -- 762 -- -- 762
Comprehensive income
(loss):
Foreign exchange
translation gain
(unaudited)........... -- -- -- (67) -- (67)
Net loss for three
months ended March 31,
2000 (unaudited)...... -- -- -- -- (7,745) (7,745)
---------
Comprehensive loss..... (7,812)
--------- ------ ------- ---- --------- ---------
Balance at March 31,
2000................... 2,621,571 $6,384 $(2,676) $(48) $(128,385) $(124,725)
========= ====== ======= ==== ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
------------------------------ -----------------
1997 1998 1999 1999 2000
--------- --------- -------- -------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss.................... $(22,104) $(44,328) $(42,413) $(12,699) $(7,745)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization expense..... 1,841 2,623 3,035 771 718
Loss (gain) on disposal of
assets................... -- 8 208 85 --
Stock compensation
expense.................. 676 651 817 -- 762
Reserve for loss on
assets................... 425 -- -- -- --
Accrued interest expense
on senior notes.......... -- 2,704 -- 1,065 --
Debt financing
amortization............. -- 2,673 2,321 1,965 --
Noncash warrant expense..... -- 110 88 -- --
Changes in operating
assets and liabilities:
Decrease (increase) in
accounts receivable.... (1,323) (2,885) (5,798) (3,747) 580
Decrease (increase) in
inventories............ (4,080) (3,849) 3,780 4,431 (1,713)
Decrease (increase) in
other assets........... (34) (502) 8 (35) 67
Increase (decrease) in
accounts payable,
accrued liabilities,
and other liabilities.. 926 7,915 (1,441) (1,910) 3,844
Increase in other long-
term liabilities....... -- (5) -- -- --
Increase (decrease) in
deferred revenues...... 114 30 1,621 206 (1,249)
--------- --------- -------- -------- -------
Net cash provided by (used
in) operating activities... (23,559) (34,855) (37,774) (9,868) (4,736)
Investing activities
Proceeds on sale of assets.. -- 78 -- -- --
Purchases of equipment...... (621) (2,593) (1,317) (994) (790)
--------- --------- -------- -------- -------
Net cash provided by (used
in) investing activities... (621) (2,515) (1,317) (994) (790)
Financing activities
Proceeds from issuance of
preferred stock............ 19,182 7,190 82,507 5,810 --
Proceeds from issuance of
common stock............... 77 101 138 7 279
Proceeds from notes
payable.................... -- 29,000 -- 2,000 --
Payments on notes payable... (115) (182) (31,841) (86) (72)
Principal payments on
capital lease obligations.. (722) (1,317) (2,319) (2,725) (282)
--------- --------- -------- -------- -------
Net cash provided by
financing activities....... 18,422 34,792 48,485 5,006 (75)
--------- --------- -------- -------- -------
Net increase (decrease)in
cash....................... (5,758) (2,578) 9,394 (5,856) (5,601)
Effect of exchange rate
changes on cash............ -- 7 8 (35) (67)
Cash and cash equivalents at
beginning of period........ 19,092 13,334 10,763 10,763 20,165
--------- --------- -------- -------- -------
Cash and cash equivalents at
end of period.............. $ 13,334 $ 10,763 $ 20,165 $ 4,872 $14,497
========= ========= ======== ======== =======
Noncash transactions and
supplemental disclosures
Capital lease obligations
incurred to purchase
assets..................... $ 2,665 $ 3,104 $ 1,256 $ -- $ 426
Inventories reclassified to
property and equipment..... -- 171 -- -- --
Interest paid............... 450 596 1,653 1,270 116
Non cash conversion of
warrants to preferred
stock...................... -- -- 620 -- --
Deferred stock
compensation............... 1,881 -- 1,169 -- 2,532
</TABLE>
See accompanying notes.
F-6
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Description of Business
Metawave Communications Corporation (the "Company") designs, develops,
manufactures and markets smart antenna systems for the wireless communications
industry. The Company believes that its spectrum management solutions,
consisting of smart antenna systems, applications software and engineering
services, enable wireless network operators to increase overall network
capacity, improve or maintain network quality and reduce network operating
costs and better manage network infrastructure. Using its proprietary
technologies, the Company has developed systems that address the capacity,
coverage and call quality problems faced by wireless network operators.
On September 2, 1998, the Company formed Metawave International
Communications Corporation ("MICC"), a wholly owned Delaware subsidiary. On
October 5,1998, the Company formed a Hong Kong subsidiary, Metawave
Communications (Asia) Limited, which is now owned by Metawave Communications
(Cayman Islands). On December 7, 1998, the Company formed Metawave
Communications (Cayman Islands), a wholly owned subsidiary of MICC. On April 2,
1999 Metawave Communications (Cayman Islands) formed a Taiwan subsidiary,
Metawave Communications Taiwan Co. Ltd.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
In 1998, the Company adopted a 52 week fiscal year ending on the Sunday
closest to December 31, 1999. The 1999 fiscal year ends on January 2, 2000,
with each of the fiscal quarters representing a 13-week period. For convenience
of presentation, all fiscal periods in these financial statements are treated
as ending on a calendar month end.
Liquidity
The Company experienced net losses of $44,328,000 and $42,413,000 for the
years ended December 31, 1998 and 1999, respectively. These losses are the
result of intense product development efforts and the costs associated with the
development of the Company's manufacturing and sales operations. Management
believes that the Company will experience substantial losses in 2000, even if
commercial sales of the Company's systems continue to grow. Management believes
that existing cash, unused credit facilities, and revenues from system sales,
will be sufficient to fund operations through 2000. Any substantial inability
to achieve the current business plan could have a material adverse impact on
the Company's financial position, liquidity or results of operations and may
require the Company to reduce expenditures to enable it to continue operations
through December 2000.
Unaudited Interim Financial Information
The financial information as of March 31, 2000 and for the three months
ended March 31, 2000 and 1999 is unaudited, but includes all adjustments,
consisting only of normal recurring adjustments, that Metawave considers
necessary for a fair presentation of the financial position at those dates and
of the operations and cash flows for the periods then ended. Operating results
for the three months ended March 31, 2000 are not necessarily indicative of
results that may be expected for the entire year.
Foreign Currency Translation
The functional currency of the Company's foreign subsidiaries is the local
currency in the country in which the subsidiary is located. Assets and
liabilities denominated in foreign currencies are translated to
F-7
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Significant Accounting Policies--(continued)
U.S. dollars at the exchange rate in effect on the balance sheet date. Revenues
and expenses are translated at the average rates of exchange prevailing during
the year. The translation adjustment resulting from this process is shown
within accumulated other comprehensive income (loss) as a component of
stockholders' equity. Gains and losses on foreign currency transactions are
included in the consolidated statement of operations as incurred. To date,
gains and losses on foreign currency transactions have not been significant.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and
accompanying notes. Accordingly, actual results may differ from those
estimates. The Company has used estimates in determining certain provisions,
including the allowance for doubtful accounts receivable, inventory reserves,
useful lives for property and equipment, and warranty accruals.
Revenue Recognition
The Company generates revenues through the sales of smart antenna systems
and related installation and optimization services. System revenues are
recognized when title to the system and risk of loss has been transferred to
the customer and all customer acceptance conditions, if any, have been
satisfied, and when collection is probable.
Service revenues, generally for installation and optimization, are
recognized when the services have been performed and all customer acceptance
conditions, if any, have been satisfied. Revenues from maintenance contracts
are deferred and recognized ratably over the term of the agreement (which is
typically one year). Any billings in excess of revenues are classified as
deferred revenues and related systems are recorded as inventory.
Concentration of Credit Risk and Major Customers
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.
The Company's customers are primarily wireless 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 26.0% of revenues
in the year ended December 31, 1999, 23.5% in 1998 and none in 1997. During
1998, one customer, Alltel Communications Inc., represented 88% of the
Company's trade accounts receivable. In 1999, two customers, AirTouch
Communications Inc. and Grupo Iusacell S.A. de C.V., represented 28% and 53% of
the Company's trade accounts receivable, respectively.
The Company performs ongoing 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.
Net Loss per Share
Basic net loss per share is computed by dividing net loss available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted net loss per share reflects the potential dilution of
securities by including other common stock equivalents, including stock options
and redeemable convertible preferred stock, in the weighted average number of
common shares outstanding as if
F-8
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Significant Accounting Policies--(continued)
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 anti-dilutive. For the periods presented, there
is no difference between the basic and diluted net loss per share.
Pro forma loss per share (unaudited) is computed by dividing net loss by the
weighted average number of shares of common stock outstanding and the weighted
average number of shares of convertible and redeemable preferred stock
outstanding as if such shares were converted to common stock at the time of
issuance.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents. The Company
invests with various high-quality institutions and, in accordance with Company
policy, limits the amount of credit exposure to any one institution.
The Company accounts for its marketable securities under the provisions of
Statement of Financial Accounting Standards ("SFAS") Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." All
marketable securities are classified as available-for-sale and are carried at
fair value, with the unrealized gains and losses, net of tax, reported as a
separate component of stockholders' equity. As of December 31, 1998 and 1999
all marketable securities were cash equivalents and unrealized holdings gains
and losses were not significant.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of purchased parts, subassemblies and finished goods.
Property and Equipment
Property, equipment and leasehold improvements are recorded at cost.
Depreciation and amortization is provided using the straight-line method over
the estimated useful lives of the related assets for financial statement
purposes over estimated useful lives of two to seven years. Leasehold
improvements are amortized over the lesser of the lease term or the estimated
useful life.
Warranty
The Company generally provides a 12 month warranty, which may vary depending
upon specific contractual terms, on all systems 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. Advertising expense of
$535,000, $692,000 and $1,387,000 was recorded for the years ended December 31,
1997, 1998 and 1999, respectively.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB No. 25), and related
interpretations, in accounting for its employee stock options
F-9
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Significant Accounting Policies--(continued)
rather than the alternative fair value accounting allowed by Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123). APB No. 25 provides that the compensation expense relative to
the Company's employee stock options is measured based on the intrinsic value
of the stock option. SFAS No. 123 requires companies that continue to follow
APB No. 25 to provide a pro forma disclosure of the impact of applying the fair
value method of SFAS No. 123 (refer to Note 6). The Company recognizes
compensation expense for options and warrants granted to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
Consensus 96-18.
Other Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and display of comprehensive income
and its components in the financial statements. The other comprehensive income
(loss) which the Company currently reports is foreign currency translation
adjustments.
Business Segments
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which establishes standards for reporting
information about operating segments in annual financial statements. The
Company operates in one segment as a provider of certain wireless
telecommunication equipment. SFAS No. 131 also establishes standards for
related disclosures about systems and services, geographic areas and major
customers. Information related to segment disclosures is contained in Notes 13
and 14.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivatives and
Hedging Activities, which requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designed as part of a hedge
transaction and, if it is, the type of hedge transaction. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. The Company does not
anticipate that the adoption of this new standard will have a material effect
on earnings or the financial position of the Company, but continues to evaluate
the impact of SFAS No. 133.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin Number 101 ("SAB 101"). This summarized certain areas of
the staff's views in applying generally accepted accounting principles as it
applies to revenue recognition. The Company believes that its revenue
recognition principles comply with SAB 101. The Company will continue to
evaluate interpretations of SAB 101.
2. Inventories
<TABLE>
<CAPTION>
December 31,
------------- March 31,
1998 1999 2000
------ ------ -----------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Purchased parts.................................. $4,922 $2,251 $3,371
Subassemblies.................................... 2,332 1,144 1,452
Finished goods................................... 675 754 1,038
------ ------ ------
$7,929 $4,149 $5,861
====== ====== ======
</TABLE>
F-10
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Inventories--(continued)
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,
---------------- March 31,
1998 1999 2000
------- ------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Equipment................................... $ 9,384 $10,100 $10,884
Furniture and fixtures...................... 869 976 982
Leasehold improvements...................... 920 910 912
------- ------- -------
11,173 11,986 12,778
Accumulated depreciation and amortization... (4,818) (6,285) (7,003)
------- ------- -------
$ 6,355 $ 5,701 $ 5,775
======= ======= =======
</TABLE>
Included in property and equipment are assets acquired under capital lease
obligations with an original cost of $9,591,000 and $8,920,000 as of December
31, 1998 and 1999, respectively. Accumulated amortization on the leased assets
was $3,357,000 and $3,749,000 as of December 31, 1998 and 1999, respectively.
4. Notes Payable
<TABLE>
<CAPTION>
December 31,
------------ March 31,
1998 1999 2000
------- ---- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Senior Secured Notes, repaid in April 1999........... $31,704 $-- $--
Note payable to U.S. Bank with monthly payments of
$217, maturing in July 2000, bearing interest at
11%................................................. 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........................................... 202 72 --
Notes payable to Chrysler Financial with monthly
payments aggregating $347, bearing interest at 10%.. 15 11 11
------- ---- ----
31,925 83 11
Less current portion................................. 31,838 75 3
------- ---- ----
Long term portion.................................... $ 87 $ 8 $ 8
======= ==== ====
</TABLE>
Senior Secured Notes
On April 28, 1998, the Company issued $29.0 million aggregate principal
amount of Senior Secured Notes ("Senior Notes"), with a maturity date of April
28, 2000. The Senior Notes accrue interest at 13.75%, payable semiannually at
the option of the Company in either additional Senior Notes or cash. In October
1998, the Company issued additional Senior Notes of approximately $2.7 million
in connection with the related accrued interest.
F-11
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Notes Payable--(continued)
In connection with the Senior Notes, the noteholders received warrants to
purchase 537,500 shares of Series D Preferred Stock at $.01 per share. The
Company recorded debt issuance fees of approximately $4.3 million related to
the estimated fair value of these warrants. The debt issuance fees were
amortized over the period during which the Senior Notes were outstanding.
On December 21, 1998, the Company issued an additional 83,202 warrants at
$0.01 per share to the Senior Noteholders in connection with certain
antidilution provisions. The fair value of these additional warrants was
estimated to be approximately $671,000 which has been amortized over the
remaining term of the Senior Notes.
In April 1999, the Company retired all of the principal and accrued interest
on the Senior Notes aggregating $33,124,570. In addition, the warrants issued
in connection with the Senior Notes were exercised by the noteholders for an
aggregate 620,702 shares of Series D Preferred Stock. Amortization of debt
issuance costs, which has been included in interest expense, aggregated
$4,170,000 in 1998 and $2,321,000 in 1999.
Line of Credit Agreement
The Company has a credit facility with a commercial bank. The facility
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, and expires on March 14, 2000. Outstanding balances
on the credit line bear interest at the bank's prime rate (8.5% as of December
31, 1998 and 1999), and are secured by the Company's accounts receivable. At
December 31, 1998 and 1999, $2.5 million was outstanding related to the
issuance of a standby letter of credit. The Company is required to comply with
certain covenants set forth in the line of credit agreement. The Company is
currently in compliance with these covenants.
On March 23, 2000, the Company signed a commitment letter renewing and
increasing the line of credit to $10 million with Imperial Bank. The renewed
revolving line of credit agreement has a maturity date of one year from the
initial draw date with interest at the prime rate on the date of draw, payable
monthly and principal payable at maturity. As of March 31, 2000, the Company
had no outstanding balance on this credit facility.
5. Convertible and Redeemable Preferred Stock
In July 1995, the Company issued 5,500,000 shares of Series A Preferred
Stock ("Series A") through a private offering. Proceeds from the financing
amounted to $5,500,000, or $1.00 per share.
In May 1996, the Company issued 2,711,113 shares of Series B Preferred Stock
("Series B") through a private offering. Proceeds from the financing amounted
to $9,150,006. An additional 29,630 shares of Series B were issued in November
1996 with proceeds of $100,002, or $3.375 per share.
In October and November 1996, the Company issued 2,491,880 shares of Series
C Preferred Stock ("Series C") through a private offering. Proceeds from the
financing amounted to $15,349,980, or $6.16 per share.
In August 1997, the Company issued 2,397,727 shares of Series D Preferred
Stock ("Series D") through a private offering. Proceeds from the financing
amounted to $19,181,816, or $8.00 per share.
In December 1998, the Company issued 898,738 shares of Series E Preferred
Stock ("Series E") through a private offering. Proceeds from the initial round
of Series E financing amounted to $7,189,904, or $8.00.
F-12
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Convertible and Redeemable Preferred Stock--(continued)
In January 1999, the Company issued 726,264 additional shares of Series E at
$8.00 per share with gross proceeds of $5,810,112. In April and June 1999, the
Company issued 15,676,153 additional shares of Series E at $5.00 per share with
gross proceeds of $78,380,765. In connection with the issuance of the Series E
at $5.00 per share in April, the existing Series E shareholders were issued
974,996 additional Series E shares adjusting the price per share from $8.00 to
$5.00.
Holders of Series A, B, C, D and E have preferential rights to dividends
($.08, $.27, $.49, $.64 and $.40 per share per annum, respectively) when and if
declared by the Board of Directors. Dividends are not cumulative until January
1, 2002. 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. Every
three shares of Series A and B is convertible into two shares of common stock
at the option of the holder. In July 1999, in accordance with certain
adjustment provisions of the Amended and Restated Certificate of Incorporation,
the Series C, D, and E conversion rate to common stock was amended to 1.30786,
1.44144 and 1.42857, respectively. The conversion rate of the Series A, B, C, D
and E Preferred Stock is subject to adjustment in the event the Company issues
shares of capital stock at a price per share below the original purchase price
for each Series, subject to certain exceptions. In addition, the conversion
rate is automatically adjusted in the event of a stock split, stock dividend,
recapitalization or similar event. As a result of the two for three reverse
stock split detailed in Note 14, the Series A, B, C, D and E conversion rates
to common stock were adjusted to 0.66667, 0.66667, 0.87190, 0.96096, and
0.95238, respectively. Each share of preferred stock automatically converts to
common stock upon the vote or written consent of the holders of the majority of
the shares of Series A, B, C, D and E originally issued or upon the closing of
an initial public offering of the Company's common stock at a price of $10 per
share from which the aggregate proceeds are not less than $40 million. The
conversion rates are subject to adjustment, pursuant to certain antidilution
provisions as provided by the Company's Amended and Restated Certificate of
Incorporation.
In the event of liquidation, the holders of Series A, B, C, D and E have
preferential rights to liquidation payments of $1.00, $3.375, $6.16, $8.00 and
$5.00 per share, respectively, plus any declared but unpaid dividends. The
preferred stock has redemption rights for a six-month period beginning on
December 31, 2002 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 48,750 shares and 16,666 shares of
Series A at an exercise price of $2.1875 per share, subject to adjustment as
provided in the Warrant Agreements. The Warrant Agreements expire after seven
years or 18 months to three years from the effective date of an initial public
offering, whichever comes later. During 1996, the Company entered into an
additional lease line to the Master Lease Agreement. The new lease included the
issuance of a warrant to purchase 19,999 shares of Series B with an exercise
price of $4.77. During 1997, the Company entered into an additional lease line
to this Master Lease Agreement. The new lease included the issuance of a
warrant to purchase 34,090 shares of Series C with an exercise price of $6.16.
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 Master
Lease Agreement. The warrants were valued using the Black-Scholes valuation
model based upon the exercise prices described above, a risk free rate of 4.5%-
6.0%, a dividend yield rate of 0%, volatility of .6 and an expected life of 2-5
years. In connection with lease agreements entered into 1998, the Company
issued warrants to purchase 4,375 shares of Series D Preferred Stock with an
exercise price of $8.00.
F-13
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity
Initial Public Offering
In February 2000, the Board of Directors authorized management to file a
registration statement with the Securities and Exchange Commission to permit
the Company to offer up to 12,000,000 shares of common stock to the public. In
February 2000, the Board of Directors authorized an increase in the
capitalization of the Company to 160,000,000 authorized shares with 150,000,000
shares of common stock, par value $.001 per share and 10,000,000 shares
designated as preferred stock, par value $.001 per share upon the effective
date of the Company's public offering. If the offering is consummated under
terms presently anticipated, all outstanding shares of redeemable convertible
preferred stock will convert into 27,972,908 shares of common stock. Unaudited
pro forma stockholders' equity reflects the assumed conversion of the
redeemable convertible preferred stock outstanding at December 31, 1999 into
common stock.
Stock Repurchases
On January 10, 1998, the Company repurchased 91,850 shares of common stock
from one of its founders for $501 pursuant to the terms of a stock repurchase
agreement with the founder. In addition, the Company caused one of its founders
to surrender 66,666 shares of common stock in 1996 for no consideration.
In December 1998, the Company also repurchased 416 shares from one of its
employees for $5,000.
Stock Option Plans
The Company's 1995 Stock Option Plan (the "1995 Plan") provides for the
granting of incentive stock options and nonqualified stock options to
employees, officers, directors and consultants. Options under the 1995 Plan
have been granted at fair market value on the date of grant and expire ten
years after the date of the grant. Options granted under the 1995 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
2,766,666 shares of common stock for issuance under the 1995 Plan.
In May 1998, the Board of Directors approved the 1998 Stock Option Plan (the
"1998 Plan"). Options granted under the 1998 Plan generally vest on the same
terms as the 1995 Plan and are exercisable for a period of ten years. 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 Plan
automatically increase by an amount equal to three percent of the Company's
outstanding common stock, up to a maximum of 666,666 shares in any calendar
year, or such lower amount as approved by the Board of Directors. The Company
initially reserved 566,666 shares under the 1998 Plan, and was increased to
1,763,369 shares in April 1999 by the Board of Directors.
In June 1999, the Board of Directors approved the adoption of the Employee
Option Incentive Program (the "Incentive Program") under the 1998 Plan. Options
granted under the Incentive Program vest five years from the date of grant,
however, vesting shall accelerate for 50% of such options upon the effective
date of an initial public offering ("IPO") of the Company's shares, and the
remaining 50% of the options shall vest upon the twelve-month anniversary of
the effective date of the IPO. Options under the Incentive Program were granted
at estimated fair value on the date of grant and expire ten years after the
date of the grant. The Board of Directors issued 336,666 shares under this
program.
In February 2000, the Board approved the 2000 Employee Stock Purchase Plan
(ESSP), subject to shareholder approval. The Company will implement the ESSP
upon the effective date of the Registration Statement on Form S-1 for the
initial public offering and continue until April 30, 2020. The ESSP, subject to
F-14
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity--(continued)
certain limitations, permits eligible employees of the Company to purchase
common stock through payroll deductions of up to 15% of their compensation. The
Company has authorized the issuance of up to 233,333 shares of common stock
under the ESSP, plus an automatic annual increase, to be added on the first day
of the fiscal year beginning in 2001, equal to the lesser of 266,666 shares, 1%
of the common stock outstanding on the last day of the preceding fiscal year,
or a lesser number of shares as determined by the Board of Directors.
The 1998 Directors' Stock Option Plan (Directors' Plan) was adopted by the
Board of Directors in February 1998 and approved by the stockholders on April
20, 1998. A total of 200,000 shares of common stock have been reserved for
issuance under the Directors' Plan. The Directors' Plan provides for
discretionary grants of nonstatutory stock options to nonemployee directors of
the Company. Following the effectiveness of an initial public offering of the
Company's common stock, the Plan provides automatic formula based grants to the
nonemployee directors. In February 2000, the Board of Directors amended the
Directors' Plan, subject to shareholders approval. The amended plan becomes
effective upon the effectiveness of the initial public offering. An automatic
grant is made to each non-employee director who joins the Board after the
closing of the initial public offering for an option to purchase 16,666 shares
of common stock. Additionally, at each annual shareholder meeting, each non-
employee director is granted an additional option to purchase 6,666 shares of
common stock provided that the director continues serving on the Board and has
served as a director six months prior to grant date. The amended Directors'
Plan increases the issuance of options under the plan to 466,666. Initial
options granted under the directors' plan to new nonemployee directors
following the IPO will vest as to 25% of the shares underlying the option on
the first anniversary of the date of the option grant and as to 1/48th of the
shares each month after the first anniversary so that these options will be
fully vested on the fourth anniversary of the grant date. Options granted to
our nonemployee directors at the time of each annual stockholders meeting
following this offering will vest as to 1/36th of the shares underlying the
option so that these options will be fully vested on the third anniversary of
the grant date. The exercise price of all stock options granted under the
Directors' Plan shall be equal to the estimated fair 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.
Deferred stock compensation is calculated as the difference between the
exercise price and the deemed fair value of the Company's common stock at the
date of grant. The deferred stock compensation is amortized over the vesting
period of the related options. In 1997 and 1999, deferred stock compensation of
$1,881,282 and $1,168,848 was recorded for options granted under the various
stock option plans. Amortized stock compensation of $676,000, $651,000 and
$817,000 was recorded during each of the years ended December 31, 1997, 1998
and 1999, respectively.
In January, February and March 2000, the Company granted 928,825 additional
stock options for common stock. In connection with these grants, the Company
has recorded approximately, $2,532,000 of additional deferred stock
compensation in the first quarter of year 2000. In addition, the Company issued
230,661 shares in connection with stock option exercises.
F-15
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity--(continued)
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):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported.................................. $(22,104) $(44,328) $(42,413)
Pro forma.................................... (22,109) (44,728) (43,231)
Basic and diluted net loss per share:
As reported.................................. (12.18) (21.88) (18.98)
Pro forma.................................... (12.18) (22.08) (12.82)
</TABLE>
The fair value for these options was estimated at the date of grant using
minimum value option pricing models that take into account: (1) the estimated
fair value of the common stock 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 1996 through 1999
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, 1998 and 1999 grants.
A summary of the Company's stock option activity and related information
follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998 December 31, 1999 March 31, 2000
-------------------- -------------------- -------------------- --------------------
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.............. 1,295,236 $ .36 2,099,196 $1.19 2,531,996 $4.59 2,885,294 $ 5.25
Granted at deemed fair
value................ 447,988 2.93 1,478,547 13.02 914,820 6.96 398,766 12.00
Granted at above
deemed fair value.... -- -- -- -- 16,666 6.75 --
Granted at below
deemed fair value.... 906,190 1.02 -- -- 455,250 4.61 530,059 6.09
Canceled.............. (362,157) .44 (803,981) 12.56 (754,757) 6.53 (93,835) 6.84
Exercised............. (188,061) .41 (241,766) .44 (278,681) .50 (230,661) 1.22
--------- --------- --------- ---------
Outstanding at end of
period................. 2,099,196 1.19 2,531,996 4.56 2,885,294 5.25 3,489,623 6.38
========= ========= ========= =========
Exercisable at end of
period................. 1,426,668 1.46 2,213,954 5.13 2,837,236 5.33 3,047,099 6.39
========= ========= ========= =========
Weighted-average fair
value of options
granted during the
period:
Granted at value.... 2.93 12.84 3.59 6.18
Granted at below
value.............. 2.84 -- 4.50 7.33
</TABLE>
F-16
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity--(continued)
The following information is provided for options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
----------------------------------------- -------------------------
Average
Weighted- Remaining Weighted-
Range of Average Contractual Average
Exercise Number of Exercise Life Number of Exercise
Price Options Price (Years) Options Price
- ------------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
$0.15 - 0.53 228,411 $0.26 6.12 214,441 $0.24
0.93 - 1.80 777,695 0.96 7.48 743,606 0.96
3.00 - 5.04 561,950 4.23 9.02 561,950 4.23
5.25 - 6.75 655,174 6.62 8.96 655,174 6.62
7.50 - 12.00 662,064 11.54 8.06 662,065 11.54
--------- ---------
2,885,294 5.25 8.47 2,837,236 5.33
========= =========
</TABLE>
Stock options available for future grants under the Company's stock option
plans total 1,136,232 and 567,907 as of December 31, 1999 and March 31, 2000,
respectively.
Common Stock Warrants
During 1999, the Company entered into an additional leasing agreement. The
new lease included the issuance of a warrant to purchase 20,833 shares of
common stock with an exercise price of $6.75. The value of the warrants,
determined using the Black-Scholes valuation model, was recorded as additional
interest expense over the term of the lease agreement.
Common Shares Reserved for Future Issuance
The Company has reserved shares of common stock as follows:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Stock options outstanding..................................... 2,885,294
Stock option available for future grant....................... 1,136,232
----------
4,021,526
Conversion of:
Series A Preferred Stock.................................... 3,666,664
Series B Preferred Stock.................................... 1,827,157
Series C Preferred Stock.................................... 2,172,677
Series D Preferred Stock.................................... 2,900,577
Series E Preferred Stock.................................... 17,405,832
----------
27,972,907
Convertible redeemable preferred stock warrants............... 90,870
Common stock warrants......................................... 20,833
----------
32,106,136
==========
</TABLE>
F-17
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Income Taxes
As of December 31, 1999, the Company had federal net operating loss
carryforwards (NOL) of approximately $108.4 million and research and
development tax credit carryforwards of approximately $1.9 million. 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 equity
financing, 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 $83.1 million of the NOL is limited to approximately
$4.0 million per year. The remaining NOL is not subject to limitation as of
December 31, 1999.
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 assets are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Prepaid assets........................................ $ 47 $ 57
Deferred tax assets:
Net operating loss carryforwards.................... 22,664 36,880
Research and development tax credit carryforwards... -- 1,872
Accrued compensation................................ 380 335
Fixed assets........................................ 90 175
Accrued expenses and reserves....................... 1,146 2,195
Deferred revenues................................... -- 564
Stock compensation.................................. 80 82
-------- --------
Total deferred tax assets............................. 24,360 42,103
-------- --------
24,313 42,046
Less valuation reserve................................ (24,313) (42,046)
-------- --------
Net deferred taxes.................................... $ -- $ --
======== ========
</TABLE>
8. Commitments
The Company leases its facilities under noncancelable operating lease
agreements that expire on various dates through 2005. The Company leases
certain equipment under noncancelable capital leases that expire on various
dates through 2002.
In June 1998, the Company moved into a new building. The lease on this
building expires on 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 12 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-18
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Commitments--(continued)
Following is a summary of future minimum payments under capital leases and
operating leases, including the principal facility, that have initial or
remaining noncancelable lease terms in excess of one year at December 31, 1999
(in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2000..................................................... $3,015 $ 2,001
2001..................................................... 2,238 2,089
2002..................................................... 620 1,969
2003..................................................... -- 2,108
2004 and thereafter...................................... -- 2,867
------ -------
5,873 $11,034
=======
Less interest............................................ 702
------
5,171
Less current portion..................................... 2,692
------
$2,479
======
</TABLE>
Rental expense for operating leases was $667,939, $1,304,007 and $2,041,328
for the years ended December 31, 1997, 1998 and 1999, respectively.
The Company entered into agreements with certain leasing companies to
provide up to $3.0 million in 1997, $3.5 million in December 31, 1998 and $3.0
million at December 31, 1999 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 7.25% in
1997, 14.5% at December 31, 1998 and 12.25% at December 31, 1999. The leases
are secured by the underlying equipment. In connection with these lease
agreements, warrants were issued to purchase preferred stock (see Note 5).
9. 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, warrants and
convertible and redeemable preferred stock have not been included in the
calculation of diluted net loss per share 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 as if such shares were converted to common stock at the time
of issuance as follows:
<TABLE>
<CAPTION>
Three Months
Year ended December 31, Ended March 31,
---------------------------- -----------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- -------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net loss (A)................. $(22,104) $(44,328) $(42,413) $(12,699) $(7,745)
======== ======== ======== ======== =======
Weighted average outstanding:
Common stock (B)........... 1,815 2,026 2,235 2,118 2,549
Convertible and redeemable
preferred stock........... 7,773 8,804 20,140 9,670 21,352
-------- -------- -------- -------- -------
Pro forma weighted average
shares outstanding (C) ..... 9,588 10,830 22,375 11,788 23,901
======== ======== ======== ======== =======
Basic and diluted net loss
per share (A/B)............. $ (12.18) $ (21.88) $ (18.98) $ (6.00) $ (3.04)
======== ======== ======== ======== =======
Pro forma net loss per share
(A/C)....................... $ (2.31) $ (4.09) $ (1.90) $ (1.08) $ (0.32)
======== ======== ======== ======== =======
</TABLE>
F-19
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 to the plan.
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 former Chief Financial Officer
("CFO"). Both loans bear interest at 5.5%. The secured loan was payable in full
on October 28, 2002, or earlier, based upon certain events specified in the
agreement. Under the original terms of the unsecured loan, $50,000 of the
principal amount of the loan was to be forgiven over a three-year period
provided that the CFO remained 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 terminated. In accordance with the loan agreement,
a total of $16,665 was forgiven in 1998 and was expensed as compensation.
The CFO resigned from the Company in January 1999. The Board authorized an
extension of due dates on the secured loan of $162,500 and the unsecured loan
and accrued interest balance of $62,460 to the earlier of January 30, 2000, or
190 days after an IPO of the Company. The Board authorized an amendment to the
Security Agreement securing the obligations of the former CFO under the secured
and unsecured promissory notes that provide for an acceleration of the notes
based upon certain events specified in the Agreement. These notes were repaid
in full in February 2000.
Powerwave Technologies, Inc. ("Powerwave"), whose chief executive officer is
a director of the Company, is the Company's sole supplier of linear power
amplifiers, a component in the Company's systems. Pursuant to a manufacturing
agreement with Powerwave (which agreement was approved by a majority of the
Company's disinterested directors), 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. The Company's purchases from Powerwave totaled $2,203,217,
$8,047,401 and $6,427,026 in 1997, 1998, and 1999, respectively.
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
In December 1997, the Company determined that it would discontinue the
Network Services division. Accordingly, the carrying value of these fixed
assets were 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 revenues for the year ended December 31, 1997 and 1998 were
revenues of $1,450,000 and $200,000 respectively, relating to the Network
Services division and the cost of revenues were $1,728,000 and $242,000,
respectively.
In June 1998, in connection with certain patent licenses, the Company paid
$250,000 in cash and issued 7,333 common stock warrants for an aggregate amount
of $360,000. The common stock warrants had an
F-20
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Revenues and Operations--(continued)
exercise price of $.015 per share and were immediately exercised. The value of
these warrants, using the Black-Scholes valuation model, of $110,000 and cash
of $250,000 was recorded as research and development expense in 1998.
Revenues from customers representing more than 10% of annual sales in each
year were as follows:
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
----------------------- -------------------
1997 1998 1999 1999 2000
------- ------- ------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
AirTouch Communications,
Inc......................... 27.0% -- -- -- 29.1%
Alltel Communications Inc. .. -- 61.8% 44.8% 91.5% --
Cox Communications Inc. ..... 63.0% -- -- -- --
GTE Wireless................. -- 13.4% -- -- --
Grupo Iusacell S.A. de
C.V. ....................... -- -- 26.0% -- 56.5%
OJSC St. Petersburg Telecom.. -- 13.4% -- -- --
Southwestco Wireless......... -- -- 20.9% -- --
Telefonica Servicios Moviles
S.A. ....................... -- 10.1% -- -- --
</TABLE>
13. International Operations
Metawave sells its smart antenna systems and services throughout the world,
and operates in a single industry segment. While certain expenses for sales and
marketing activities are incurred in various geographical regions,
substantially all of Metawave's assets are located and the majority of its
operating expenses are incurred at its corporate headquarters. Revenue
information by geographic region is the only segment information presented as
follows:
<TABLE>
<CAPTION>
Year Ended December Three Months Ended
31, March 31,
---------------------- -------------------
1997 1998 1999 1999 2000
------ ------- ------- --------- ---------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
United States................... $1,450 $12,233 $16,717 $ 6,834 $ 4,054
Paraguay........................ -- 1,615 -- -- --
Russia.......................... -- 2,143 -- -- --
Mexico.......................... -- -- 5,879 -- 5,275
------ ------- ------- --------- ---------
Total........................... $1,450 $15,991 $22,596 $ 6,834 $ 9,329
====== ======= ======= ========= =========
</TABLE>
14. Subsequent Event
Reverse Stock Split
On April 12, 2000 the Board of Directors approved a two for three reverse
stock split of Metawave's common stock. As a result of the split the conversion
rate of each series of preferred stock was adjusted to reflect the split. All
share and per share data and all conversion rate disclosures in the
accompanying financial statements have been retroactively adjusted to reflect
this split.
F-21
<PAGE>
Stylized Metawave Logo
Text on top: Customers & Deployments
Map of the world depicting customer deployments by commercial sales and field
trials
Bullet points:
* Commercial Sale
* Field Trial
Graphic of radio frequency spectrum
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
6,250,000 Shares
[LOGO OF METAWAVE COMMUNICATIONS CORPORATION]
Common Stock
--------------------
PROSPECTUS
--------------------
Merrill Lynch & Co.
Salomon Smith Barney
U.S. Bancorp Piper Jaffray
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 us 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............................................. $ 24,668
NASD Filing Fee.................................................. 9,125
Nasdaq National Market Listing Fee............................... 1,000
Printing Fees and Expenses....................................... 200,000
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.................................................... 250,207
----------
Total.......................................................... $1,000,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Article IX of
Metawave's certificate of incorporation and sections 6.1 and 6.2 of Article VI
of Metawave's bylaws provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. In addition, Metawave has entered into indemnification
agreements with its directors and officers. The indemnification agreements may
require Metawave, among other things, to indemnify its directors against
certain liabilities that may arise by reason of their status or service as
directors (other than liabilities arising from willful misconduct of culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors'
insurance if available on reasonable terms. The underwriting agreement (Exhibit
1.1 hereto) also provides for cross indemnification among Metawave and the
underwriters with respect to certain matters, including matters arising under
the Securities Act of 1933.
Item 15. Recent Sales of Unregistered Securities
(a) Since January 1, 1997, we have issued and sold (without payment of any
selling commission to any person except as noted below) the following
unregistered securities (as adjusted to reflect the automatic conversion of our
outstanding preferred stock into common stock upon completion of this
offering):
(1) In August 1997, we issued and sold shares of Series D preferred
stock convertible into an aggregate of 2,304,120 shares of common stock to
22 investors for an aggregate purchase price of $19,181,865.
(2) In December 1998 and April and June 1999, we issued and sold shares
of Series E Preferred Stock convertible into an aggregate of 17,405,832
shares of common stock to 25 investors for an aggregate purchase price of
$91,380,781. We paid an aggregate of $1,650,322 in commissions in
connection with the sale of Series E preferred stock.
II-1
<PAGE>
(3) We issued to an equipment lease provider in June 1997, a warrant to
purchase shares of Series C preferred stock convertible into 29,722 shares
of common stock for an aggregate purchase price of $209,994.
(4) In April 1998, we 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, we
issued warrants to purchase shares of Series D preferred stock convertible
into 596,470 shares of common stock for an aggregate purchase price of
$5,375. We paid an aggregate of $1,450,000 in commissions in connection
with the issuance of the Senior Secured Bridge Notes.
(5) In May 1998, we issued to an equipment lease provider a warrant to
purchase shares of Series D preferred stock convertible into 4,204 shares
of common stock for an aggregate purchase price of $35,000.
(6) In June 1998, in connection with certain patent licenses, we issued
the licensor a warrant to purchase 7,333 shares of common stock for an
aggregate purchase price of $110. Such licensor subsequently exercised the
warrant and purchased 7,333 shares of common stock for an aggregate
purchase price of $110.
(7) In May 1999, we issued to an equipment lease provider a warrant to
purchase 20,833 shares of common stock for an aggregate purchase price of
$140,625.
(8) As of March 31, 2000, an aggregate of 939,169 shares of common stock
had been issued upon exercise of options under our stock option plans.
(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)(7) 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 us, to information about the
Registrant. The issuances described in Items 15(a)(8) 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* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
3.3* Sixth Amended and Restated Certificate of Incorporation of the
Registrant, to be effected prior to the effective date of the
offering.
3.4* Seventh Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
offering.
4.1* Form of Stock Certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.2* 1995 Stock Option Plan, as amended.
10.3* 1998 Stock Option Plan, as amended.
10.4* 2000 Employee Stock Purchase Plan.
10.5* 1998 Amended and Restated Directors' Stock Option Plan.
10.6* Series E Preferred Stock Purchase Agreement dated April 28, 1999.
10.7* Fifth Amended and Restated Investors Rights Agreement dated April
28, 1999 by and among the Registrant and certain holders of the
Registrant's capital stock.
10.8* Lease for Willow Creek Corporate Center dated September 29, 1997 by
and between the Registrant and Carr America Realty Corporation.
10.9+ Purchase Agreement dated March 4, 1998 by and between the Registrant
and ALLTEL Supply Inc.
10.10 Loan Agreement dated October 14, 1997 by and between Registrant and
Imperial Bank, and amendments thereto.
10.11+* Manufacturing Agreement between the Registrant and Powerwave
Technologies, Inc. dated as of September 3, 1998.
10.12+* Purchase Agreement between the Registrant and GTE Wireless
Incorporated dated as of September 8, 1998.
10.13+* Technical Cooperation Agreement between the Registrant and Shanghai
Telecom dated as of December 17, 1998.
10.14+ Purchase Agreement between the Registrant and Southwestco Wireless,
L.P. dated as of February 24, 1999.
10.15+* Value Added Reseller Agreement between the Registrant and CommVerge
Solutions (Asia), Inc. dated as of December 4, 1999.
10.16+* Distribution Agreement between the Registrant and SeeNode Co., Ltd.
dated as of February 10, 2000.
10.17+ Purchase Agreement between the Registrant and AirTouch Support
Services, Inc. dated as of January 1, 2000.
10.18+ Purchase Agreement between the Registrant and Grupo IUSACELL S.A.,
de C.V. dated as of December 17, 1999.
10.19+* Purchase Agreement between the Registrant and Cellco, L.P., dba Bell
Atlantic dated as of December 20, 1999.
10.20* Employment Agreement with Mr. Douglas O. Reudink dated July 7, 1995.
10.21* Employment Agreement with Mr. Robert H. Hunsberger dated July 27,
1997.
10.22+* Employment Agreement with Mr. Andy Merrill dated July 12, 1999.
10.23* Employment Agreement with Mr. Richard Henderson dated October 29,
1997.
10.24* Employment Agreement with Mr. Victor K. Liang dated July 23, 1998.
10.25+* Employment Agreement with Mr. Stuart Fuhlendorf dated March 10,
2000.
10.26* 2000 Stock Plan.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-5).
27.1* Financial Data Schedule.
99.1* Report of Ernst & Young LLP, Independent Auditors on Financial
Statement Schedule.
99.2* Financial Statement Schedule.
</TABLE>
- --------
* Previously filed.
+ 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.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and this offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 5 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 April 25, 2000.
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. 5 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
--------- ----- ----
<S> <C> <C>
/s/ Robert H. Hunsberger President, Chief Executive April 25, 2000
_________________________________ Officer and Director (Principal
Robert H. Hunsberger Executive Officer)
/s/ Stuart W. Fuhlendorf Senior Vice President and Chief April 25, 2000
_________________________________ Financial Officer (Principal
Stuart W. Fuhlendorf Financial and Accounting
Officer)
/s/ Douglas O. Reudink Chief Technical Officer and April 25, 2000
_________________________________ Chairman of the Board of
Douglas O. Reudink Directors
/s/ Bandel L. Carano Director April 25, 2000
_________________________________
Bandel L. Carano
/s/ Bruce C. Edwards Director April 25, 2000
_________________________________
Bruce C. Edwards
/s/ David R. Hathaway Director April 25, 2000
_________________________________
David R. Hathaway
/s/ Scot B. Jarvis Director April 25, 2000
_________________________________
Scot B. Jarvis
/s/ Jennifer Gill Roberts Director April 25, 2000
_________________________________
Jennifer Gill Roberts
/s/ David A. Twyver Director April 25, 2000
_________________________________
David A. Twyver
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
3.3* Sixth Amended and Restated Certificate of Incorporation of the
Registrant, to be effected prior to the effective date of the
offering.
3.4* Seventh Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and effective upon completion of this
offering.
4.1* Form of Stock Certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2* 1995 Stock Option Plan, as amended.
10.3* 1998 Stock Option Plan, as amended.
10.4* 2000 Employee Stock Purchase Plan.
10.5* 1998 Amended and Restated Directors' Stock Option Plan.
10.6* Series E Preferred Stock Purchase Agreement dated April 28, 1999.
10.7* Fifth Amended and Restated Investors Rights Agreement dated April
28, 1999 by and among the Registrant and certain holders of the
Registrant's capital stock.
10.8* Lease for Willow Creek Corporate Center dated September 29, 1997 by
and between the Registrant and Carr America Realty Corporation.
10.9+ Purchase Agreement dated March 4, 1998 by and between the Registrant
and ALLTEL Supply Inc.
10.10 Loan Agreement dated October 14, 1997 by and between Registrant and
Imperial Bank, and amendments thereto.
10.11+* Manufacturing Agreement between the Registrant and Powerwave
Technologies, Inc. dated as of September 3, 1998.
10.12+* Purchase Agreement between the Registrant and GTE Wireless
Incorporated dated as of September 8, 1998.
10.13+* Technical Cooperation Agreement between the Registrant and Shanghai
Telecom dated as of December 17, 1998.
10.14+ Purchase Agreement between the Registrant and Southwestco Wireless,
L.P. dated as of February 24, 1999.
10.15+* Value Added Reseller Agreement between the Registrant and CommVerge
Solutions (Asia), Inc. dated as of December 4, 1999.
10.16+* Distribution Agreement between the Registrant and SeeNode Co., Ltd.
dated as of February 10, 2000.
10.17+ Purchase Agreement between the Registrant and AirTouch Support
Services, Inc. dated as of January 1, 2000.
10.18+ Purchase Agreement between the Registrant and Grupo IUSACELL S.A.,
de C.V. dated as of December 17, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.19+* Purchase Agreement between the Registrant and Cellco, L.P., dba Bell
Atlantic dated as of December 20, 1999.
10.20* Employment Agreement with Mr. Douglas O. Reudink dated July 7, 1995.
10.21* Employment Agreement with Mr. Robert H. Hunsberger dated July 27,
1997.
10.22+* Employment Agreement with Mr. Andy Merrill dated July 12, 1999.
10.23* Employment Agreement with Mr. Richard Henderson dated October 29,
1997.
10.24* Employment Agreement with Mr. Victor K. Liang dated July 23, 1998.
10.25+* Employment Agreement with Mr. Stuart Fuhlendorf dated March 10,
2000.
10.26* 2000 Stock Plan.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
27.1* Financial Data Schedule.
99.1* Report of Ernst & Young LLP, Independent Auditors on Financial
Statement Schedule.
99.2* Financial Statement Schedule.
</TABLE>
- --------
* Previously filed.
+ 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 10.9
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) in
excess Initial Spectrum Clearing Order purchased by Customer pursuant to the
terms and conditions 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 performance measures to be used for the
evaluation of the Products in the Initial Spectrum Clearing Order during the
Performance Evaluation Period set forth in Exhibit E.
"Performance Evaluation Period" shall mean the period of time specified in
Exhibit E during which the Products in the Initial Spectrum Clearing Order
in accordance 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.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
"Services" shall mean the engineering services set forth in Exhibit A or any
additional services set forth in any amendments to Exhibit A as may be
subsequently agreed to from time to time by Seller and Customer.
"Site" shall mean each of the Customer cell site locations at which a Product is
installed.
"Software" shall mean the (i) object-code computer programs embedded in the
Product which control and monitor the operation of the Product ("Embedded
Software"), and (ii) the Lamplighter PC-based graphical user interface computer
program for the Product, and all Features, Major Releases, Point Releases, and
Software Patches (as such terms are defined in Exhibit H), other updates and
modifications to such Software (the "Software Updates") and any documentation in
support thereof.
"Software License" shall mean the software license for the Software and Software
Updates to be delivered to Customer for use with the Products as set forth in
Exhibit D.
"Specifications" shall mean the specifications for the Products set forth in
Exhibit B and incorporated herein.
3. PURCHASE ORDERS; PRICING; CANCELLATIONS
a. Customer shall order Products and Services pursuant to this
Agreement by submitting a Purchase Order to Seller at least ninety
(90) days prior to date of delivery for such Products and Services.
b. Upon receipt of the Purchase Order, Seller shall have [***]
to confirm or reject its acceptance of the Purchase Order in writing
to the Customer, subject to completion of Site survey for each Product
to be completed no later than [***] prior to the date of delivery
specified on the Purchase Order. If Seller fails to reject acceptance
within [***] after receipt of the Purchase Order, the Purchase Order
will be deemed accepted.
c. If the Site Survey reveals that the Products configurations
set forth in the Purchase Order must be changed in order to implement
and install the Products, Seller shall notify Customer immediately
with a written proposal for changes. In no event shall Seller's
notification and submission of a written proposal for changes exceed
[***] from the date of completion of Site survey.
d. Customer shall have [***] to accept the written proposal for
changes upon receipt of the proposal. If accepted, Seller and Customer
shall execute a written Change Order at which time such Change Order
shall become binding on Seller and Customer subject to Section 3(e)
below. If rejected, Customer may either inform the Seller in writing
to proceed with the original Purchase Order or cancel the Purchase
Order subject to section 3(e) below.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
e. Customer may cancel delivery of a Product prior to Seller's
shipment of the Product provided that if Customer directs such
cancellation with less than [***] written notice from the delivery
date specified in Purchase Order, Customer shall pay to Seller any
nonrecurring losses associated with such cancellation and which are
documented in writing by Seller, provided, however, that any such
losses shall not exceed [***] of the Purchase Price of each Product
included in such cancellation.
f. Within thirty days following Customer's completion of its
seminannual budget, Customer shall give Seller, for planning purposes,
a non-binding forecast of its estimated requirements for the Products
and Services for the forthcoming [***].
4. SHIPPING; TITLE; RISK OF LOSS
a. Unless otherwise instructed by Customer, and subject to section 3,
Seller shall ship all Products to the destination designated in a
Purchase Order on or before the delivery date(s) specified in a
Purchase Order and render invoices in accordance with Section 6 below.
Customer is responsible for the payment of all reasonable shipping
charges, except as noted in Section 4(b) below, and any exceptional
shipping charges required to fulfill a Purchase Order shall be agreed
to in advance with Customer.
b. Products shall be packed by Seller, at no additional charge to
Customer, in containers adequate to prevent damage during shipping,
handling and storage.
c. Unless otherwise specified herein, title to Products sold by Seller to
Customer shall vest in Customer on shipment of Product to Customer
(except title to Software shall remain with Seller pursuant to the
terms of the Software License attached as Exhibit D hereto).
d. Risk of loss or damage to any Product supplied hereunder shall pass to
Customer upon Conditional Acceptance, except for Products installed by
Customer, in which case risk of loss or damage shall pass to Customer
on shipment of Product to Customer.
5. WARRANTY
a. Seller warrants for a period [***] (the "Warranty Period") that (i)
all Products furnished hereunder will be free from defects in
materials, workmanship and title, (ii) all Products will conform in
all material respects to the documentation and specifications provided
by the Seller herein, (iii) the media on which the Software is
contained will be free from defects in material and workmanship under
normal use, and (iv) the Software will conform in all material
respects to the documentation provided by Seller. The warranties in
this Agreement are given in
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
lieu of all other warranties express or implied which are specifically
excluded, including, without limitation, implied warranties of
merchantibility and fitness for a particular purpose.
b. If Customer believes that there is a claim under the warranty set
forth herein, Customer shall follow the procedures set forth in
Exhibit H hereto (Product Maintenance). If Seller is unable to repair
or replace the Product so that it conforms to Specifications, Customer
shall receive a refund of the prorated undepreciated portion of the
Purchase Price actually paid by Customer to Seller for the returned
portion of the Products. The Purchase Price shall be depreciated over
a five (5) year period for Software and a ten (10) year period for
non-Software Products. The actions taken by Seller under the Product
Maintenance Program procedures set forth in Exhibit H shall be the
full extent of Seller's liability and Customer's exclusive remedy with
respect to a claim under this section 5.
c. This warranty does not apply to any claim which arises out of any one
of the following: (i) the Product is used in other than its normal and
customary manner; (ii) the Product has been subject to misuse,
accident, neglect or damage by Customer; (iii) the Product has been
installed, optimized or moved from its original installation site by
any person other than Seller or a person who has been certified by
Seller through completion of a Seller-sponsored training course to
provide such services; (iv) unauthorized alterations or repairs have
been made to the Product, or parts have been used in the Product which
are not approved by Seller, such approval not to be unreasonably
withheld (a current list of approved parts is set forth in Exhibit A);
(v) the Product is not maintained pursuant to Seller maintenance
programs or under the supervision of a person who has been certified
by Seller to provide such maintenance service through completion of a
Seller-sponsored training course described in Exhibit G; (vi) an event
of Force Majeure has occurred; (vii) the failure of third party
antennas, lines or interconnection facilities at the Site; and (viii)
damage which occurs during shipment of equipment from Customer to
Seller.
6. INVOICES AND PAYMENT
a. 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;
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
b. maintain adequate property insurance for each Site, including coverage
for each Product at a Site during the period of installation and
operation prior to Conditional Acceptance; and
c. comply with its obligations set forth in Exhibit F.
8. INFRINGEMENT INDEMNITY
a. Seller shall indemnify and hold harmless Customer and its Affiliates
against any and all liabilities, losses, costs, damages and expenses,
including reasonable attorney's fees, associated with any claim or
action for actual or alleged infringement by any Product or Software
supplied in accordance with this Agreement of any United States
patent, trademark, copyright, trade secret or other intellectual
property right incurred by Customer and its Affiliates as a result of
Customer's use of such Products or Software in accordance with this
Agreement provided that (i) Customer promptly notifies Seller in
writing of the claim, (ii) Customer gives Seller full opportunity and
authority to assume sole control of the defense and all related
settlement negotiations, and (iii) Customer gives Seller information
and assistance for the defense (Customer will be reimbursed for
reasonable costs and expenses incurred in rendering such assistance,
against receipt of invoices therefor). Subject to the conditions and
limitations of liability stated in this Agreement, Seller shall
indemnify and hold harmless Customer from all payments, which by final
judgments in such claims, may be assessed against Customer on account
of such alleged infringement and shall pay resulting settlements,
costs and damages finally awarded against Customer by a court of law,
arbitration or other adjudication of the claim.
b. Customer agrees that if the Products or Software become, or in
Seller's opinion are likely to become, the subject of such a claim,
Customer will permit Seller, at its option and expense, either to
procure the right for Customer to continue using such Products or
Software or to replace or modify same so that they become non-
infringing as long as they continue to conform in all material
respects to the specifications contained in this Agreement and
Exhibits, and, if neither of the foregoing alternatives is available
on terms which are acceptable to Seller, Customer shall at the written
request of Seller, return the infringing or potentially infringing
Products or Software and all the rights thereto at Seller's expense.
Customer shall receive a refund of the prorated undepreciated portion
of the Purchase Price actually paid by Customer to Seller for the
returned portion of the Products. The Purchase Price shall be
depreciated over a five (5) year period.
c. Seller shall have no obligation to Customer with respect to any claim
of patent or copyright infringement which is based upon (i) adherence
to specifications, designs or instructions furnished by Customer, (ii)
the combination, operation or use of any Products supplied hereunder
with products, software or data not supplied by Seller, (iii) the
alteration of the Products or modification of any
<PAGE>
Software made by any party other than Seller; or (iv) the Customer's
use of a superseded or altered release of some or all of the Software
if infringement would have been avoided by the use of a subsequent
unaltered release of the Software that is provided to the Customer.
9. INDEPENDENT CONTRACTOR
Seller hereby declares and agrees that Seller is engaged in an independent
business and will perform its obligations under this Agreement as an independent
contractor and not as the agent or employee of Customer and has no authority to
represent Customer as to any matters. Seller shall be solely responsible for
payment of compensation to its personnel and for injury to them in the course of
their employment except to the extent that any intentional or negligent act of
Customer is solely and directly responsible for any such injury . Seller is
responsible for payment of all federal, state, or local taxes or contributions
imposed or required under unemployment insurance, social security and income tax
laws for persons employed by Seller to perform Seller's obligations under this
Agreement.
10. INDEMNIFICATION
Seller shall indemnify Customer, its employees and directors, and each of them,
against any loss, damage, claim, or liability, arising out of, as a result of,
or in connection with the use of the Product in accordance with this Agreement
or the acts or omissions, negligent or otherwise, of Seller in the performance
of this Agreement, or a contractor or an agent of Seller or an employee of
anyone of them, except where such loss, damage, claim, or liability arises from
the sole negligence or willful misconduct of Customer, agents or its employees.
Seller shall, at its own expense, defend any suit asserting a claim for any
loss, damage or liability specified above, and Seller shall pay any costs,
expenses and attorneys' fees that may be incurred by Customer in connection
with any such claim or suit or in enforcing the indemnity granted above,
provided that Seller (i) is given prompt notice of any such claim or suit and
(ii) full opportunity to assume control of the defense or settlement. Neither
Seller nor Customer shall not be liable to the other for indirect or
consequential damages, including but not limited to lost profits.
11. TERM AND TERMINATION
The term of this Agreement shall be 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
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
a person or entity who acquires all or substantially all of the
assets, business or stock of Seller, whether by sale, merger or
otherwise.
b. Customer reserves the right to assign this Agreement or any portion
hereof to any present or future Affiliate. Notwithstanding the
foregoing, without the prior written consent of Seller, (i) the
Software license granted to Customer in the form of Exhibit D
(Software License), may not be sublicensed, assigned or otherwise
transferred by Customer except to Affiliates; (ii) the Products may
not be transported, relocated, sold or otherwise transferred outside
the United States and (iii) no assignment may be made to an entity
which Seller considers to be a competitor.
c. Subject to the provisions of paragraphs a, and b above, this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns, if any, of the parties hereto.
13. [***] 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.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
15. COMPLIANCE WITH LAWS
Seller shall comply with all applicable federal, state and local laws,
regulations and codes, including the procurement of permits and licenses when
needed, in the performance of this Agreement.
16. FORCE MAJEURE
Except for payment of moneys due, neither party shall be liable for delays in
delivery or performance or for failure to manufacture, deliver or perform
resulting from acts beyond the reasonable control of the party responsible for
performance. Such acts shall include, but not be limited to (a) acts of God,
acts of a public enemy, acts or failures to act by the other party, acts of
civil or military authority, governmental priorities, strikes or other labor
disturbances, hurricanes, earthquakes, fires, floods, epidemics, embargoes, war,
riots, and loss or damage to goods in transit; or (b) inability to obtain
necessary products, components, services or facilities on account of causes
beyond the reasonable control of the delayed party or its suppliers. In the
event of any such delay, the date(s) of delivery or performance shall be
extended for as many days are reasonably required due to the delay. If such
delay continues for 45 days, either party may terminate the Purchase Order
affected by the event by providing written notice.
17. GOVERNING LAW; DISPUTE RESOLUTION
a. This Agreement and each Purchase Order shall be construed in
accordance with the internal laws of the State of Washington, without
regard to its choice of law provisions.
b. Any and all disputes arising between the parties shall be resolved in
the following order: (i) by good faith negotiation between
representatives of Customer and Seller who have authority to fully and
finally resolve the dispute to commence within ten (10) days of the
request of either party; (ii) in the event that the parties have not
succeeded in negotiating a resolution of the dispute within ten (10)
days after the first meeting, then the dispute will be resolved by
nonbinding mediation to be held in a mutually agreed location in the
United States, using a mutually agreed upon non-affiliated neutral
party having experience with or knowledge in the wireless
communications equipment industry to be chosen within twenty (20) days
after written notice by either party demanding mediation (the costs
therefor to be shared equally); and (iii) if within sixty (60) days of
the initial demand for mediation by the parties, the dispute cannot be
resolved by mediation, then a party may institute litigation in a
court having subject matter jurisdiction, and the parties expressly
consent and submit themselves to the personal jurisdiction of such
court.
<PAGE>
18. DELAY PENALTIES
a. The parties agree that damages for delay are difficult to calculate
accurately, and, therefore, agree that penalties will be paid for late
performance of certain of Seller's obligations under this Agreement.
b. In the event that Seller [***] (i) complete the [***] by a date
mutually agreed upon by the parties and set forth in a Purchase Order,
Change Order or otherwise in writing, or (ii) [***] specified in a
Purchase Order or Change Order which has been accepted by Seller,
Seller shall immediately [***] has been delayed. Seller shall [***] as
the case may be. Notwithstanding the foregoing, such [***]
c. [***] which (i) specified in a Purchase Order from Customer received
by Seller and (ii) is later than the availability dates set forth in
Exhibit B, Section 4.3 for CDMA Products will result in the following
[***]; [***] for the CDMA Product specified in the Purchase Order
[***] which shall be calculated on a basis of the [***] and the
Purchase Price of each CDMA Product contained in such Purchase Order
(the "Aggregate Purchase Price") provided that (i) Seller's [***] and
(ii) the [***] the availability dates set forth in Exhibit B, Section
4.3, and is not caused, in whole or in part, by [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
19. GENERAL PROVISIONS
a. All information, data and materials provided by either party under
this Agreement shall be subject to the terms and conditions of the
Non-Disclosure Agreement between the parties dated April 10, 1996.
b. Seller and Customer may issue a joint press release concerning the
execution of this Agreement. Such press release shall be subject to
prior review and written approval by both parties, not to be
unreasonably withheld.
c. Waiver by either party of any obligation or default by the other party
shall not be deemed a waiver by such party of any other obligation or
default.
d. Any rights of cancellation, termination or other remedies prescribed
in this Agreement are cumulative and are not intended to be exclusive
of any other remedies to which the injured party may be entitled at
law or equity (including but not limited to the remedies of specific
performance and cover) in case of any breach or threatened breach by
the other party of any provision of this Agreement, unless such other
remedies which are not prescribed in this Agreement are specifically
limited or excluded by this Agreement. The use of one or more
available remedies shall not bar the use of any other remedy for the
purpose of enforcing the provisions of this Agreement; provided,
however, that a party shall not be entitled to retain the benefit of
inconsistent remedies.
e. If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not
invalidate or render unenforceable the entire Agreement, but rather
the entire Agreement shall be construed as if not containing the
particular invalid or unenforceable provisions, and the rights and
obligations of Seller and Customer shall be construed and enforced
accordingly.
f. This Agreement, including all Exhibits attached to or referenced in
this Agreement, shall constitute the entire agreement between Customer
and Seller with respect to the subject matter hereof.
g. No provision of this Agreement shall be deemed waived, amended or
modified by any party hereto, unless such waiver, amendment or
modification is in writing and signed by a duly authorized
representative of each of the parties.
h. This Agreement applies only to sales of Products and Services in the
United States.
i. Each party shall comply with all applicable U.S. and foreign export
control laws and regulations and shall not export or re-export any
technical data or products except in compliance with the applicable
export control laws and regulations of the U.S. and any foreign
country.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
Metawave Communications Corporation ALLTEL Supply Inc.
By: /s/ Richard Henderson By: /s/ H.S. Fisher, Jr.
----------------------------------- ---------------------------
Name: Richard Henderson Name: H.S. Fisher, Jr.
----------------- ----------------
Title: Vice President of Sales and Marketing Title: Senior Vice President,
------------------------------------- ----------------------
Operations
----------
EXHIBITS ATTACHED:
A Product and Services Pricing
B Performance Specifications
C Site Acceptance Test Procedure (ATP)
D Software License
E System Acceptance Test Procedure (ATP)
F Installation and Optimization
G Training
H Product Maintenance Program
<PAGE>
EXHIBIT A: PRODUCTS AND SERVICES PRICING
TO THE AGREEMENT BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ALLTEL SUPPLY, INC. ("CUSTOMER")
Metawave Communications Corporation
8700 148/th/ Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
- -------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(C) 1998, METAWAVE COMMUNICATIONS CORPORATION
CONFIDENTIAL PROPRIETARY
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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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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.
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Products and Services Pricing
================================================================================
[***]
<TABLE>
<CAPTION>
4. SpotLight Spares Pricing
SPOTLIGHT RECOMMENDED SPARES KIT
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PART NUMBER DESCRIPTION [***] [***] [***]
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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 [***] [***] [***]
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TOTALS:
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</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
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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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</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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<S> <C> <C>
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</TABLE>
Products and Services Pricing
================================================================================
<TABLE>
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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 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
[***]
Certificate of Conditional Acceptance
IN WITNESS WHEREOF, Metawave Communications Corporation and ALLTEL Supply, Inc.
certify that the following tests have been performed with the indicated results.
|-------------------------------------------|--------|----------|--------------|
| Test Performed | Passed | Failed | See Comments |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
IN WITNESS WHEREOF, Metawave Communications Corporation and ALLTEL Supply, Inc.
certify that the products and services have been accepted at the following cell
sites on the following dates in accordance with the terms and conditions set
forth in the Products and Services Purchase Agreement ("Agreement") dated
____________________ between Metawave Communications Corporation and ALLTEL
Supply, Inc. and that the services have been performed and products perform as
specified in the Agreement.
Cell Site Name & Number: _____________________________ Date: ___________________
Metawave Communications Corporation ALLTEL Supply, Inc.
By: _______________________________ By: _______________________________
(Signature) (Signature)
Name: _____________________________ Name: _____________________________
(Please Print) (Please Print)
Title: ____________________________ Title: ____________________________
(Please Print) (Please Print)
Date: _____________________________ Date: _____________________________
(Please Print) (Please Print)
Comments
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Customer Copy)
________________________________________________________________________________
Metawave/ALLTELL CONFIDENTIAL PROPRIETARY Page 12 of 13
Exhibit C to the Agreement
FINAL
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
Certificate of Conditional Acceptance
IN WITNESS WHEREOF, Metawave Communications Corporation and ALLTEL Supply, Inc.
certify that the following tests have been performed with the indicated results.
|-------------------------------------------|--------|----------|--------------|
| Test Performed | Passed | Failed | See Comments |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
| [***] | [ ] | [ ] | [ ] |
|-------------------------------------------|--------|----------|--------------|
IN WITNESS WHEREOF, Metawave Communications Corporation and ALLTEL Supply, Inc.
certify that the products and services have been accepted at the following cell
sites on the following dates in accordance with the terms and conditions set
forth in the Products and Services Purchase Agreement ("Agreement") dated
____________________ between Metawave Communications Corporation and ALLTEL
Supply, Inc. and that the services have been performed and products perform as
specified in the Agreement.
Cell Site Name & Number: _____________________________ Date: ___________________
Metawave Communications Corporation ALLTEL Supply, Inc.
By: _______________________________ By: _______________________________
(Signature) (Signature)
Name: _____________________________ Name: _____________________________
(Please Print) (Please Print)
Title: ____________________________ Title: ____________________________
(Please Print) (Please Print)
Date: _____________________________ Date: _____________________________
(Please Print) (Please Print)
Comments
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Metawave Copy)
________________________________________________________________________________
Metawave/ALLTELL CONFIDENTIAL PROPRIETARY Page 13 of 13
Exhibit C to the Agreement
FINAL
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SOFTWARE LICENSE AGREEMENT
--------------------------
EXHIBIT D
TO THE PURCHASE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORPORATION ("SELLER")
AND
ALLTEL SUPPLY, INC. ("CUSTOMER")
1. DEFINITIONS
"Agreement" shall mean the Purchase Agreement between Seller and Customer
executed concurrently herewith, and the Exhibits attached thereto, including
this Exhibit E (Software License).
"Software" shall mean the (i) object-code computer programs embedded in the
Spotlight Unit which control and monitor the operation of the Spotlight Unit
("Embedded Software"), and (ii) the Lamplighter(TM) PC-based graphical user
interface computer program for the Spotlight Unit, and all Features, Major
Releases, Point Releases, Software Patches, SP Software (as such terms are
defined in Exhibit H), other updates and modifications ("Software Updates")
and any documentation in support thereof .
"Spotlight Unit" shall mean the Spotlight(TM) antenna system described in
Exhibit B.
Any terms not defined herein shall have the same meanings as in the
Agreement and the Exhibits thereto.
2. SCOPE
Pursuant to the Agreement, Software will be delivered by Seller to Customer
for use with a Spotlight Unit according to the terms of the Agreement and
this Exhibit. Customer shall then become a licensee with respect to such
Software.
3. LICENSING GRANT
3.1 Concurrent with execution of the Agreement, and subject to the terms
and conditions set forth herein, Seller grants to Customer a revocable,
non-exclusive and non-transferable license under Seller's applicable
proprietary rights to use Software delivered to Customer hereunder.
Such use shall apply only to operate a Spotlight Unit delivered under
the Agreement.
3.2 The licensing fees for the current versions of the Embedded Software
and of Lamplighter(TM) Software are included in the Purchase Price for
the Spotlight Unit. Software Updates are available under the Software
Maintenance Program described in Exhibit H or for additional licensing
fees.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
4. LIMITATIONS ON USE OF SOFTWARE
4.1 Without the prior written consent of Seller, Customer shall only use
the Software in conjunction with a single Spotlight Unit existing
within the site specified in the Purchase Order ("Designated Spotlight
Unit").
4.2 Customer may use the Software to perform the activities listed in
section 2.5 of Exhibit B and those activities available in future
enhancements or features. Under no condition shall the Software be
used for any other purpose, including, but not limited to, substituted
Spotlight Units, or Spotlight Units not owned by Customer, or Spotlight
Units located at a location other than the site specified in the
Purchase Order.
4.3 The License granted to Customer in Section 2 is personal and may not be
transferred to another Spotlight or site or another entity without the
written consent of Seller.
4.4 The Software is subject to laws protecting patents, trade secrets,
know-how, confidentiality and copyright.
4.5 Customer shall not translate, modify, adapt, decompile, disassemble, or
reverse engineer the Software or any portion thereof.
4.6 Unless otherwise expressly agreed by Seller, Customer shall not permit
its directors, officers, employees or any other person under its direct
or indirect control, to write, develop, produce, sell, or license any
software that performs the same functions as the Software by means
directly attributable to access to the Software (e.g. reverse
engineering or copying).
4.7 Customer shall not export the Software from the United States without
the written permission of Seller. If written permission is granted for
export of the Software, then Customer shall comply with all U.S. laws
and regulations for such exports and shall hold Seller harmless,
including legal fees and expenses for any violation or attempted
violation of the U.S. export laws.
4.8 Customer acknowledges that Seller owns the Software and that any rights
therein not specifically granted in this License are the exclusive
property of Seller.
5. RIGHT TO COPY, PROTECTION AND SECURITY
5.1 Software provided hereunder may be copied (for back-up purposes only)
in whole or in part, in printed or machine-readable form for Customer's
internal use only, provided, however, that no more than two (2) printed
copies and two (2) machine-readable copies shall be in existence at any
one time without the prior written consent of Seller, other than copies
electronically resident in the Spotlights.
5.2 With reference to any copyright notice of Seller associated with
Software, Customer agrees to include the same on all copies it makes in
whole or in part. Seller's copyright notice may appear in any of
several forms, including machine-readable form. Use of a copyright
notice on the Software does not imply that such has been published or
otherwise made generally available to the public.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
5.3 Customer agrees to keep confidential, in accordance with the terms of
the Agreement or a non disclosure agreement signed by the parties, and
not provide or otherwise make available in any form any Software or its
contents, or any portion thereof, or any documentation pertaining to
the Software, to any person other than employees of Customer or Seller.
5.4 Software is the sole and exclusive property of Seller and no title or
ownership rights to the Software or any of its parts, including
documentation, is transferred to Customer.
5.5 Customer acknowledges that it is the responsibility of Customer to take
all reasonable measures to safeguard Software and to prevent its
unauthorized use or duplication.
6. REMEDIES
Customer acknowledges that violation of the terms of this Exhibit or the
Agreement shall cause Seller irreparable harm for which monetary damages may
be inadequate, and Customer agrees that Seller may, in addition to any other
legal or equitable remedy it may have, seek temporary or permanent injunctive
relief without the need to prove actual harm in order to protect Seller's
interests.
7. TERM
Unless otherwise terminated pursuant to Section 8 hereof, or in the event
that Customer is required to return the Software pursuant to section 8(b) of
the Purchase Agreement, the term of the license granted pursuant to Section 2
herein shall be perpetual.
8. TERMINATION
8.1 The license granted hereunder may be terminated by Customer upon one
(1) month's prior written notice.
8.2 Seller may terminate the license granted hereunder if Customer is in
material default of any of the terms and conditions of this Exhibit D
(Software License Agreement) , and such termination shall be effective
if Customer fails to correct such default within thirty (30) days
after written notice thereof by Seller. The provisions of Sections 4
and 5 herein shall survive termination of any such license.
8.3 Within one (1) month after termination of the license granted
hereunder, Customer shall furnish to Seller a document certifying that
through its best efforts and to the best of its knowledge, the
original and all copies in whole or in part of all Software, in any
form, including any copy in an updated work, have been returned to
Seller or destroyed. With prior written consent from Seller, Customer
may retain one (1) copy for archival purposes only.
9. RIGHTS OF THE PARTIES
9.1 Nothing contained herein shall be deemed to grant, either directly or
by implication, estoppel, or otherwise, any license under any patents,
patent applications or copyrights of Seller except as expressly
granted herein.
9.2 Rights in programs or operating systems of third parties, if any, are
further limited by their license agreements with such third parties,
which agreements are hereby
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
incorporated by reference thereto and made a part hereof as if fully
set forth herein. Customer agrees to abide thereby.
9.3 During the term of the license granted pursuant to Section 2 herein
and for a period of one (1) year after expiration or termination,
Seller, and where applicable, its licensor(s), or their
representatives may, upon prior notice to Customer, a) inspect the
files, computer processors, equipment, facilities and premises of
Customer during normal working hours to verify Customer's compliance
with this Agreement, and b) while conducting such inspection, copy
and/or retain all Software, including the medium on which it is stored
and all documentation that Customer may possess in violation of the
license or the Agreement.
9.4 Customer acknowledges that the provisions of this Exhibit E are
intended to inure to the benefit of Seller and its licensors and their
respective successors in interest. Customer acknowledges that Seller
or its licensors have the right to enforce these provisions against
Customer, whether in Seller's or its licensor's name.
10. LIMITATIONS ON SOFTWARE
Customer understands that errors occur in Software and Seller makes no
warranty that the Software will perform without error. Customer agrees that
it is Customer's responsibility to select and test the Software to
determine that is meets Customer's needs. Customer accepts the Software "as
is" subject to the warranty set forth in Section 5 of the Purchase
Agreement.
11. [***]
[***] CERTAIN INFORMATION ON THIS PAGE(S) HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
12. ENTIRE UNDERSTANDING
12.1 This Exhibit D (Software License) is a part of, and is to be read
together with, the Agreement which contains additional terms and
conditions, warranties and indemnities applicable to the Software.
12.2 Notwithstanding anything to the contrary in other agreements,
purchase orders or order acknowledgments, the Agreement, the Software
specifications set forth in Exhibit B and this Exhibit D set forth
the entire understanding and obligations regarding use of Software,
implied or expressed.
<PAGE>
EXHIBIT E: SYSTEM ACCEPTANCE TEST PROCEDURE (ATP)
TO THE AGREEMENT
BETWEEN
METAWAVE COMMUNICATIONS CORP. ("SELLER")
AND
ALLTEL SUPPLY, INC. ("CUSTOMER")
Metawave Communications Corporation
8700 148th Avenue NE
Redmond, WA 98052 USA
Tel. 425 702-5600
Fax 425 702-5970
http://www.metawave.com
CONFIDENTIAL PROPRIETARY FINAL
- --------------------------------------------------------------------------------
This document and the information in it is the proprietary and confidential
information of Metawave Communications Corporation and is provided by Metawave
under an agreement of nondisclosure to the Customer for internal evaluation
purposes only and is protected by applicable copyright and trade secret law.
This document may only be disclosed or disseminated to those employees of the
Customer who have a need to use it for evaluation purposes; no other use or
disclosure can be made by Customer without Metawave's consent.
(c)1998, Metawave Communications Corporation
CONFIDENTIAL PROPRIETARY
- --------------------------------------------------------------------------------
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
1. Introduction......................................................................................... 3
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
1. Introduction
The objective of the spectrum clearing System Acceptance Test
Procedure (ATP) is to evaluate the system-wide performance achieved
through a system wide deployment of Metawave's SpotLight Multibeam
Antenna Platform ("SpotLight") to provide a network capable of
carrying the analog traffic predicted in the market forecast while
maintaining analog service after having cleared spectrum for a CDMA
carrier. The spectrum clearing System ATP will be performed in a
single ALLTEL market determined by ALLTEL.
The System ATP will occur in the following five phases:
1. Network Planning,
2. Baseline Performance Collection,
3. SpotLight Installation and Site ATP,
4. SpotLight Network Optimization,
5. SpotLight Performance Collection, Evaluation and Sign-Off.
2. System (ATP)
The System ATP consists of a comparison of test results from a
baseline period prior to commercial operation of SpotLight (Baseline
Performance Collection Phase) with results from a period of time in
which the SpotLight units are installed and network optimized
(SpotLight Performance, Evaluation and Sign-off Phase). The ATP uses
the following tests:
. [***]
. [***]
. [***]
. [***]
. [***]
. [***]
2.1. Network Planning Phase
2.1.1. Entrance Criteria
In order for ALLTEL and Metawave to produce an accurate network
plan, ALLTEL must provide the following information:
1. All cell site specific information including:
. [***]
. [***]
- --------------------------------------------------------------------------------
Metawave/ALLTEL CONFIDENTIAL PROPRIETARY Page 3 of 10
Exhibit E to the Agreement
FINAL
* Confidential treatment is requested for the language which has been
underscored or marked. Such language has been deleted from the copy filed with
the SEC.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
. [***]
. [***]
. [***]
2. receive antenna type with orientation if not omni-directional,
3. transmit antenna type with orientation if not omni-directional,
4. signaling antenna type with orientation if not omni-directional,
5. cell site to antenna cable type and length,
6. link budget - including effective radiated power for both
signaling and voice channels,
7. number of voice channels,
8. frequency planning information;
. frequency chart for the network,
. DCC used at each site,
. SAT/DSAT used at each site,
. signaling channel used at each site,
. frequency group used at each site,
. forward link power control settings,
. reverse link power control settings,
9. [***]
10. [***]
11. [***]
12. [***]
13. [***]
14. [***]
. [***]
. [***]
. [***]
. [***]
- --------------------------------------------------------------------------------
Metawave/ALLTEL CONFIDENTIAL PROPRIETARY Page 4 of 10
Exhibit E to the Agreement
FINAL
*** Confidential treatment is requested for the language which has been
underscored or marked. Such language has been deleted from the copy filed
with the SEC.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
2.1.2. Tasks:
Metawave and ALLTEL must generate a network plan that allows for the
predicted analog growth while maintaining the current network performance
with [***] cleared.
2.1.3 Exit Criteria
Metawave and ALLTEL shall mutually agree upon and document the following:
[***]
2.2. Baseline Performance Collection Phase
2.2.1. Entrance Criteria:
Successful completion of 2.1.
2.2.2. Tasks:
Collection of switch statistic data and [***].
2.2.2.1. Performance Criteria
2.2.2.1.1. Switch Statistics Collection
In order to collect the information necessary for the evaluation, [***]
[***]
- --------------------------------------------------------------------------------
Metawave/ALLTEL CONFIDENTIAL PROPRIETARY Page 5 of 10
Exhibit E to the Agreement
FINAL
*** Confidential treatment is requested for the language which has been
underscored or marked. Such language has been deleted from the copy filed
with the SEC.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
[***]
2.2.2.1.2. [***] Drive Test
The purpose of the drive testing is to determine the baseline network
[***] measurements from both the forward and reverse links. This will
be compared to the network [***]
The drive testing and analysis will be performed in the same manner
before and after the spectrum clearing. The agreed upon drive route
will be characterized ten times. It will be driven each day of a non-
holiday week, Monday through Friday, at busy hour and non-busy hour,
the times of each being market dependent and agreed upon by ALLTEL and
Metawave.
Both ALLTEL and Metawave personal must be present during the drive
test data collection.
For the analysis of the drive test data, [***]
The [***]
2.2.3. Exit Criteria:
A) Metawave and ALLTEL will sign off on a document confirming the
validity of baseline switch statistic data and drive test data.
2.3. SpotLight Installation and Site ATP Phase
2.3.1. Entrance Criteria:
A) [***]
B) [***]
- --------------------------------------------------------------------------------
Metawave/ALLTEL CONFIDENTIAL PROPRIETARY Page 6 of 10
Exhibit E to the Agreement
FINAL
*** Confidential treatment is requested for the language which has been
underscored or marked. Such language has been deleted from the copy filed
with the SEC.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
2.3.2. Tasks:
[***]
2.3.3. Exit Criteria:
[***]
2.4. SpotLight Network Optimization Phase
2.4.1. Entrance Criteria
[***]
2.4.2. Tasks:
[***]
2.4.3. Exit Criteria:
[***]
2.5. SpotLight Performance Collection, Evaluation and Sign-off Phase
2.5.1. Entrance Criteria:
[***]
- --------------------------------------------------------------------------------
Metawave/ALLTEL CONFIDENTIAL PROPRIETARY Page 7 of 10
Exhibit E to the Agreement
FINAL
*** Confidential treatment is requested for the language which has been
underscored or marked. Such language has been deleted from the copy filed
with the SEC.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
2.5.2. Tasks:
Collection and evaluation of [***].
2.5.2.1. Performance Criteria
2.5.2.1.1. Switch Statistic Collection
[***]
2.5.2.1.2 [***]
The collection of [***] as defined in 2.2.2.1.2.
2.5.3 Exit Criteria
[***]
- --------------------------------------------------------------------------------
Metawave/ALLTEL CONFIDENTIAL PROPRIETARY Page 8 of 10
Exhibit E to the Agreement
FINAL
*** Confidential treatment is requested for the language which has been
underscored or marked. Such language has been deleted from the copy filed
with the SEC.
<PAGE>
SpotLight Multibeam Antenna Platform Site Acceptance Test Procedure
================================================================================
Certificate of Final Acceptance
(for the Products in the Initial Spectrum Clearing Order)
IN WITNESS WHEREOF, Metawave Communications Corporation and Customer certify
that the following tests have been performed with the indicated results.
- --------------------------------------------------------------------------------
Test Performed Passed Failed See Comments
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, Metawave Communications Corporation and Customer certify
that the products and services have been accepted at the following cell sites on
the following dates in accordance with the terms and conditions set forth in the
Products and Services Purchase Agreement ("Agreement'') dated ______________
between Metawave and Customer, and that the services have been performed and
products perform as specified in the Agreement.
Market Name & Number: _________________ Date: ___________________
Metawave Communications Corporation: Customer: ____________________________
By: ________________________________ By: __________________________________
(Signature) (Signature)
Name: ______________________________ Name: ________________________________
(Please Print) (Please Print)
Title: _____________________________ Title: _______________________________
(Please Print) (Please Print)
Date: ______________________________ Date: ________________________________
(Please Print) (Please Print)
Comments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Customer Copy)
- --------------------------------------------------------------------------------
Metawave/ALLTEL CONFIDENTIAL PROPRIETARY Page 9 of 10
Exhibit E to the Agreement
FINAL
*** Confidential treatment is requested for the language which has been
underscored or marked. Such language has been deleted from the copy filed
with the SEC.
<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 10.10
LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of October 14, 1997 (this "Loan
Agreement") between METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation
(herein called "Borrower"), and IMPERIAL BANK (herein called "Bank").
1. COMMITMENT.
A. FACILITY-A COMMITMENT. Subject to all the terms and conditions
of this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Facility-A
Loan") to Borrower, from time to time and in such amounts as Borrower shall
request pursuant to this SECTION 1.A., up to an aggregate principal amount
outstanding under the Facility-A Loan Account (as hereinafter defined) not to
exceed the least of: (a) Eighty percent (80%) of Eligible Accounts (the
"Borrowing Base") or (b) $5,000,000.00 (the "Facility-A Commitment"). If at any
time or for any reason, the outstanding principal amount of the Facility-A Loan
Account is greater than the least of: (x) the Borrowing Base or (y) the
Facility-A Commitment, Borrower shall immediately pay to Bank, in cash, the
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Facility-A Loans shall expire on the Facility-A Maturity
Date (as hereinafter defined), subject to Bank's right to renew said commitment
in its sole and absolute discretion at Borrower's request. Any such renewal of
said commitment shall not be binding upon Bank unless it is in writing and
signed by an officer of Bank. Provided that no Event of Default (as hereinafter
defined) has occurred and is continuing, all or any portion of the Facility-A
Loans advanced by Bank which are repaid by Borrower shall be available for
reborrowing in accordance with the terms hereof. Borrower promises to pay to
Bank the entire outstanding unpaid principal balance (and all accrued unpaid
interest thereon) of the Facility-A Loan Account on October 14, 1999 ("Facility-
A Maturity Date").
(1) FACILITY-A LOANS. The amount of each Facility-A Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-A Commitment (herein called the
"Facility-A Loan Account") and Bank shall credit the Facility-A Loan Account
with all loan repayments in respect thereof made by Borrower. When Borrower
desires to obtain a Facility-A Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with SECTION 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day (as hereinafter defined) before the day on which the
Facility-A Loan is to be made. Facility-A Loans may only be used for working
capital purposes and the issuance of letters of credits.
(a) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to the
availability of the Facility-A Commitment and in reliance on the representations
and warranties of Borrower set forth herein, at any time and from time to time
from the date hereof through the Banking Day immediately prior to the Facility-A
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which request shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $3,000,000.00 and (ii) shall be deemed to constitute
Facility-A Loans for the purpose of calculating availability under the
Facility-A Commitment. Unless Borrower shall have deposited with Bank cash
collateral in an amount sufficient to cover all undrawn amounts under each such
Letter of Credit and Bank shall have agreed in writing, no Letter of Credit
shall have an expiration date that is later than the Facility-A Maturity Date.
All Letters of Credit shall be in form and substance acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's
application and letter of credit agreement, in the form of EXHIBIT B attached
hereto and incorporated herein by this reference. Borrower will pay any standard
issuance and other fees that Bank notifies Borrower will be charged for issuing
and processing Letters of Credit for Borrower.
(2) LIMITATION ON ADVANCE OF ANY FACILITY-A LOAN.
Notwithstanding any of the provisions contained in SECTION 1.A hereof, prior to
any advance of a Facility-A Loan, a representative of Bank shall have conducted
an audit of Borrower's books and records relating to the Collateral and made
extracts therefrom, and arranged for verification of the Accounts, directly with
the account debtors or otherwise, all with results reasonably satisfactory to
Bank, the cost of such audit of which shall be at Borrower's sole expense. Based
on Bank's review of such audit, and prior to the advance of a
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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Facility-A Loan in accordance with the terms of SECTION 1.A hereof, Bank may
adjust the Borrowing Base percentage, in its sole and reasonable discretion, as
provided for under SECTION 9.B. hereof.
(3) NON-FORMULA AVAILABILITY. Provided that no Event of Default
has occurred and is continuing, and subject to the availability of the Facility-
A Commitment and in reliance on the representations and warranties of Borrower
set forth herein, at any time from the date hereof through April 30, 1998, Bank
hereby agrees to make Facility-A Loans to Borrower in such amounts as Borrower
shall request pursuant to this SECTION 1.A.(3), in an aggregate principal amount
not to exceed $2,500,000.00 (the "Non-Formula Availability"); provided, however,
that the outstanding amounts under this Non-Formula Availability shall be deemed
to constitute Facility-A Loans for the purpose of calculating availability under
the Facility-A Commitment.
(4) INTEREST PAYMENTS ON FACILITY-A LOANS. Borrower further
promises to pay to Bank from the date of the advance of the initial Facility-A
Loan through the Facility-A Maturity Date, on or before the tenth (10th) day of
each month, interest on the average daily unpaid balance of the Facility-A Loan
Account during the immediately preceding month at a rate of interest equal to
the rate of interest per annum which Bank has announced as its prime lending
rate (the "Prime Rate"), which shall vary concurrently with any change in the
Prime Rate. Interest shall be computed at the above rate on the basis of the
actual number of days during which the principal balance of the Facility-A Loan
Account is outstanding divided by 360, which shall for interest computation
purposes be considered one (1) year.
2. LOAN REQUESTS. Requests for Loans hereunder shall be in writing duly
executed by Borrower in the form of EXHIBIT C attached hereto and incorporated
herein by this reference and shall contain a certification setting forth the
matters referred to in SECTION 1, which shall disclose that Borrower is entitled
to the amount and type of Loan being requested. Bank is hereby authorized to
charge Borrower's deposit account with Bank for all principal and interest due
Bank under this Loan Agreement.
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this SECTION 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the Facility-A Loan Account
following the FacilityA Maturity Date. All payments shall be applied first to
any late charges due hereunder, next to accrued interest then payable and the
remainder, if any, to reduce any unpaid principal due under the Facility-A Loan
Account.
5. DEFAULT INTEREST. From and after the Facility-A Maturity Date, or
such earlier date as all sums owing under the Facility-A Loan Account becomes
due and payable by acceleration or otherwise, or upon the occurrence of an Event
of Default, at the option of Bank all sums owing under the Facility-A Loan
Account shall bear interest until paid in full at a rate equal to the lesser of
(a) five percent (5.0%) per annum in excess of the then applicable interest rate
provided for in SECTION 1.A.(3) hereof or (b) the maximum amount permitted to be
charged by applicable law, until all obligations hereunder are repaid in full or
the Event of Default is waived or cured to the satisfaction of Bank, as
applicable.
6. DEFINITIONS. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on EXHIBIT A attached hereto and incorporated herein by this reference.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected; (b)
Borrower is, and at the time the Collateral becomes
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subject to Bank's security interest will be, the true and lawful owner of and
has, and at the time the Collateral becomes subject to Bank's security interest
will have, good and clear title to the Collateral, subject only to Bank's rights
therein and to Permitted Liens; (c) Each Account is, and at the time the Account
comes into existence will be, a true and correct statement of a bona fide
indebtedness incurred by the debtor named therein in the amount of the Account
for either merchandise sold or delivered (or being held subject to Borrower's
delivery instructions) to, or services rendered, performed and accepted by, the
account debtor; (d) That there are and will be no defenses, counterclaims, or
setoffs which may be asserted against the Accounts from time to time represented
by Borrower to be Eligible Accounts, except as permitted in the definition
thereof; (e) Any and all financial information, including information relating
to the Collateral, submitted by Borrower to Bank, whether previously or in the
future, is and will be true and correct in all material respects; (f) There is
no material litigation or other proceeding pending or threatened against or
affecting Borrower, and Borrower is not in default with respect to any order,
writ, injunction, decree or demand of any court or other governmental or
regulatory authority; (g) (i) The consolidated balance sheets of Borrower dated
as of September, 1997, and the related consolidated profit and loss statements
for the fiscal year then ended, copies of which have heretofore been delivered
to Bank by Borrower, and all other statements and data submitted in writing by
Borrower to Bank in connection with Borrower's request for credit are true and
correct, and said balance sheet and profit and loss statement accurately present
the financial condition of Borrower as of the date thereof and the results of
the operations of Borrower for the period covered thereby, and have been
prepared in accordance with GAAP, (ii) since such date, there have been no
material adverse changes in the financial condition of Borrower, and (iii)
Borrower has no knowledge of any material liabilities, contingent or otherwise,
which are not reflected in said balance sheet, and Borrower has not entered into
any special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a Material Adverse Effect upon its financial condition,
operations or business as now conducted; (h) Borrower has no material liability
for any delinquent local, state or federal taxes, and, if Borrower has
contracted with any government agency, it has no liability for renegotiation of
profits; and (i) to the best of its knowledge, Borrower, as of the date hereof,
possesses all necessary trademarks, trade names, copyrights, patents, patent
rights, and licenses to conduct its business as now operated, without any known
conflict with valid trademarks, trade names, copyrights, patents, patent rights
and license rights of others.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank,
which will not be unreasonably withheld:
A. Make any substantial change in the character of its business as
now conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in SECTION 7.(G)(I), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank;
D. Sell, dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted, such Collateral
which is disposed in connection with the sale of Network Services Division or
other assets which are obsolete or otherwise considered surplus), or execute any
financing statements covering the Collateral in favor of any secured party or
Person other than Bank;
E. Sell, transfer, assign, mortgage, pledge, license (except in the
ordinary and normal course of its business as it is now conducted), lease, grant
a security interest in, or otherwise encumber any of its Intellectual Property;
F. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower);
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G. Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or liquidate, dissolve, merge
or consolidate, or commence any proceedings therefore; or, except in the
ordinary and normal course of its business as now conducted, sell (including,
without limitation, the selling of any property or other asset accompanied by
the leasing back of the same) any assets including any fixed assets, any
property, or other assets necessary for the continuance of its business as now
conducted; and
H. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock, except for the repurchase of
Borrower's capital stock from officers, directors, employees or consultants of
Borrower upon termination of their employment with or rendering of services to
Borrower.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Notwithstanding the provisions contained in SECTION 1.A.(2)
hereof, permit representatives of Bank to conduct annual audits of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, provided that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense. Borrower hereby acknowledges
and agrees that upon completion of any such audit, including any such audit
conducted in accordance with the provisions of SECTION 1.A.(2) hereof, Bank
shall have the right to adjust the Borrowing Base percentage based on its review
of the results of such Collateral audit, if in its reasonable discretion the
Accounts have a lower likelihood of collection than Bank previously believed
prior to such Collateral audit;
C. Promptly notify Bank of any attachment or other material legal
process levied against any of the Collateral and any information received by
Borrower relative to the Collateral, including the Accounts, the account debtors
or other Persons obligated in connection therewith, which may in any way affect
the value of the Collateral or the rights and remedies of Bank in respect
thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in collecting any sums
payable by Borrower under the Facility-A Loan Account or any other obligation
secured hereby, enforcing any term or provision of this Loan Agreement or
otherwise or in the checking, handling and collection of the Collateral and the
preparation and enforcement of any agreement relating thereto;
E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon, to the extent necessary to repay any
indebtedness owed to Bank, shall at the option of Bank become the sole property
of Bank, such policies and the proceeds of any other insurance covering or in
any way relating to the Collateral, whether now in existence or hereafter
obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of the Facility-A Loan Account
shall exceed the maximum amount of outstanding loans to which Borrower is
entitled under SECTION 1 hereof, as applicable, Borrower shall immediately pay
to Bank for credit to the Facility-A Loan Account the amount of such excess;
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H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the State of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s), as
the failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank.
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall
be calculated and monitored on a monthly basis, except as shall be expressly
stated to the contrary. Borrower affirmatively covenants that so long as any
loans, obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth (meaning all
assets, excluding any value for goodwill, trademarks, patents, copyrights,
organization expense and other similar intangible items, less all liabilities,
plus Subordinated Debt) of not less than $6,000,000.00.
B. At all times maintain a Maximum Ratio of Total Liabilities
(meaning all liabilities, excluding Subordinated Debt) to Tangible Net Worth (as
defined in SECTION 10.A. hereof) not to exceed 1.50:1.00;
C. At all times maintain a Minimum Quick Ratio (meaning all cash
plus Accounts divided by current liabilities) of not less than 1.00:1.00;
D. As soon as it is available, but not later than twenty-five (25)
days after and as of the end of each month, deliver to Bank an internally-
prepared financial statement consisting of a balance sheet and profit and loss
statement, in form satisfactory to Bank, and a Compliance Certificate in the
form of EXHIBIT D attached hereto and incorporated herein by this reference,
certified by an officer of Borrower;
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E. As soon as it is available, but not later than one hundred twenty
(120) days after the end of Borrower's fiscal year, deliver to Bank unqualified
copies of Borrower's consolidated financial statements together with changes in
financial position audited by an independent certified public accountant
selected by Borrower but acceptable to Bank;
F. So long as the Facility-A Commitment shall be outstanding or any
amounts remain outstanding and unpaid under the Facility-A Loan Account, as soon
as it is available, but not later than twenty-five (25) days after and as of the
end of each month, deliver to Bank, in such form and detail as Bank may require,
statements showing aging of the Accounts and Borrower's accounts payable,
together with a Borrowing Base Certificate in the form of EXHIBIT E attached
hereto and incorporated herein by this reference, certified by an officer of
Borrower. Notwithstanding the foregoing, as a condition to any request for a
FacilityA Loan, Borrower shall have delivered to Bank said aging statements as
well as a Borrowing Base Certificate covering the most recent month then ended
prior to the date of Borrower's request for an advance for a FacilityA Loan;
G. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
H. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$150,000.00.
11. LOAN FEE. Borrower has paid, and Bank hereby acknowledges receipt of
a loan fee in the amount of Twenty-five Thousand Dollars ($25,000.00).
12. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document; (b) Except for
any failure to pay as described in clause (a) above, material breach be made in
any warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof,
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under SECTION 8,
SUBSECTIONS 9.A., 9.B., 9.C., 9.F., 9.G. and 9.H., SUBSECTIONS 10.A., 10.B. and
10.C. of this Loan Agreement, and SECTIONS 1 and 2 of the General Security
Agreement and a cure period of five (5) days shall exist for SUBSECTIONS 9.I.,
10.D., 10.E. and 10.F.); (c) Any statement, warranty or representation made by
Borrower at any time proves materially false; (d) Borrower defaults in the
repayment of any principal of or the payment of any interest on any indebtedness
exceeding in the aggregate principal amount $100K or breaches or violates any
term or provision of any promissory note, loan agreement, mortgage, indenture or
other evidence of such indebtedness pursuant to which amounts outstanding in the
aggregate exceed $2.0M if the effect of such breach is to permit the
acceleration of such indebtedness, whether or not waived by the note holder or
obligee, and such failure shall not have been cured to Bank's satisfaction
within fifteen (15) calendar days after Borrower shall become aware thereof,
whether by written notice from Bank or otherwise, or there has in fact been an
acceleration of such indebtedness; (e) Borrower becomes insolvent or makes an
assignment for the benefit of creditors; (f) Any proceeding be commenced by
Borrower under any bankruptcy, reorganization, arrangement, readjustment of debt
or moratorium law or statute or, any such a proceeding is commenced against
Borrower and is not dismissed or stayed within ten (10) days (provided that no
Loans will be made prior to the dismissal of such proceeding); (g) Any money
judgment, writ of attachment, garnishment, execution or other legal process be
entered against Borrower or issued against any material property of Borrower
which is not fully covered by insurance (subject to reasonable deductibles) and
remains unvacated, unbonded, unstayed or unpaid or undischarged for more than
fifteen (15) days (whether or not consecutive) or in any event later than five
(5) days prior to the date of any proposed sale thereunder, or if any assessment
for taxes against Borrower other than against any of its real property, is made
by the Federal or State government or any department thereof; or (h) Any change
in Borrower's financial condition, prospects or operations which has a Material
Adverse Effect. Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its option and without demand first made and without
notice to Borrower, do any one or more of the following: (i) Terminate its
obligation to make loans to Borrower as provided in SECTION 1 hereof; (ii)
Declare all sums secured hereby immediately due and payable; (iii) Immediately
take possession of the Collateral wherever it may be found, using all legally
permissible means to do so, or require Borrower to assemble the Collateral and
make it available to Bank at a place designated by Bank which is reasonably
convenient to Borrower and
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Bank, and Borrower waives all claims for damages due to or arising from or
connected with any such taking; (iv) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by law, or
provided for herein; (v) Sell, lease or otherwise dispose of the Collateral at
public or private sale, with or without having the Collateral at the place of
sale, and upon terms and in such manner as Bank may determine, and Bank may
purchase same at any such sale; (vi) Retain the Collateral in full satisfaction
of the obligations secured thereby to the extent permitted under the Uniform
Commercial Code; (vii) Exercise any remedies of a secured party under the
Uniform Commercial Code; or (viii) Immediately record the IP Security Agreement
with the United States Patent and Trademark Office, the Register of Copyrights
and/or the UCC Division of the California Secretary of State, to perfect Bank's
security interests created and assignment granted in the Intellectual Property
thereunder. Prior to any such disposition, Bank may, at its option, cause any of
the Collateral to be repaired or reconditioned in such manner and to such extent
as Bank may deem advisable, and any sums expended therefor by Bank shall be
repaid by Borrower and secured hereby. Bank shall have the right to enforce one
or more remedies hereunder successively or concurrently, and any such action
shall not estop or prevent Bank from pursuing any further remedy which it may
have hereunder or by law. If a sufficient sum is not realized from any such
disposition of the Collateral to pay all obligations secured by this Loan
Agreement, Borrower hereby promises and agrees to pay Bank any deficiency.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
14. ATTORNEYS' FEES. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
15. GOVERNING LAW; JUDICIAL REFERENCE.
A. GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa Clara County, if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP (S) 170.6. The referee shall (x) be requested to set the matter
for hearing within sixty (60) days after the date of selection of the referee
and (y) try any and all issues of law or fact and report a statement of decision
upon them, if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and judgement
shall be entered pursuant to CCP (S) 644 in any court in the State of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery
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permitted by this Loan Agreement shall be completed no later than fifteen (15)
days before the first hearing date established by the referee. The referee may
extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, (S) 1280 through (S) 1294.2
of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
16. MISCELLANEOUS PROVISIONS.
A. Borrower agrees that it will review the products and services
offered by Bank and use its best efforts to establish its primary banking
accounts with Bank, provided, that the products and services offered by Bank are
satisfactory to Borrower.
B. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
C. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
D. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
E. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
F. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such
-8-
<PAGE>
agreement shall become effective upon the execution of a counterpart hereof or
thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
BANK: BORROWER:
IMPERIAL BANK METAWAVE COMMUNICATIONS CORPORATION,
A DELAWARE CORPORATION
By: /s/ James E. Ellison /s/ Vito Palermo
-------------------------------- -------------------------------------
Senior Vice President/Manager Chief Financial Officer and Secretary
LIST OF EXHIBITS AND SCHEDULES
- ------------------------------
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Form of Application and Letter of Credit Agreement
EXHIBIT C: Loan Request Form
EXHIBIT D: Compliance Certificate
EXHIBIT E: Borrowing Base Certificate
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<PAGE>
________________________________________________________________________________
________________________________________________________________________________
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the Intellectual Property Security Agreement (upon its recordation in
accordance with SECTION 12(VIII) hereof) or otherwise.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), comade or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the nondelivery or nonfurnishing thereof, in any
such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"ELIGIBLE ACCOUNTS" means such of Borrower's Accounts as Bank in its sole
reasonable discretion shall determine are eligible from time to time; provided,
however, that in no event shall Eligible Accounts include the following:
(1) all domestic and pre-approved international (foreign) Accounts
under which payment is not received within the earlier of (a) 90 days from
the applicable invoice date and (b) 60 days from the applicable payment due
date;
(2) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
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<PAGE>
(5) Accounts due from an account debtor if more than twenty-five
percent (25%) of the aggregate amount of Accounts of such account debtor
have at that time remained unpaid for more than the earlier of (a) ninety
(90) days from the applicable invoice date and (b) sixty (60) days from the
applicable payment due date;
(6) Accounts with respect to international (foreign) transactions
unless (a) such Accounts are insured or covered by a letter of credit in a
manner and form acceptable to the Bank, (b) the account debtors of such
Accounts are foreign companies with sales greater than Five Hundred Million
Dollars ($500,000,000) per year, or (c) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds thirty-five percent (35%) of the total accounts receivable
balance;
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 12.
"FACILITY-A MATURITY DATE" has the meaning set forth in SECTION 1.A.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL SECURITY AGREEMENT" means that certain General Security Agreement
(Tangible and Intangible Personal Property) dated of even date herewith, made by
Borrower in favor of Bank.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person, whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien on assets of such Person and which is
nonrecourse to the credit of such Person, but only to the extent of the fair
market value of the assets so subject to the Lien, (g) obligations of such
Person arising under acceptance facilities or under facilities for the discount
of accounts receivable of such Person, (h) any obligation of such Person to
reimburse the issuer of any letter of credit issued for the account of such
Person upon which a draw has been made, and (i) any lease having the effect of
indebtedness, whether or not the same shall be treated as such on the balance
sheet of Borrower under GAAP.
"IP SECURITY AGREEMENT" means that certain Collateral Assignment, Patent
Mortgage and Security Agreement executed in blank by Borrower in favor of Bank
to be filed by Bank in accordance with SECTION 12(VIII) hereof.
"INTELLECTUAL PROPERTY" means collectively, all of Borrower's intellectual
property, including, without limitation, the following:
(1) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret (collectively, the "Copyrights");
11
<PAGE>
(2) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products;
(3) Any and all design rights which may be available to Borrower;
(4) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same (collectively, the "Patents");
(5) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
such trademarks (collectively, the "Trademarks");
(6) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(7) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(8) All amendments, renewals and extensions of any of the Copyrights,
Patents or Trademarks; and
(9) All proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"LIEN" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"LOAN DOCUMENTS" means this Loan Agreement, the General Security Agreement
and that certain Agreement to Provide Insurance (Real or Personal Property)
dated of even date herewith, each as executed by Borrower in favor of Bank,
together with all other documents entered into or delivered pursuant to any of
the foregoing (including, without limitation, the IP Security Agreement upon its
recordation in accordance with SECTION 12(VIII) hereof), in each case as
originally executed or as the same may from time to time be modified, amended,
supplemented or restated.
"LOANS" means the Facility-A Loans advanced pursuant to SECTION 1.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Documents.
"PERMITTED INDEBTEDNESS" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed on
SCHEDULE 1 attached hereto and incorporated herein by this reference;
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Loan Agreement, other than clause (3) immediately above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
12
<PAGE>
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"PERMITTED LIENS" means the following:
(1) liens and security interests existing as of this date and
disclosed in SCHEDULE 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment and in an amount not greater than the purchase price thereof or
(b) existing on such equipment at the time of its acquisition, provided that the
lien and security interest is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business not
interfering in any material respect with the business of Borrower and any
interest or title of a lessor or licensor under any lease or license, as
applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities imposed
without action of such parties;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not interfering in any material respect with the
ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Loans, and has been approved in Bank's sole and absolute discretion and in
writing.
13
<PAGE>
SCHEDULE 1 TO EXHIBIT A
SPECIFIC PERMITTED INDEBTEDNESS
14
<PAGE>
SCHEDULE 2 TO EXHIBIT A
SPECIFIC PERMITTED LIENS
15
<PAGE>
EXHIBIT B
FORM OF APPLICATION AND LETTER OF CREDIT AGREEMENT
[TO BE PROVIDED AND ATTACHED BY BANK]
16
<PAGE>
EXHIBIT C
LOAN REQUEST FORM
[TO BE PROVIDED AND ATTACHED BY BANK]
17
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of __________________________ of
METAWAVE COMMUNICATIONS CORPORATION, a Delaware corporation ("Borrower")
attached hereto and submitted to IMPERIAL BANK ("Bank") pursuant to that certain
Loan Agreement dated as of October __, 1997, entered into between Borrower and
Bank (the "Loan Agreement"), are in compliance with all financial covenants
(unless otherwise noted below) as specified in SECTION 10 therein, as follows:
COVENANT: ACTUAL:
A. Minimum Tangible Net Worth of:
-----------------------------
$6,000,000.00
B. Maximum Liabilities to Tangible Net Worth Ratio:
-----------------------------------
1.50 : 1.00 ___________________
C. Minimum Quick Ratio:
-------------------
1.00 : 1.00 ___________________
Exceptions: (if none, so state):
The undersigned authorized officer of Borrower hereby certifies that Borrower is
in complete compliance with the terms and conditions of the Loan Agreement for
the period ending _____________________, ____, and as of the date of this
Compliance Certificate the representations and warranties stated therein are
true, accurate and complete as of the date hereof (except as to those
representations and warranties which specifically reference a particular date
and except as noted above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Loan Agreement) to exist in the
next thirty (30) days. The required support documents for this certification
are attached and prepared in accordance with GAAP consistently applied.
Date:____________________ METAWAVE COMMUNICATIONS CORPORATION,
a Delaware corporation
18
<PAGE>
EXHIBIT E
BORROWING BASE CERTIFICATE
(To be provided and attached by Bank)
19
<PAGE>
Imperial Bank Exhibit 10.10
5330 Carillon Point
Kirkland, WA 98033
(425) 832-1233
(425) 576-2810
February 11, 2000
VIA FACSIMILE AND US MAIL
-------------------------
METAWAVE COMMUNICATIONS CORPORATION
8700 148th AVENUE NE
REDMOND, WA 98052
Re: LOAN EXTENSION
Borrower Name: METAWAVE COMMUNICATIONS CORPORATION
Loan Number: 736000021
Note Number: 3
Gentlemen:
Imperial Bank has approved an extension of Facility-A Maturity Date to March 14,
2000 from its current maturity as evidenced by that certain Loan Agreement dated
October 14, 1997.
Except as modified and extended hereby, the existing loan documentation as
amended concerning your obligation remains in full force and effect.
Very truly yours,
/s/ Christopher Fenner
Christopher Fenner
Vice President
<PAGE>
March 23, 2000
John Schaller
Corporate Controller
Metawave Communications Corp
10735 Willows Rd NE
Redmond, Washington 98052
Dear John:
This letter sets forth a commitment from Imperial Bank ("Bank") to provide
Metawave Communications Corp ("Borrower") the credit described below. The
credit facility will be subject to the terms and conditions of the Bank's
definitive loan documents which will include (but not be limited to) the
following in detail:
I. CREDIT FACILITY
A $10,000,000 Revolving Line of Credit ("Line") to support working capital
with a $2,500,000 sublimit for issuance of Trade-Related Commercial and
Standby Letters of Credit ("Letters of Credit").
II. MATURITY
364 days from completion of definitive loan documents.
III. TERMS
Interest will be payable monthly with principal due at Maturity.
IV. COLLATERAL
Bank to have a blanket first priority security interest perfected by UCC
filings and related Security Agreements on all assets of Borrower
including all present and future inventory, chattel paper, accounts,
contract rights, unencumbered equipment, general intangibles, and fixtures
and the product thereof, including specific filings on the Company's
intellectual property with the US Patent and Trademark Office and the US
Copyright Office.
V. GUARANTORS
Before Borrower may loan any amounts to or enter into any guaranties of
amounts owing by its Taiwanese subsidiary as otherwise permitted
hereunder, Borrower shall provide a subsidiary guarantee from such
Taiwanese subsidiary in form acceptable to Bank.
<PAGE>
VI. BORROWING FORMULA
Advances will be limited to the lesser of: (i) 80% of Eligible Accounts or
(ii) the amount available under the Line. Notwithstanding, non-formula
based non-cash advances of up to $2,500,000 will be allowed for Letters of
Credit as long as Borrower maintains a Quick Ratio of 1.50 to 1.00, as
outlined in Section VIII.A.1.
In the case that the Borrowing Base availability is above the outstanding
Letters of Credit, cash advances will be allowed against the Borrower
Base, over and above the outstanding Letters of Credit, and Borrower will
be required to maintain a Quick Ratio of 1.25 to 1.00, as outlined in
Section VIII.A.1.
As used herein, "Eligible Accounts" will include those domestic and pre-
approved foreign accounts receivable of Borrower which are outstanding
less than 90 days from invoice date subject to certain exclusions for
contra, US government and inter-company accounts. Approved foreign
accounts receivable include the following:
i. Foreign accounts receivable that are fully insured.
ii. Foreign accounts receivable that are backed by a site Letter of
Credit whose documents have been reviewed and found acceptable to Imperial and
where the issuing bank has been found acceptable to Imperial.
iii. Foreign accounts receivable that are backed by a usance Letter of
Credit whereby the issuing bank and related credit risk has been found
acceptable by Imperial.
Additional foreign accounts receivable will be eligible to the extent they
are approved in writing by Bank.
Any account which alone exceeds 35% of total accounts will have the amount
in excess of 35% excluded unless approved in writing by Bank.
Notwithstanding, IUSACELL, Alltel, GTE, BAMS, Airtouch, and Southwestco
will have no concentration limit.
Any account 25% or more of which is outstanding over 90 days from invoice
date will be excluded in its entirety.
VII. PRICING
Interest Rate: Bank's Prime Rate per annum.
Facility Fee: $30,000, due and payable upon acceptance.
VIII. COVENANTS
A. Financial Covenants:
1) Upon closing, Borrower to maintain on a monthly basis unless
otherwise noted:
a) Minimum Quick Ratio of 1.50 to 1.00. Notwithstanding,
Borrower shall maintain a Minimum Quick Ratio of 1.25 to
1.00 as long as Borrowing Base supports cash advances over
and above the outstanding Letters of Credit.
b) Minimum Tangible Net Worth of $12,500,000 plus 50% of any
equity or subordinated debt raised by Borrower.
<PAGE>
c) Maximum Total Liabilities to Tangible Net Worth of 1.50 to
1.00.
1 "Adjusted Quick Ratio" is defined as cash plus accounts
receivable divided by current liabilities less deferred
revenue and current portion of indebtedness fully
subordinated to the debt due to Bank.
2 "Tangible Net Worth" is defined as the financial statement
net worth of the Borrower prepared in accordance with GAAP
less intangible assets plus indebtedness fully subordinated
to the debt due to Bank.
3 "Total Liabilities" is defined as all the Borrower's
liabilities except for the indebtedness fully subordinated to
the debt due to the Bank
B. Borrower to provide Bank prior to a Initial Public Offering:
1) Unqualified audited financial statements within 120 days
after each fiscal year.
2) Company prepared monthly financial statements and Compliance
Certificate within 30 days after the end of each month.
3) Monthly aging of accounts receivable and accounts payable with
Borrowing Base Certificate within 30 days after the end of each
month.
4) Operating budgets, annual budgets and forecast within 30 days of
fiscal year end.
5) Other financial information that the Bank may reasonably request
C. Borrower to provide Bank after the Initial Public Offering:
1) Unqualified audited financial statements and 10-K within 5 days
of standard SEC filing date of 10-K.
2) 10-Q and Compliance Certificate within 5 days of standard SEC
filing date of 10-Q.
3) Company prepared monthly financial statements and Compliance
Certificate within 30 days after the end of each month.
4) Monthly aging of accounts receivable and accounts payable with
Borrowing Base Certificate within 30 days after the end of each
month.
5) Operating budgets, annual budgets and forecast within 30 days of
fiscal year end.
6) Other financial information that the Bank may reasonably request.
D. Other Covenants:
1) Upon review of the Bank's services Borrower will exercise best
efforts to establish its primary banking accounts at the Bank,
provided that Bank's services are satisfactory to Borrower.
2) Without Bank's prior approval, Borrower shall not:
a. Enter into any mergers or acquisitions, except for non-cash
transactions not resulting in change in control and the
Borrower is the surviving entity.
b. Major debt agreements except for:
i. Debt existing at the closing of this loan.
ii. Debt secured by a lien for the purchase of equipment.
iii. Subordinated Debt, which must be approved by the Bank,
and appropriate Subordination Agreements and Inter-
Creditors Agreements must be executed.
iv. Other Debt not to exceed $500,000.
v. Debt to trade creditors incurred in the ordinary course
of business.
c. Repurchase stock or pay cash dividends.
d. Hypothecate assets.
e. Loan money or guarantee loans of others, except to wholly-
owned subsidiaries in the ordinary course of business.
Notwithstanding, such loans or guarantees shall not exceed
$2,500,000 in the aggregate.
<PAGE>
3) Borrower shall provide Bank proof of insurance on all tangible
corporate assets and a Lender's Loss Payable Clause with Bank as
loss payee.
4) Borrower shall notify Bank in writing of any legal action
commenced against it which may result in damages over $50,000.
Borrower shall provide Bank with such notice immediately upon
Borrower's receipt of notice of such legal action.
5) Borrower shall pay Bank a $250 documentation fee at the closing
of transaction.
IX. OTHER CONDITIONS
A. Prior to cash advances over $500,000 against the Line, Bank shall
conduct an initial collateral audit by Bank's designated agent at
Borrower's expense, with results satisfactory to Bank. Thereafter,
Bank shall conduct annual collateral audits by Bank's designated agent
at Borrower's expense, with results satisfactory to Bank.
B. All reasonable expenses of Bank for legal fees, documentation fees,
UCC searches and filing fees, and all other costs involved with
documenting and enforcing the loans, including the expenses of Bank's
outside counsel, shall be borne by the Borrower, whether or not the
Credit Facilities close.
This letter is provided solely for your information and is delivered to you with
the understanding that neither it nor its substance shall be disclosed to any
third person, except those who are in confidential relationship with you, or
where the same is required by law.
If the terms set forth above are acceptable to you, please so indicate by
signing and returning the original of this letter to us. The loan fees of
$30,000 and the documentation fee of $250, all referred to above, will be
payable at the signing of definitive loan documents. Unless a signed copy of
this letter indicating your acceptance has been returned by no later than April
15, 2000, the terms herein will expire and be of no further affect. Upon return
of this letter and the payment, the Bank will prepare drafts of definitive loan
documents for your review. If you and the Bank do not enter into definitive
loan documents, the Bank will refund to you the any amount of the loan fees
collected, less any amount for the Bank's expenses for the foregoing.
This letter is intended to set forth the terms of the credit facility currently
under discussion between us. It is intended that all legal rights and
obligations of the Bank and you would be set forth in the signed definitive loan
documents.
<PAGE>
On behalf of the Senior Management of the Bank, we are delighted to propose
making this credit facility available to Borrower and look forward to a long and
mutually rewarding relationship. Please don't hesitate to call if you have any
questions or problems.
Sincerely, Sincerely,
/s/ Julia Doke /s/ James Ellison
Julia Doke James Ellison
Assistant Vice President Senior Vice President & Manager
Imperial Bank Imperial Bank
Emerging Growth Industries Emerging Growth Industries
Accepted and agreed to:
Metawave Communications Corp
By: /s/ John Schaller
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Title: Controller and Treasurer
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Date: March 23, 2000
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EXHIBIT 10.14
ORIGINAL
GENERAL PURCHASING AGREEMENT
BETWEEN SOUTHWESTCO WIRELESS, L.P.
AND
Metawave Communications Corporation
Contract No. 880-9810-1020
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TABLE OF CONTENTS
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SECTION TITLE PAGE
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ARTICLE I................................................................... 5
TERMS AND CONDITIONS APPLICABLE TO.......................................... 5
1. DEFINITIONS....................................................... 5
2. TERM OF AGREEMENT................................................. 6
3. ORDERS............................................................ 6
4. TERMINATION OF ORDERS............................................. 7
5. PRICING AND DELIVERY.............................................. 7
6. INVOICES AND PAYMENT.............................................. 7
7. PRICE PROTECTION.................................................. 8
8. MOST FAVORED CUSTOMER............................................. 9
9. AUDIT............................................................. 9
10. TERMINATION....................................................... 9
11. TRAINING.......................................................... 10
12. MANUALS AND DOCUMENTATION......................................... 10
13. WARRANTIES........................................................ 11
14. BENCHMARK TESTING, PRODUCT AND SOFTWARE TRIAL..................... 12
15. FORCE MAJEURE..................................................... 13
16. TAXES............................................................. 13
17. NOTICE............................................................ 14
18. INDEPENDENT CONTRACTORS........................................... 14
19. INDEMNIFICATION................................................... 14
20. INFRINGEMENT...................................................... 15
21. USE AND PROTECTION OF INFORMATION................................. 16
22. SUPPLIER'S INFORMATION............................................ 17
23. AVAILABILITY...................................................... 17
24. LICENSES.......................................................... 17
25. ASSIGNMENT........................................................ 17
26. SUBCONTRACTING.................................................... 18
27. PUBLICITY AND ADVERTISING......................................... 18
28. CHOICE OF LAW..................................................... 18
29. WAIVER AND ESTOPPEL............................................... 18
30. SEVERABILITY...................................................... 18
31. HEADINGS.......................................................... 19
32. INSURANCE......................................................... 19
33. RELEASES VOID..................................................... 20
34. OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA)......................... 20
35. NON-DISCRIMINATION COMPLIANCE..................................... 20
36. SUCCESSORS AND ASSIGNS............................................ 20
37. SWCO'S PROPERTY................................................... 20
38. LAWS, RULES AND REGULATIONS....................................... 20
39. ATTORNEYS' FEES AND COSTS......................................... 21
40. COUNTERPARTS...................................................... 21
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ARTICLE II.................................................................. 22
TERMS AND CONDITIONS APPLICABLE TO.......................................... 22
1. SCOPE............................................................. 22
2. FORM OF ORDER..................................................... 22
3. SITE PREPARATION.................................................. 22
4. TRANSPORTATION.................................................... 23
5. TITLE AND RISK OF LOSS............................................ 23
6. INSTALLATION AND COMMISSIONING.................................... 23
7. SELF INSTALLATION................................................. 24
8. INSTALLATION, ASSISTANCE AND TECHNICAL SUPPORT.................... 24
9. STANDARD OF PERFORMANCE FOR ACCEPTANCE............................ 25
10. CABLES AND RELATED ITEMS.......................................... 25
11. ENGINEERING CHANGES............................................... 25
12. TRADE-IN.......................................................... 25
13. RELOCATION OF EQUIPMENT........................................... 25
14. SUPPLIES AND/OR REPLACEMENT PARTS................................. 26
15. CONVERSION OF FINANCIAL ARRANGEMENT............................... 26
16. TRANSFER OF TITLE TO A THIRD PARTY................................ 26
17. NEW EQUIPMENT..................................................... 26
18. REMOVAL OF EQUIPMENT.............................................. 26
ARTICLE III................................................................. 28
TERMS AND CONDITIONS APPLICABLE TO THE SUPPLIER'S HARDWARE.................. 28
1. SCOPE............................................................. 28
2. FORM OF ORDER..................................................... 28
3. AVAILABILITY OF MAINTENANCE AND SPARE PARTS....................... 29
4. SUPPLIER RESPONSIBILITIES FOR TYPE 1 EMERGENCY.................... 30
5. SUPPLIER RESPONSIBILITIES FOR TYPE 2 EMERGENCY.................... 30
6. SWCO's RESPONSIBILITIES........................................... 30
7. ON-SITE MAINTENANCE............................................... 31
8. NOTIFICATION AND RESPONSE......................................... 31
9. MAINTENANCE TERM AND MAINTENANCE CHARGES.......................... 31
10. ENGINEERING COMPLAINTS............................................ 32
11. ENGINEERING CHANGES............................................... 32
12. EQUIPMENT NON-PERFORMANCE CREDIT.................................. 33
13. REMEDIES FOR EQUIPMENT FOR FAILURE TO MEET OPERATIONAL LEVEL...... 33
14. WARRANTY.......................................................... 33
15. ESCALATION GUIDELINES............................................. 33
16. PROCEDURES FOR SUPPLIER'S HMP..................................... 34
ARTICLE IV.................................................................. 37
TERMS AND CONDITIONS APPLICABLE TO.......................................... 37
1. SCOPE............................................................. 37
2. DEFINITIONS....................................................... 37
3. FORM OF ORDER..................................................... 37
4. LICENSE........................................................... 38
5. LICENSE TERM...................................................... 39
6. LICENSE FEE....................................................... 39
7. SOFTWARE DELIVERY................................................. 39
8. RISK OF LOSS...................................................... 40
9. INSTALLATION...................................................... 40
10. STANDARD OF PERFORMANCE FOR ACCEPTANCE............................ 40
11. NEW RELEASES...................................................... 40
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12. SOFTWARE MAINTENANCE............................................... 41
13. SOFTWARE MAINTENANCE CHARGE........................................ 42
14. TERMINATION OF MAINTENANCE......................................... 43
15. OBJECT CODE AND TECHNICAL DOCUMENTATION............................ 43
16. RELOCATION OF SOFTWARE............................................. 43
17. ENHANCEMENT OF SERVICES............................................ 43
18. SOFTWARE EVALUATION................................................ 43
19. SOFTWARE VIRUS PROTECTION.......................................... 44
ARTICLE V................................................................... 45
TERMS AND CONDITIONS APPLICABLE TO THE PERFORMANCE ACCEPTANCE............... 45
1. INTRODUCTION...................................................... 45
2. PRODUCT CONFIGURATION PLANNING PHASE.............................. 45
3. MEASUREMENT PROCESS............................................... 45
4. BASELINE PERFORMANCE COLLECTION PHASE............................. 45
5. INSTALLATION AND COMMISSIONING PHASE.............................. 45
6. PRODUCT OPTIMIZATION PHASE........................................ 45
7. PERFORMANCE COLLECTION, EVALUATION AND
ACCEPTANCE PHASE.................................................. 45
8. RESPONSIBILITIES.................................................. 45
ARTICLE VI.................................................................. 46
ENTIRE AGREEMENT............................................................ 46
1. ENTIRE AGREEMENT ENTIRE AGREEMENT................................. 46
2. SIGNATURES........................................................ 46
SCHEDULE A.................................................................. 47
PRODUCTS AND RELATED SERVICES............................................... 47
1. PRICING SUMMARY................................................... 47
2. EQUIPMENT DISCOUNTS............................................... 47
3. EQUIPMENT PRICING................................................. 47
4. MAINTENANCE FEES.................................................. 47
5. GENERAL CONDITIONS FOR ORDER...................................... 48
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ARTICLE I
TERMS AND CONDITIONS APPLICABLE TO
THE ENTIRE AGREEMENT
THIS GENERAL PURCHASE AGREEMENT is between SOUTHWESTCO WIRELESS, L.P., a
Delaware Limited Partnership, doing business as Cellular One, (hereinafter
called "SWCO") having an office and place of business at 11333 N. Scottsdale
Rd., Suite 200, Scottsdale, Arizona 85254 and Metawave Communications
Corporation, a Delaware Corporation, having its principal office and place of
business at 10735 Willows Road NE, Redmond, Washington 98073 (hereinafter called
"Supplier").
WHEREAS, SWCO may place Orders for the purchase of Product, Software and/or
Related Services from Supplier for use in the United States; and
WHEREAS, SWCO and Supplier each desire that the terms and conditions
controlling all such purchases be consistent, uniform, and agreed to by both
parties in advance of the -placement of any such Orders; and
WHEREAS, this Agreement is intended to establish consistent and uniform
terms and conditions for all purchases that SWCO may make from Supplier;
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
conditions herein contained, SWCO and Supplier agree as follows:
1. DEFINITIONS
1.1 "Agreement" refers to this General Purchase Agreement.
1.2 "Commissioning" refers to the procedures described in Supplier's
Product system manual to place the Equipment into commercial service at a
particular site which is documented by SWCO's signature on the Commissioning
Certificate attached hereto as Exhibit
1.3 "Equipment" refers to goods, including software necessary for the
operation of the equipment, available from Supplier hereunder.
1.4 "Initial Order" refers to the first Order for Equipment and associated
Services purchased by SWCO as defined in Schedule A.
1.5 "Order" refers to a written order from SWCO for the purchase, lease or
license from Supplier of a Product and/or Related Services.
1.6 "Outstanding Order" refers to an Order for which title/lease/license
to the Product and/or license to Software described therein has not passed to
SWCO or for which any Related Services described therein have not been accepted.
1.7 "Party" refers to either SWCO or Supplier, as the context requires;
both SWCO and Supplier may be collectively referred to as the "Parties."
1.8 "Product" refers to the Equipment and Software described on Schedule A
hereto.
1.9 "Related Services" means those services such as installation,
technical support, Software development, maintenance, and training, which
Supplier will provide to SWCO
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hereunder. Those Related Services which will be provided by Supplier, and the
charges therefore, if any, are set forth on Schedule A.
1.10 "Software" refers to software purchased by or provided to SWCO
including (i) computer programs embedded in the Equipment or Product which
control and monitor the operation of the Equipment ("Embedded System Software"),
as described in Schedule A; and (ii) the LampLighter(TM) PC-based graphical user
interface computer program for the Equipment, and all Features, Major Releases,
Point Releases, Software Patches (as defined in Article IV), and other updates
and modifications to such Software and any documentation in support thereof.
1.11 "Subcontractor" means any person who or entity which enters into a
contract with Supplier but with whom SWCO has no contractual relationship, and
all employees, agents and representatives of that person or entity.
2. TERM OF AGREEMENT
This Agreement shall be effective on 2/24, 1999 (the "Effective Date").
Unless terminated in accordance with Section 10 of this Article (Termination),
this Agreement shall continue in effect for one (1) year from the Effective Date
(the "Term") and will be automatically renewed for subsequent one-year terms at
each annual anniversary of the "Effective Date" (a "Renewal Term").
3. ORDERS
3.1 All Orders made by SWCO from Supplier shall be in the form of a SWCO
purchase order document that contains the items in the Section " Form of Order"
located in each Article of this Agreement. Each Order shall reference and be
deemed to incorporate the specifications applicable to the Product or Related
Services being ordered and any special terms, in addition to those set forth in
this Agreement made in writing by Supplier in SWCO and accepted by SWCO.
3.2 If notice of rejection of an Order is not received by SWCO within
[***] from the date of the Order, such Order shall be deemed to have been
accepted by Supplier.
3.3 Whenever the provisions of an Order conflict with the provisions of
this Agreement, the provisions of the Order which are not preprinted as part of
a form shall control. Printed provisions on the reverse side of SWCO's Orders
and all provisions on Supplier's forms whether in Supplier's notice of
acceptance, catalogue, invoice, confirmation, or otherwise, shall be deemed
deleted and of no force or effect. An Order may be modified only by a written
instrument signed by SWCO and Supplier.
3.4 It is expressly understood and agreed that this Agreement is intended
solely to establish uniform and consistent terms and conditions for any Orders
SWCO may choose to place with Supplier, that SWCO is not obligated to place any
Orders with Supplier, except for the Initial Order, that this Agreement does not
grant Supplier an exclusive privilege to sell to SWCO any or all Products,
Software and/or Related Services which SWCO may require by contract with other
manufacturers and suppliers for the procurement of comparable products, software
and/or services.
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3.5 SWCO assumes no liability for Product produced, processed or shipped
in excess of the amount specified in the Order placed with Supplier.
3.6 If following the completion of the site survey, Supplier reasonably
determines that Equipment configuration or the Related Services set forth in the
Order must be changed, Supplier shall notify SWCO with a written proposal for
changes to the purchase Order. Upon receipt, SWCO shall have [***] business days
to accept or reject the written proposal for changes. If accepted, SWCO shall
execute a written change Order to reflect the required changes identified by the
site survey. If SWCO rejects the written proposal for changes, SWCO may
terminate the purchase Order subject to Section 4 of Article I.
4. TERMINATION OF ORDERS
SWCO, prior to delivery, may terminate any Order, or portion thereof,
except for the Initial Order. In the event SWCO terminates an Order or portion
thereof, the following table will determine termination charges for undelivered
Product. No termination charge shall apply to Software not delivered or Related
Services not performed.
Time of Cancellation Prior to Maximum Termination Charge
Requested Delivery Date (% of Price)
[***]
Before Supplier applies these cancellation charges it will take into
consideration Supplier's ability to recommit such Product toward the fulfillment
of order(s) from other customers; and Supplier agrees to use every reasonable
effort to recommit such equipment.
5. PRICING AND DELIVERY
5.1 Upon placement by SWCO of an Order, Supplier agrees to sell to SWCO
those Products and/or Software specified on the Order for the applicable price
set forth on Schedule A. The price in Schedule A is exclusive of such taxes as
may be applicable pursuant to Section 16 of Article 1 (Taxes).
5.2 Supplier shall arrange for the delivery, and, if applicable,
installation of the Product or Provision of the Related Services on the date(s)
specified in the Order. Time is of the essence as to all dates for provision,
delivery and installation, unless mutually agreed to by both Parties.
6. INVOICES AND PAYMENT
6.1 For the Initial Order only, Supplier shall render invoices following
the date of acceptance of the Equipment, Software or Related Service as
indicated by SWCO's execution of the Certificate of Acceptance attached as a
part of Article V. Such invoices shall be sent to the billing address noted on
the Order and shall contain a detailed list of charges which shall include,
where applicable, type, description, and serial number of Equipment, Software,
description of Related Services, basic charge for the Equipment, Software, or
Related Service, and other
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applicable charges. Any taxes, transportation costs or other associated costs
billable hereunder are to be stated separately. Applicable sales/use taxes shall
be paid to the state in which taxable items are delivered, based on final
destination as noted in the Order for each item. If Order requires shipment to
multiple states, than each item invoiced must indicate final shipping
destination. Supplier shall attach to the invoices a copy of bills of lading and
shipping notice showing through routing and weight. Each invoice shall be paid
within thirty (30) days of receipt unless it is disputed by SWCO.
For all other Orders, Suppler shall render invoices as follows: for
Equipment to be installed by Supplier [***] for Equipment to be installed by
SWCO [***] on shipment; and for Related Services, [***] on completion unless
otherwise agreed to by both Parties.
6.2 The following detailed information is required on each invoice in
order to assure prompt remittance:
(1) SWCO's Order number.
(2) Supplier's invoice number.
(3) Quantity and price of each item shipped.
(4) Applicable sales/use tax:
i) the value of the taxable Product/Related Service by
individual taxing jurisdiction;
ii) the sales/use tax for each such Product/Related Service by
individual taxing jurisdiction;
iii) the value of nontaxable Product/Related Services; and
iv) Supplier's sales/use tax registration number for each
applicable taxing jurisdiction.
(5) Other charges (if applicable).
(6) Final total cost.
(7) Contract number.
6.3 Charges payable by SWCO will apply and shall be calculated from the
date of acceptance for Equipment or Software and the commencement date for a
Service. For any period of less than a calendar month, the charges shall be
prorated on the basis of a thirty (30) day month.
7. PRICE PROTECTION
Supplier shall not increase the prices for any Equipment, Software and/or
Related Services set forth on Schedule A during the Term. During a Renewal Term,
if any, Supplier may increase the price of Product, Software and/or Related
Service not more than [***]
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in any annual Renewal Term effective upon sixty (60) days prior written notice
and such increased price shall apply only to Orders placed after the effective
date of such price increase.
8. Most Favored Customer
8.1 For the Term and each Renewal Term of this Agreement, Supplier shall
[***] as [***]. Supplier represents that all of the [***] by Supplier hereunder
are [***]. If during the Term or any Renewal Term of this Agreement Supplier
[***], then:
(1) Supplier shall, within thirty (30) calendar days after the
effective date of such [***];
(2) This Agreement and all applicable Orders shall [***]; and
(3) [***].
[***]
8.2 If during the Term of this Agreement, or during any Renewal Term of
this Agreement, Supplier [***]
9. AUDIT
Supplier shall prepare and maintain complete, legible, and accurate records
relating to this Agreement during the Term and maintain such for two (2) years
from the date of termination. SWCO shall have the right, through its designated
representatives, to examine and audit, at all reasonable times, all such records
and such other records and accounts as may, under recognized accounting
practices, contain information bearing upon this Agreement.
10. TERMINATION
This Agreement may be terminated b written notice only, as follows:
(a) By either Party, [***] with such termination being effective as of the
end of the Term or Renewal Term. SWCO shall have the right to place Purchase
Orders up until the effective date of the termination, and termination of this
Agreement pursuant to this subsection (a) shall not affect any Outstanding
Purchase Order as of the effective date of the termination.
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(b) By either Party, in the Event of Default or breach of this Agreement
and/or Order by Supplier, when the breach or Default has not been cured after
thirty (30) day written notice by the non-breaching Party. Any of the following
shall be considered an "Event of Default":
i) Either Party is judged bankrupt or insolvent; or
ii) Either Party makes a general assignment for the benefit of its
creditors; or
iii) A trustee or receiver is appointed for either Party or for any
of its property; or
iv) Any petition by or on behalf of either Party is filed to take
advantage of any debtor's act or to reorganize under the
bankruptcy or similar laws; or
v) Either Party disregards laws, ordinances, rules, regulations or
orders of any public authority.
In the event of termination pursuant to this subsection (b), SWCO shall
have the right, at its option, to confirm in whole or in part any Outstanding
Order, in which case Supplier shall be obligated to fulfill the Order to the
extent it is confirmed, or to cancel, in whole or in part, any outstanding Order
without any liability to SWCO. The foregoing right is in addition to, and not in
limitation of, any other remedy SWCO may have at law or equity.
11. TRAINING
11.1 Supplier shall, at Supplier's published rates, provide sufficient
training, training materials and technical support to SWCO to enable SWCO to
properly and effectively use the Product. Such training shall be conducted at a
site selected by SWCO, or at Supplier's offices located in Redmond, Washington,
and on dates that are mutually agreed to.
11.2 Supplier shall provide a training class on site in each SWCO MSA
where Equipment is installed. Additionally, Supplier shall provide a Refresher
course annually at a site selected by SWCO. The content of each course shall
include, but not be limited to site preparation, installation, remedial
maintenance, failure recovery/backup, failure repair techniques, test equipment,
diagnostic software use, and full documentation requirements, and may be changed
by Supplier when, in its judgment, such change is warranted. Supplier shall
provide sufficient personnel to conduct said course and shall furnish, at no
additional cost, instructional aids appropriate for each course, including
books, pamphlets and diagrams.
11.3 SWCO may reproduce any training materials originated by Supplier for
the purpose of training SWCO personnel. Any such reproductions shall include any
copyright 6r similar proprietary notices contained in the items being
reproduced.
12. MANUALS AND DOCUMENTATION
12.1 Supplier shall provide, on or before the installation date for
Product and at no additional charge, an updated CD Rom covering the
installation, maintenance and operation of the Equipment and Software for every
Spotlight ordered. Supplier shall provide all future updates of such CD Rom at
Supplier's then published rates.
12.2 SWCO may reproduce any manuals for the purpose of installing,
maintaining and operating the Equipment and Software. Any such reproductions
shall include copyright or
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similar proprietary notices contained in the items being reproduced. SWCO may
purchase additional sets of manuals at Supplier's published rates.
13. WARRANTIES
13.1 Supplier warrants to SWCO that the Equipment and Software furnished
will be free from defects in design (except to the extent designed by SWCO),
material and workmanship and will conform to and perform in accordance with the
specifications and documentation. Supplier also warrants to SWCO that Services
will be performed in a fully workmanlike manner to SWCO's reasonable
satisfaction. In addition, if Equipment or Software furnished contains one or
more manufacturers' warranties, Supplier hereby assigns such warranties to SWCO.
All warranties shall survive inspection, acceptance and payment. Equipment or
Software not meeting the warranties will, at SWCO's option, be repaired,
adjusted or replaced by Supplier at no cost to SWCO.
13.2 Except as otherwise stated herein, the warranty period for purchased
Equipment, Software or Related Services will be in effect for [***] after the
date of acceptance of such Equipment, Software or Related Services; provided;
however, that such warranty period for Equipment or Software shall be extended
by a period equal to the time during which such Equipment or Software is not
operational as a result of such Equipment or Software not meeting its
warranties. The warranty period for replacement Product shall be the remaining
warranty period of the replaced Product or ninety (90) days, whichever is the
greater.
13.3 If any breach of warranty occurs with respect to Equipment or
Software and if such breach has not been corrected within a reasonable time (not
to exceed thirty (30) days from SWCO notice to Supplier of the breach), SWCO may
cancel any Outstanding Orders covering such defective Equipment or Software and
any other Outstanding Orders for Equipment or Software affected by such breach.
In the event a breach occurs during the warranty period on accepted Equipment or
Software, and Supplier is unable to correct such breach through the procedures
set forth in Articles III and IV within [***] from SWCO notice to Supplier of
the breach, Supplier shall promptly remove such defective portion of Equipment
or Software and refund to SWCO all monies previously paid to Supplier for such
defective portion of Equipment or Software affected by the uncorrected breach.
13.4 Supplier warrants that SWCO shall acquire good and clear title to any
Product purchased hereunder, free and clear of all liens and encumbrances And
with respect to Software which is licensed, Supplier warrants SWCO shall acquire
all rights and interests to use such Software.
13.5 Supplier represents and warrants to SWCO that at the time of
delivery, all Products and Software delivered hereunder shall be "CALEA
Compliant," meaning that they shall not adversely affect SWCO' s ability to
comply with the provisions of Pub L. 103-414, Title 1, October 25, 1994, 108
Stat 4279 as it may be amended from time to time as well as any regulations or
industry standards implementing the provisions of the law.
13.6 This warranty does not apply to any claim which arises out of any of
the following: (1) the Equipment has been subject to unreasonable misuse,
neglect, damage by SWCO or a third party; (ii) only in the event the
installation was provided by someone other than Supplier and the Equipment has
not been installed or optimized according to Supplier's
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guidelines, or parts have been used in the Equipment which are not designed to
be used with the Equipment; (iii) the Equipment is not maintained pursuant to
Supplier's Maintenance Program only in the event the maintenance was provided by
someone other than Supplier; (iv) an event of Force Majeure has occurred; and
(v) the Equipment is non-performing as a result of the failure of third party
equipment or services including but not limited to antennas, antenna lines or
interconnection facilities not provided by Supplier at the site.
13.7 THE WARRANTIES IN THIS AGREEMENT ARE GIVEN IN LIEU OF ALL OTHER
WARRANTIES EXPRESS OR IMPLIED WHICH ARE SPECIFICALLY EXCLUDED, 1NCLIJDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
14. BENCHMARK TESTING, PRODUCT AND SOFTWARE TRIAL
14.1 Upon SWCO's request, and subject to availability, Supplier shall
[***] be incorporated into the Order.
14.2 Upon SWCO's request, and subject to availability, Supplier shall, at
no additional charge, provide SWCO with the use of products similar to Equipment
and Software ordered by SWCO, but not yet installed, for purposes of program
testing, conversion, compiling and other activities if Supplier normally
provides similar use of such products to its other customers.
14.3 Supplier and SWCO may agree to an Equipment and Software trial(s) to
demonstrate additional functionality which shall be governed by the following
provisions:
(1) Supplier shall bear all expenses related to the trial of the
Equipment and Software, including the cost of transportation,
installation, deinstallation, modification, repair, maintenance,
packing, and unpacking, unless otherwise agreed to by the
Parties.
(2) The trial period will begin the day following SWCO's receipt of
Supplier's notice that all Equipment and Software subject to the
trial have been installed and are ready for testing. The trial
will continue for the period agreed to by Supplier and SWCO.
(3) At the end of the trial period, SWCO shall notify Supplier
whether or not SWCO will order the trialed Equipment and
Software. For any Equipment and Software not ordered by SWCO,
Supplier shall remove such Equipment or Software within seven
(7) days after Supplier's receipt of the notice, and SWCO will
promptly return any Software to Supplier.
(4) If, during the [***]
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15. FORCE MAJEURE
Neither SWCO nor Supplier shall be liable or deemed in default for any
delay or failure in performance of an Order or any part of this Agreement to the
extent that such delay or failure is caused by accident, fire, industry-wide
strike, embargo, act of the government, war or national emergency requirement,
act of God, or act of the public enemy ("Force Majeure Conditions"). If any
Force Majeure Condition occurs, the Party delayed or unable to perform shall
promptly give notice to the other Party. The Party affected by the other Party's
delay or inability to perform may elect to:
(1) Terminate the Order or part thereof as to Product or Related Services
not already received; or
(2) Suspend the Order for the duration of the Force Majeure Condition, and
resume performance once the Force Majeure Condition ceases.
Until notice is given otherwise, option (2) shall be deemed selected.
16. TAXES
16.1 Supplier shall bear the cost of all taxes, including but not limited
to gross receipt taxes, imposed upon Supplier. Supplier shall be responsible to
invoice SWCO and remit to the appropriate government authorities all applicable
sales and use taxes imposed by law. SWCO shall be responsible to reimburse
Supplier for applicable sales and use taxes billed and remitted as required
hereunder.
16.2 Supplier shall provide to SWCO a sales and use tax registration
number for each state in which Related Services are performed or that is the
final destination, as set forth on the Order, of Product provided under this
Agreement. The registration number for each applicable state will be added to
every invoice issued by Supplier to SWCO hereunder. Supplier shall remit the
sales/use tax to the state of final destination of Product, or the state in
which the Related Services are performed. Supplier shall notify SWCO of any
state for which Supplier does not bill and remit sales/use taxes because
Supplier does not have nexus with that state.
16.3 If any of the Related Services include contractor services, Supplier
shall comply with any applicable state's resident and non-resident contractor
laws. Supplier will be responsible for its subcontractors compliance with such
laws. Supplier shall provide SWCO with documentation of such compliance
(including subcontractor documentation), which, at minimum, shall include a copy
of the non-resident compliance certificate issued by each applicable state.
16.4 Each invoice issued by Supplier hereunder shall separately set forth;
(i) the value of the taxable Product/Related Service by individual taxing
jurisdiction, (ii) the sales/use tax for each such Product/Related Service by
individual taxing jurisdiction, and (iii) the value of nontaxable
Product/Related Services.
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16.5 Supplier agrees to pay, and hold SWCO harmless from and against, any
penalty, interest, tax or other charge that may be levied or assessed as a
result of the delay or failure of Supplier for any reason to pay any tax or file
any return or information required by law, rule or regulation or by contract. If
SWCO believes that Supplier has failed to comply with any of the terms of this
Section 16, SWCO shall discuss such failure with Supplier, and upon the
presentation of evidence that such failure has in fact occurred, SWCO may
withhold up to ten percent (10%) of any invoice affected by such noncompliance.
17. NOTICE
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed given when either personally served or mailed by
certified, registered mail, return receipt requested, or delivered by a
reputable overnight delivery service, or by facsimile transmission confirmed by
another form of delivery within one (1) business day, to:
SWCO: Cellular One
11333 North Scottsdale Road, #200
Scottsdale, Arizona 85254
Attention: Contract Manager
Supplier: Metawave Copy to: Metawave 1
10735 Willows Road NE 10735 Willows Road NE
Redmond, Washington 98073 Redmond, Washington 98073
Attention: V.P. of Sales & Marketing
Attention: General Counsel
If either Party changes its address during the term hereof, it shall so
advise the other Party in writing, and all notices thereafter required to be
given shall be sent to such new address.
18. INDEPENDENT CONTRACTORS
Neither Supplier nor its officers and directors and its associated
personnel and employees shall be deemed to be employees or agents of SWCO, it
being understood that Supplier is an independent contractor for all purposes and
at all times. Supplier shall be solely responsible for the safety and
supervision of its employees as well as for the withholding or payment of all
federal, state and local personal income taxes, social security, unemployment
and sickness disability insurance and other payroll taxes with respect to its
employees, including contributions from them as required by law.
19. INDEMNIFICATION
19.1 Supplier shall defend, indemnify, and hold harmless SWCO, its
parents, subsidiaries and affiliates, and their directors, officers, agents and
employees from any and all liabilities, claims or demands whatsoever, (including
the costs, expenses and reasonable attorney's fees incurred on account thereof)
that may be made: (i) by any person, specifically including, but not limited to,
Supplier, its agents or subcontractors, for injuries including bodily injury
(including death to persons) or damage to property (including theft) occasioned
by or alleged to have been occasioned by the acts or omissions of the Supplier
its agents or subcontractors whether negligent or otherwise; or (ii) by persons
furnished by Supplier or any
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subcontractors under Worker's Compensation or similar acts, except to the extent
such liability, claim, or demand arises in whole or in part from the negligence
or willful misconduct of SWCO, its agents or employees.
19.2 Supplier shall defend SWCO against any such liability, claim or
demand and control the litigation, settlement and defense thereof. The foregoing
indemnification shall apply whether the death, injury or property damage is
caused by the sole acts or omissions of Supplier or by the concurrent acts or
omissions of SWCO or Supplier hereunder, except Supplier shall not be
responsible for that portion of any liability, claim or demand to the extent
that it arises from the negligence or willful misconduct of SWCO, its employees
or agents SWCO agrees to notify Supplier promptly of any written claim or
demands against SWCO for which Supplier is responsible hereunder.
19.3 The supplied Equipment, Hardware, Software, Product and Related
Services provided hereunder (i) shall perform on and after January 1, 2000 in as
good a manner as before such date, and (ii) shall at all times manage,
manipulate and report data involving dates (including the year 2000, dates
before and after the year 2000, and single-century and multicentury formulas)
without generating incorrect values or dates or causing an abnormally-ending
scenario within an application. Supplier shall provide SWCO with evidence of
successful completion of laboratory testing, that the supplied Equipment,
Hardware, Software, Product and Related Services provided hereunder properly
performs all internal and external time and date processing. Such certification
shall be provided no later than thirty (30) days after the execution of this
Agreement. In addition, Supplier agrees to cooperate with SWCO in conducting
Year 2000 interoperability tests to ensure that the supplied Equipment,
Hardware, Software, Product and Related Services do not adversely `affect the
operation, output, functionality or other elements of SWCO's operation. Further,
Supplier agrees to cooperate with SWCO in providing information to third
parties, such as customers, regulatory bodies, and auditors, regarding
Supplier's Year 2000 compliance as it relates to the supplied Equipment,
Hardware, Software, Product and Related Services. Supplier shall indemnify SWCO
and for any loss, cost, or damages (including attorney's fees) sustained because
of Supplier's Year 2000 noncompliance.
20. INFRINGEMENT
20.1 The following terms apply to any infringement, suit for or claim or
allegation of infringement of any United States patent, trademark, copyright,
trade secret or other proprietary interest (collectively referred to as "IP
Claim") based on the manufacture, use, sale, resale, or importation into the
United States of any Equipment, Software, Related Service, documentation or
other item furnished to SWCO under or in contemplation of this Agreement.
Supplier shall indemnify and hold harmless SWCO and any of its affiliates,
customers, officers, directors, employees, assigns and successors for any loss,
damage, expense, cost (including, but not limited to, any attorney's fees
incurred in the enforcement of this indemnity) or liability that may result by
reason of any such IP Claim, and Supplier shall defend or settle, at its own
expense, any such IP Claim against SWCO.
20.2 SWCO shall provide Supplier with prompt written notice of any IP
Claim that identifies Equipment, Software or Related Service provided to SWCO
hereunder and tender to Supplier control of any such action or settlement
negotiations to the extent covered by the indemnification provided herein.
Supplier shall keep SWCO advised of the status of any such IP Claim and of its
defense and/or negotiation efforts and shall afford SWCO reasonable
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opportunity to review and comment on significant actions planned to be taken by
Supplier on behalf of SWCO. If any such IP Claim involves other vendors of SWCO,
Supplier shall cooperate as reasonably necessary to effectively defend SWCO.
SWCO shall, at Supplier's expense, reasonably cooperate with Supplier in the
defense of SWCO.
20.3 If the use, manufacture, sale, or importation in the United States of
any Equipment, Software, or Related Service furnished hereunder becomes subject
to an IP Claim, Supplier shall, at SWCO's option and at no expense to SWCO, (i)
by license or other release from claim of infringement obtain for SWCO and
SWCO's customers the right to make, use, sell and/or import into the United
States the Product, Software or Related Service, as appropriate; or (ii)
substitute an equivalent non-infringing Product, Software or Related Service
reasonably acceptable to SWCO, which meets the specifications for the Product,
Software or Related Service, and extend this indemnity thereto; or (iii) modify
such Product, Software, or Related Service to make it non-infringing but
continue to meet the specifications therefore, and extend this indemnity
thereto.
20.4 Supplier shall have no obligation to SWCO with respect to any claim
of patent or copyright infringement which is based upon (i) adherence to
specifications, designs, or -instructions furnished by SWCO, unless such
specifications, designs, or instructions are incorporated into Product made
generally available to Supplier's customers, (ii) the combination, operation or
use of any Equipment supplied hereunder with products, software, or data with
which the Equipment is not intended to be used or for which the Equipment is not
designed, unless at Supplier's direction, (iii) the alteration of the Equipment
or modification of any Software made by any party other than Supplier, unless at
Supplier's direction, or (iv) SWCO's use of a superseded or altered release of
some or all of the Software if infringement would be avoided by the use of a
subsequent, unaltered release of the Software that is provided to SWCO by
Supplier.
21. USE AND PROTECTION OF INFORMATION
21.1 The Parties shall, both during the Term of this Agreement and for a
period of [***] after termination of this Agreement, hold in strictest
confidence information which is confidential and/or proprietary to the other
("Confidential Information", as more fully described below). The Parties shall
not disclose or make each other's Confidential Information available, in any
form, to any third party or use each other's Confidential Information for any
purpose other than as specified in this Agreement. Each Party shall take all
reasonable steps to ensure that Confidential Information is not disclosed or
distributed by its employees or agents (who have access to same because of and
only on a need-to-know basis) in violation of any provision of this Agreement,
but in no event less than reasonable means. If in the course of performance of
this Agreement Supplier needs to disclose SWCO Confidential Information to a
subcontractor or agent, the agent/contractor must sign a Non-Disclosure
Agreement substantially in the form of Schedule B.
21.2 SWCO's and Supplier's Confidential Information shall include all
information clearly marked as confidential.
21.3 The foregoing shall not prevent either Party from disclosing
Confidential Information which: (i) is or becomes a part of the public domain
through no act or omission of the other Party; (ii) was in the other Party's
lawful possession prior to such access to or the
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disclosure of same and had not been obtained by such other Party either directly
or indirectly from the Party hereto granting such access or making such
disclosure, all of which is so documented by such other party; (iii) is lawfully
disclosed to the other Party by a third party without restriction on such
disclosure; (iv) is required to be disclosed pursuant to subpoena, law,
regulation, or other legal process, provided, however, that the Party responding
to such request first provides written notice to the other Party of the request;
(v) is approved by the other Party for disclosure; or (vi) with respect to
information that is the same as or substantially identical to the Confidential
Information, is independently developed and is so documented by the other Party.
21.4 Each Party acknowledges that the other would suffer irreparable
damage in the event of any material breach of the provisions of this Section 21.
Accordingly, in such event, a Party would be entitled to seek preliminary and
final injunctive relief, as well as any other applicable remedies at law or in
equity against the Party who has breached or threatened to breach this Section
21 and that Party hereby waives the defense that money damages would be
adequate.
22. SUPPLIER'S INFORMATION
No specifications, drawings, sketches, models, samples, tools, computer
programs, technical information, business information, or data, other than that
specified in Section 21 of this Article, written, oral or otherwise, furnished
by Supplier to SWCO hereunder or in contemplation hereof shall be considered by
SWCO to be confidential or proprietary unless so agreed to by SWCO in writing at
the time an Order is placed.
23. AVAILABILITY
Supplier represents and warrants that the Equipment and Software listed on
Schedule A or its equivalent shall be available for purchase by SWCO from
Supplier for a minimum of five (5) years following the initial acquisition of
the Product pursuant to this Agreement.
24. LICENSES
No licenses, express or implied, under any patents, trademarks or copyright
are granted by SWCO to Supplier. No licenses, express or implied, under any
patents, trademarks or copyright are granted by Supplier to SWCO except for
Software licenses contained in Article IV.
25. ASSIGNMENT
25.1 Any assignment of the work to be performed, in whole or in part, or
of any other interest hereunder by Supplier without the prior written consent of
SWCO, except an assignment confined solely to monies due or to become due, shall
be void. It is expressly agreed that any such assignment of monies shall be void
to the extent that it attempts to impose upon SWCO obligations to the assignee
additional to the payment of such monies, or to preclude SWCO from dealing
solely and directly with Supplier in all matters pertaining hereto, including
the negotiation of amendments or settlements of amounts due. SWCO, upon five (5)
days prior written notice to Supplier, may assign all its rights, duties and
obligations under this Agreement to an affiliate or affiliates of SWCO or to a
partnership or partnerships to which SWCO or its affiliate has an ownership
interest.
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25.2 SWCO shall not (i) assign, sublicense or otherwise transfer the
Software license set forth in Article IV, to any third party without the prior
consent of the Supplier, except as permitted in Section 25.1, (ii) purchase the
Equipment solely for the purpose of reselling or distributing it to a third
party (third party does not include SWCO's affiliates); or (iii) permit its
directors, officers, employees, agents or any other third person to reverse
engineer the Equipment or the Software.
26. SUBCONTRACTING
Supplier shall not, without SWCO's prior written approval, subcontract any
portion of the work to be performed on SWCO property hereunder, except for the
purchase of standard commercial supplies and materials.
27. PUBLICITY AND ADVERTISING
Supplier shall submit to SWCO all advertising, sales promotion, press
releases and other publicity matters relating to the Equipment or Software
furnished or the Related Services performed by Supplier under this Agreement
wherein SWCO's name, marks or the name or mark of any Bell Atlantic Company is
mentioned or language from which the connection of said names or marks therewith
may be inferred or implied. Supplier shall not publish or use such advertising,
sales promotion, press releases, or publicity matters without SWCO's prior
written approval. Supplier shall post no signs at any site at which Equipment or
Software is being installed or serviced except those required by local, state or
federal law.
28. CHOICE OF LAW
This Agreement shall be governed by the laws of the State of New York
without reference to its conflicts of law provisions and the Software shall have
the definition of goods under the U.C.C. The exclusive jurisdiction for any
legal proceeding regarding this Agreement shall be the state or federal courts
in New York and the Parties expressly submit to the jurisdiction of said courts.
29. WAIVER AND ESTOPPEL
Either Party's failure at any time to enforce any of the provisions of this
Agreement or any right with respect thereto, or to exercise any option herein
provided, will in no way be construed to be a waiver of such provisions, rights,
or options or in any way to affect the validity or enforcement of this
Agreement. The exercise by either Party of any right or options under the terms
or covenants herein shall not preclude or prejudice the exercising thereafter of
the same or any other right under this Agreement.
30. SEVERABILITY
If any provision or portion of a provision of this Agreement is invalid
under applicable statute or rule of law, it is only to that extent to be deemed
omitted, and such unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall then be construed as if such unenforceable
provision(s) had never been contained herein.
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31. HEADINGS
The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein.
32. INSURANCE
32.1 Supplier shall maintain, during each Term and Renewal Term of this
Agreement, at its own expense, the following insurance:
a. Worker's Compensation insurance as prescribed by the law of the
state in which the work is performed;
b. Employer's liability insurance with limits of at least
$1,000,000 each occurrence:
c. Comprehensive general liability insurance (including products
liability insurance) and, if the use of automobiles is required,
comprehensive -automobile liability insurance, each with limits
of at least $1,000,000 for bodily injury, including death, to
any one person, and $1,000,000 on account of any occurrence, and
$1,000,000 for each occurrence of property damage; and
d. Excess liability insurance with a combined single limit of
$5,000,000.
32.2 The insuring carriers and the form of the insurance policies shall be
subject to approval by SWCO. SWCO shall be named as an additional insured on all
such policies. Supplier shall furnish to SWCO certificates of such insurance
within ten (10) days of the execution of this Agreement. The certificates shall
provide that ten (10) days prior written notice of cancellation or material
change of the insurance to which the certificates relate shall be given to SWCO.
The fulfillment of the obligations hereunder in no way modify Supplier's
obligations to indemnify SWCO.
32.3 Supplier shall also require Supplier's subcontractors, if any, who
may enter upon SWCO's premises to maintain similar insurance and to agree to
furnish SWCO, if requested, certificates or adequate proof of such insurance.
Certificates furnished by Supplier's subcontractors shall contain a clause
stating that SWCO is to be notified in writing at least ten (10) days prior to
cancellation of, or any material change in, the policy.
32.4 SWCO may reasonably require Supplier at any time, and from time to
time, subject to Supplier's ability to obtain such additional insurance, to
obtain and maintain in force additional insurance with coverage or limits in
addition to those above described. However, the additional premium costs of any
such additional insurance required by SWCO shall be borne by SWCO, and Supplier
shall arrange to have such costs billed separately and directly to SWCO by the
insuring carrier(s). SWCO shall be authorized by the Supplier to confer directly
with the agent or agents of the insuring carrier(s) concerning the extent and
limits of Supplier's insurance coverage in order to assure the sufficiency
thereof.
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33. RELEASES VOID
Neither Party shall require waivers or releases of any personal rights from
representatives or customers of the other in connection with visits to its
premises and both Parties agree that such releases or waivers shall not be
pleaded by them or by third persons in any action or proceeding.
34. OCCUPATIONAL SAFETY AND HEALTH ACT (OSHA)
Supplier shall be responsible for the safety of its work and shall maintain
all lights, guards, signs, temporary passages, and any other necessary
protection and precautions for that purpose. Supplier and its Subcontractors
shall give access to the authorized representatives of the Secretary of Labor or
any state or local official for the purpose of inspecting or investigating or
carrying out of any of the duties under the Occupational Safety and Health Act
of 1970, and any amendments thereto, or any applicable state, or local laws,
rules, or regulations affecting safety and health. Supplier shall be responsible
for any violation by it or its subcontractors of any safety or health standards
issued thereunder, shall immediately remedy any citation giving rise to such
violations, and Supplier shall defend, indemnify, and hold harmless SWCO from
any penalty, fine or liability in connection therewith.
35. NON-DISCRIMINATION COMPLIANCE
The applicable provisions in Schedule C, entitled "Non-Discrimination
Compliance Agreement" shall form a part of this Agreement and any amendments
thereto.
36. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of, and shall be binding upon the
Parties hereto and their respective successors and permitted assigns.
37. SWCO'S PROPERTY
37.1 Title to all property owned by SWCO and furnished to Supplier shall
remain in SWCO
37.2 Any property to which SWCO has title and which is in Supplier's
possession or control shall be used only in the performance of this Agreement
unless authorized in writing by SWCO. Supplier shall adequately protect such
property, and shall deliver or return it to SWCO or otherwise dispose of it as
directed by SWCO.
38. LAWS, RULES AND REGULATIONS
38.1 Supplier shall comply, at its own expense, with the applicable
provisions of the EEO, Fair Labor Standards Act of 1938, as amended, The
Occupational Safety and Health Act, and all other applicable federal, state and
local laws, ordinances, regulations and codes including identification and
procurement of required permits, certificates, approvals and inspections in
performance under this Agreement.
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38.2 The employee and agents of each Party shall, while on the premises of
the other, comply with all governmental rules and regulations in effect at such
premises, including security requirements. Supplier's right of entry shall be
subject to applicable governmental security laws.
38.3 Both Parties agrees to indemnify and hold the other Party harmless
for any loss or damage that may be sustained by reason of any failure to comply
with this Section 38.
39. ATTORNEYS' FEES AND COSTS
In the event that this Agreement or any Order is breached by Supplier,
then, in addition to all other rights and remedies SWCO may have, at equity and
in law, Supplier shall be liable for SWCO's reasonable attorneys' fees and costs
incurred in collecting any sums that are due and owing under this Agreement or
in taking any legal action that is necessary in order to enforce the terms and
conditions of this Agreement.
40. COUNTERPARTS
This Agreement may be executed in counterparts, all of which shall be considered
an original and together they shall constitute one (1) agreement.
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ARTICLE II
TERMS AND CONDITIONS APPLICABLE TO
EQUIPMENT ACQUISITION
1. SCOPE
Supplier shall provide to SWCO the Equipment and Related Services as
described in the Orders SWCO may from time to time place hereunder.
2. FORM OF ORDER
Each Order for Equipment and Related Services shall contain the following:
(1) Date of Order and Order Number,
(2) The incorporation by reference of this Agreement:
(3) The incorporation by reference of specifications which differ from
those in published guides;
(4) A detailed list of the Equipment or Related Services that are
required. Such list is to include where applicable quantities, model
numbers, features, descriptions, specifications, prices, charges,
purchase option-credits, and discounts. The last will indicate which
equipment is purchased and which is leased;
(5) The billing and delivery addresses;
(6) The required dates for delivery and installation of Equipment or
Related Services;
(7) The name and telephone number of the SWCO person to contact regarding
delivery and the coordination of other activities; and
(8) Any other special terms and conditions that are not provided for
elsewhere in the Order or this Agreement.
3. SITE PREPARATION
Supplier shall promptly perform a site survey and shall promptly furnish to
SWCO site preparation specifications in such detail as to ensure that the
Equipment to be installed shall operate efficiently from an environmental point
of view. SWCO shall prepare the site at its own expense and in accordance with
the site specifications. Supplier shall reimburse SWCO for any site preparation
expenses needlessly incurred because of inaccurate site preparation
specifications, or because the site was prepared for Equipment which was
returned for failure to conform to the provisions of this Agreement.
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4. TRANSPORTATION
4.1 Supplier shall deliver the Equipment complete and in accordance with
SWCO instructions, if any, with transportation charges prepaid by Supplier.
Supplier shall deliver the Equipment in sufficient time to meet the required
installation date. SWCO may delay the delivery of the Equipment by giving the
Supplier notice prior to shipment.
4.2 Supplier shall, at no additional charge, properly pack the Equipment
in connection with the shipment of such Equipment to the delivery location and
in connection with the removal of such Equipment, if such Equipment is returned
to Supplier pursuant to this Agreement.
4.3 Unless SWCO provides special shipping instructions, transportation
charges shall not exceed the cost of shipment via surface common carrier between
the delivery location and Supplier's facility. SWCO shall reimburse Supplier for
such transportation charges for the shipment of the Equipment to the delivery
location. SWCO shall reimburse Supplier for rigging and drayage costs incurred
at the delivery location.
4.4 If Supplier removes or replaces any Equipment because such Equipment
is nonconforming with the provisions of this Agreement, Supplier shall bear all
transportation charges including rigging and drayage costs. If SWCO has already
paid Supplier for such charges, Supplier shall promptly refund such payment.
4.5 Supplier shall be responsible for dealing with carriers to ensure
delivery of shipments, locating missing or late shipments, resolving billing for
transportation charges, and submitting and resolving all claims arising from
loss of or damage to such shipments.
4.6 Claims for transportation damage shall be filed and processed by
Supplier. Without cost to SWCO, and at SWCO's option, damaged Product, Software
shall be promptly repaired to the satisfaction of SWCO or replaced, with all
replacement parts to be handled on an expedited shipping basis.
5. TITLE AND RISK OF LOSS
For the Initial Order only, title shall not vest nor shall risk of loss
pass until installation has been fully performed and the equipment has been
accepted by SWCO in accordance with Article V. On all subsequent Orders for
Equipment title shall vest in SWCO and risk of loss pass to SWCO only when
Equipment has been delivered at the F.O.B. point of destination.
6. INSTALLATION AND COMMISSIONING
6.1 Supplier shall install the Equipment, perform its standard test
procedures and prepare the Equipment for Commissioning, all on or before the
ordered Commissioning date and Supplier shall certify to SWCO that such
Equipment is ready for the Commissioning. There shall be no installation or
Commissioning charges associated with any Equipment except those charges that
are listed in the Order. Supplier shall remove and dispose of all packing
materials and other surplus materials upon completion of the installation.
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6.2 No Equipment shall be deemed to be installed until all Equipment and
all Software required by the Order has been installed. However, the Parties may
agree that Commissioning can be certified on a site by site basis.
6.3 If Supplier fails to complete such Commissioning and deliver to SWCO
its certification of Commissioning on or before the ordered Commissioning date,
SWCO may either cancel the Order or extend such ordered Commissioning date to a
subsequent date. If SWCO elects to extend the ordered Commissioning date, the
Parties agree that SWCO will be damaged in an amount which will be difficult to
determine with certainty. Therefore, Supplier agrees to pay SWCO as a late
Commissioning-charge, and not as a penalty, an amount equal to one percent (1%)
of the purchase price for each week or part thereof of delay occurring after the
ordered Commissioning date originally specified on the Order until either the
Commissioning date or the date on which SWCO cancels the Order, whichever first
occurs. Such late Commissioning-charge shall not accrue beyond twelve (12) weeks
of delay and shall take the form of a credit against the purchase price of the
Equipment in favor of SWCO.
6.4 The foregoing not withstanding, in the event that construction delays
or other causes not covered by Section 15 of Article I (Force Majeure) and not
within the reasonable -control of Supplier, force postponement of the
installation of a Product, the Product, shall be stored until installation can
be resumed. Transfer and storage charges incurred shall be paid by SWCO. Labor
costs for loading and unloading shall be based upon an hourly rate to be
determined by agreement between SWCO and Supplier. The cost of special services,
such as design, warehousing, inventory, etc., shall be negotiated between SWCO
and Supplier prior to placement of the Order.
7. SELF INSTALLATION
7.1 SWCO may, at its option, install the Equipment. Such election shall be
stated in the Order or anytime prior to delivery. If SWCO so elects to install
the Equipment, Supplier shall, if requested by SWCO, provide services relating
to installing, Commissioning, and optimizing, at a mutually agreed upon rate.
7.2 If SWCO elects to install the Equipment and Supplier fails to deliver
the Equipment by the ordered delivery date, Supplier shall be subject to a late
delivery charge in the form of a credit against the purchase price of the
Equipment as provided for in Section 6 of this Article (Installation and
Commissioning), except that the calculation of damages will be based on the
delay occurring after the ordered delivery date until the actual delivery date
rather than after the ordered Commissioning date. In addition, SWCO may cancel
the Order.
8. INSTALLATION, ASSISTANCE AND TECHNICAL SUPPORT
8.1 During the Warranty period, such technical support shall be provided
without charge to SWCO, unless otherwise specified in Schedule A. The
availability or performance of this technical support service shall not be
construed as altering or affecting Supplier's warranties or any other obligation
of Supplier under this Agreement.
8.2 Supplier shall provide SWCO with ongoing technical support, including,
field service and assistance. During the Warranty period, such technical
support shall be provided without charge to SWCO, unless otherwise specified in
Schedule A. The availability or
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performance of this technical support service shall not be construed as altering
or affecting Supplier's warranties or any other obligation of Supplier under
this Agreement.
9. STANDARD OF PERFORMANCE FOR ACCEPTANCE
For the Initial Order only, SWCO shall certify to Supplier that the
Equipment has been accepted upon the successful achievement of the Performance
Acceptance Procedure as specified in Article V. Within ten (10) days after
Supplier has certified that the Equipment has been installed and ready for use,
SWCO, with Supplier's advice and assistance, shall commence the acceptance
tests.
10. CABLES AND RELATED ITEMS
An Order shall be deemed to include all items necessary for the proper
operation of the Equipment as ordered by SWCO, provided by Supplier, and
includes any other components or materials necessary to enable the operation of
the Equipment in accordance with the specifications.
11. ENGINEERING CHANGES
11.1 Engineering changes which are (i) generally made available by
Supplier to customers on the same Equipment provided hereunder and (ii) are
intended to correct defects in the Equipment, shall, with the consent of SWCO,
be made by Supplier to the Equipment at no charge. The administration and
installation of engineering changes shall be accomplished by Supplier, unless
otherwise agreed to by the Parties.
11.2 Engineering changes which correct a safety defect shall be made as
soon as possible at no charge. Supplier shall notify SWCO of any such safety
defect and recommended interim safety measure to be taken.
12. TRADE-IN
SWCO may request Supplier to [***]. In such event, Supplier may [***].
13. RELOCATION OF EQUIPMENT
SWCO may move Equipment from one location to another. At SWCO's request,
Supplier shall arrange for and supervise the dismantling, packing and moving of
any purchased Equipment and shall inspect and reinstall such Equipment at the
new location. In addition, Supplier shall specify to SWCO, prior to any move,
which of the existing cables and ancillary equipment associated with the
Equipment to be moved are reusable at the new site. SWCO shall pay Supplier for
such Related Services at Supplier's published rates.
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14. SUPPLIES AND/OR REPLACEMENT PARTS
Supplier shall provide SWCO with specifications for all replacement parts
which are used or required to operate any Equipment. The relevant supplies shall
be available from Supplier upon SWCO request for a minimum of seven (7) years
following the acquisition of the Equipment.
15. CONVERSION OF FINANCIAL ARRANGEMENT
SWCO may elect to convert any part or all of an Order for purchase
Equipment, any time prior to shipment to a third party lease, or, subject to
availability by Supplier, to any of Supplier's purchase, installment sale,
lease, rental plan, or other marketing pricing policy and may do so with no
liability.
16. TRANSFER OF TITLE TO A THIRD PARTY
In connection with the financing of Equipment, SWCO may request Supplier to
pass title to the Equipment directly to an assignee designated by SWCO. If SWCO
requests, Supplier shall execute a bill of sale conveying title to the Equipment
to the assignee. In such event, the assignee shall succeed to all of SWCO's
rights under the Order with respect to the Equipment, although SWCO shall
continue to exercise such rights on behalf of the assignee until Supplier is
otherwise notified. Notwithstanding the foregoing, SWCO guarantees payment of
the purchase price for the Equipment to Supplier. The right of SWCO to request
Supplier to pass title to the Equipment to the assignee shall include the right
to sublicense any licensed Software relating to the Equipment without the
payment of any additional license fees to Supplier.
17. NEW EQUIPMENT
Supplier warrants that the Equipment shall be new and of original manufacture in
the United States.
18. REMOVAL OF EQUIPMENT
18.1 Promptly after the cancellation of an Order, pursuant to this
Agreement Supplier shall, at its expense, pack and remove the Equipment affected
thereby. In addition, Supplier shall make all necessary transportation
arrangements to ship the Equipment away from SWCO premises.
18.2 If Supplier for any reason does not remove the Equipment within ten
(10) days after the cancellation of an Order or the termination of a lease, SWCO
may, at Supplier's expense and risk, arrange to have the Equipment packed and
shipped to Supplier. In such event, Supplier shall promptly, after receipt of
SWCO invoices, reimburse SWCO for any costs which may thereby be incurred.
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ARTICLE III
TERMS AND CONDITIONS APPLICABLE TO THE SUPPLIER'S HARDWARE
MAINTENANCE PROGRAM
1. SCOPE
1.1 Supplier shall provide to SWCO Supplier's Hardware Maintenance Program
("HMP") which is necessary to maintain the Equipment in accordance with its
specifications and to keep the same in good working order and operating
condition as described in the Orders SWCO may from time to time place hereunder.
1.2 Equipment maintained hereunder shall include Equipment ordered under
this Agreement, and Supplier's equipment acquired from other sources which has
been maintained to Supplier's specifications, inspected by Supplier and
refurbished, as necessary, to specifications by Supplier at Supplier's published
rates.
1.3 Supplier shall make available to SWCO, prior to commencement of HIvIP,
at Supplier's published rates, documentation to facilitate installation,
operation and preventive and remedial maintenance. If the originally produced
documentation is changed as a result of the application of an engineering change
to a field installation, SWCO shall be provided with the updated documentation
at no charge.
1.4 Pursuant to the terms of this Agreement, Supplier shall provide SWCO
with Supplier owned or licensed diagnostic software which is made available by
Supplier for commercial use and which is necessary for SWCO's maintenance of the
Equipment.
2. FORM OF ORDER
Each Order for maintenance Related Services or HMP shall contain the
following:
(1) Date of Order and Order Number;
(2) The incorporation by reference of this Agreement;
(3) The billing and Equipment location addresses;
(4) The required commencement dates for maintenance Related Services, and
the length of term for such Related Services;
(5) The name and telephone number of the SWCO contact person regarding the
coordination of the activities; and
(6) Any other special terms and conditions that are not provided for
elsewhere in the Order or this Agreement.
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3. AVAILABILITY OF MAINTENANCE AND SPARE PARTS
3.1 Supplier shall assist SWCO in determining SWCO's requirements for an
inventory of spare parts by providing SWCO with a standard spare parts list and
the current usage statistics for such parts.
3.2 Supplier shall make available to SWCO spare parts and HMP for a period
of not less than [***] years from the date of the each Order. The price for such
spare parts and HMP will be listed in Supplier's published rates. If subsequent
to such [***] year period Supplier no longer makes available a spare part,
Supplier shall notify SWCO [***] year in advance of its decision to discontinue
the spare part. If during the [***] year period, Supplier fails to provide such
HMP or spare parts or is unable to obtain an~1iterna~iource acceptable to SWCO,
then such inability shall be deemed noncompliance with this Agreement. In
addition to the other rights and remedies SWCO may have at law and equity under
this Agreement, SWCO shall have the right to require Supplier, without charge,
to provide technical information and any other rights to allow SWCO to obtain
such HMP and spare parts through its own manufacture or contracts with other
vendors.
3.3 The technical information noted above shall include, but is not
limited to: (a) manufacturing drawings and specifications of raw materials and
components comprising such parts; (b) manufacturing drawings and specifications
covering special tooling and the operation thereof; (c) a detailed list of all
commercially available parts and components purchased by Supplier on the open
market disclosing the part number, and name and location for the purchase
thereof; and (d) one (1) complete set of equipment diagrams and maintenance
procedures.
3.4 Supplier shall provide spare parts on an emergency basis from
Supplier's local office. Emergency spare parts which are unavailable from
Supplier's local office shall be made available to SWCO through Supplier's field
service channels upon request on an overnight basis. Such parts may be new or
refurbished parts and may be exchanged at Supplier's standard exchange rates.
3.5 Supplier shall repair or replace, and return to SWCO within thirty
(30) days defective parts which are shipped to Supplier. The estimated cost of
repair shall be specified at the time the request for repair is made by SWCO. If
during the repair of the part Supplier determines that the cost of repair will
deviate by ten percent (10%) or more from the estimate, Supplier shall notify
SWCO. If a part is deemed irreparable, Supplier shall notify SWCO.
3.6 The Party shipping any part under this Section 3 shall bear the cost
of transportation and risk of loss.
3.7 Supplier shall use only new parts or parts of equal quality and
operating specifications in performing maintenance. Parts that are removed and
replaced shall become the property of Supplier. All parts placed into operation
shall become the property of the owner of the Equipment.
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4. SUPPLIER RESPONSIBILITIES FOR TYPE 1 EMERGENCY
4.1 During the warranty period or subsequent HMP, Supplier shall provide
telephone support for Type 1 Emergencies during Supplier's normal hours of
operation. Type I Emergencies are defined as those incidences that are non-
Service affecting. Response time shall be within one (1) hour from the time SWCO
makes contact with Supplier. Telephone support shall include, but not be limited
to: engineering change information, diagnostic error interpretation, diagnostic
updates information, etc. Supplier shall provide SWCO with the procedure and
name of the responsible contact for providing requested telephone support.
4.2 If required, Supplier shall respond to an emergency repair request for
Type 1 Emergency by dispatching qualified personnel within twenty-four (24)
hours of the time the request is placed with Supplier. Supplier shall make
available such technical support for Type 1 Emergencies during Supplier's normal
hours of operation.
5. SUPPLIER RESPONSIBILITIES FOR TYPE 2 EMERGENCY
5.1 During the warranty period or subsequent HMP, Supplier shall provide
telephone support for Type 2 Emergency on a twenty-four (24) hour per day basis,
seven (7) days a week. Type 2 Emergencies are defined as those incidences that
prohibit or severely limit SWCO's ability to provide services. Response time
shall be within one (1) hour from the time SWCO makes contact with Supplier.
Telephone support may include, but not be limited to: engineering change
information, diagnostic error interpretation, diagnostic updates information,
etc. Supplier shall provide SWCO with the procedure and name of the contact
responsible for providing requested telephone support.
5.2 If required, Supplier shall respond to an emergency repair request for
Type 2 Emergencies by dispatching qualified personnel within eight (8) hours of
the time the request is placed with Supplier. Supplier shall make available
technical support for Type 2 Emergencies twenty-four (24) hours per day, seven
(7) days a week.
5.3 On all requests for Type 2 Emergencies, Supplier shall provide
continuous effort until the Equipment is restored to operational condition.
Supplier's escalation guidelines as specified in Section 15 of this Article 3
(Escalation Guidelines) shall apply from the time the Supplier's representative
arrives at SWCO's site.
6. SWCO's RESPONSIBILITIES
6.1 Unless otherwise requested of Supplier by SWCO, SWCO shall perform all
preventive and remedial maintenance.
6.2 SWCO shall maintain, at SWCO's site or within a convenient distance,
an inventory of spare parts including tools, documentation, diagnostics, and
test equipment for all Equipment covered hereunder and shall continually
replenish the inventory based upon, but not necessarily in conformity with,
Supplier's recommended level. Access to and use of the parts shall be provided
to Supplier when providing HMP hereunder.
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7. ON-SITE MAINTENANCE
7.1 SWCO may order dedicated On-Site field engineers at Supplier's
published rates. These rates shall be provided to SWCO upon request.
7.2 On-Site maintenance coverage shall include for the charge specified in
the Order, any time during a consecutive ten (10) hour period, daily, Mondays
through Fridays, excluding New Year's Day, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Unless
otherwise specified in that Order, such ten (10) hour period shall be from 7:00
a.m. to 5:00 p.m. local time, with one (1) hour for lunch normally taken between
12:00 noon and 1:00 p.m.
7.3 On-Site maintenance coverage may be extended to include additional
time periods and weekends at an additional charge and may be increased to
twenty-four (24) hours a day seven (7) days a week for three hundred sixty-five
365 days a year.
7.4 Any absences from the shift described herein shall be by mutual
agreement prior to such absences with credit on invoices for such absences. For
any extended absences such as during vacation periods, Supplier agrees to assign
an alternate resident field engineer for the duration of such absences.
7.5 Additional temporary support personnel shall be sent to support the
resident field engineer when this requirement is deemed necessary to assure
continued efficient operation.
7.6 On-Site maintenance coverage shall be at the direction of SWCO.
7.7 The coverage period for On-Site maintenance may be changed by SWCO
upon thirty (30) days prior notice to Supplier, subject to the terms of Section
7.2 of this Article.
8. NOTIFICATION AND RESPONSE
8.1 Supplier shall furnish its designated point of contact to enable SWCO
to promptly notify Supplier of the need for maintenance.
8.2 Supplier shall provide continuously updated charts on its maintenance
organization up to and including the national support level. Such charts shall
include twenty-four (24) hour contact information.
9. MAINTENANCE TERM AND MAINTENANCE CHARGES
9.1 Supplier's HMP is included in the purchase Price of each piece of
Equipment purchased by SWCO and shall extend throughout the duration of the
Warranty Period, as set forth in Section 13.2 of Article 1 ("Initial HMP").
Following the expiration of the Initial HMP, SWCO has a choice of (i)
subscribing to Supplier's HMP on an annual basis pursuant to the terms herein
and at the HMP fees set forth in Schedule A ("Extended HMP") for the duration
of the term of the Agreement and thereafter at Supplier's then current HMP fees,
or (ii) having defective Field Replaceable Units ("FRUs") repaired or replaced
with refurbished FRUs at Supplier's then current repair rates.
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9.2 The I-IMP charge set forth in Schedule A is not subject to increase
during the initial maintenance term. Thereafter the I-IMP charge is subject to
change by Supplier upon ninety (90) days prior written notice to SWCO; provided,
however, that such I-IMP unit charge shall not be increased more than once in
any twelve (12) month period and in no event shall any increase exceed five
percent (5%) of the HMP unit charge applicable to the preceding year.
9.3 Supplier shall have no responsibility to repair or replace FRUs which
have been repaired or altered in an unauthorized manner not in accordance with
Supplier's Maintenance Program, or which have had the bar code, serial number,
or other identifying mark modified, removed or obliterated through an
intentional action by SWCO. In the event that SWCO sends a FRU to Supplier for
which no defects or failures can be found, Supplier may invoice SWCO at the then
current fee for the services rendered during the evaluation process. Such
charges shall only be rendered after three (3) such occurrences within a sixty
(60) day period.
10. ENGINEERING COMPLAINTS
10.1 Receipt of an engineering complaint from SWCO shall be acknowledged
by Supplier within fifteen (15) days. Such acknowledgment shall include the
proposed resolution of the stated problem, or the date by when a solution might
be expected. In the event that Supplier anticipates that the solution to the
engineering complaint will exceed thirty (30) days, then Supplier shall issue
biweekly progress reports to SWCO, reporting actions taken and progress made
during the reporting period. In addition, such reports will indicate the
approximate date by which Supplier anticipates that the ongoing engineering
complaint may be successfully resolved.
10.2 In the event that the engineering complaint is marked service
emergency, then Supplier agrees to exert effort which goes beyond that which is
customarily provided to resolve engineering complaints. Supplier further agrees
to provide status reports to SWCO's Manager, Engineering/ Inspection
Coordination, as frequently as may be mutually determined.
10.3 SWCO's point of contact for all engineering complaint information and
correspondence shall be SWCO Manager, Engineering Equipment 2125 East Adams,
Phoenix, Arizona 85034. All such engineering complaints should be directed to
the numbers identified in 16.1 of this Article.
11. ENGINEERING CHANGES
11.1 Engineering changes which are (i) generally made available by
Supplier to customers on the same Equipment provided hereunder and (ii) are
intended to correct defects in the Equipment shall, with the consent of SWCO, be
made by Supplier to the Equipment at no charge. The administration and
installation of engineering changes shall be accomplished by Supplier, unless
otherwise agreed to by the Parties.
11.2 Engineering changes which correct a safety defect shall be made as
soon as possible at no charge. Supplier shall notify SWCO of any such safety
defect and recommended interim safety measure to be taken.
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12. EQUIPMENT NON-PERFORMANCE CREDIT
If any Equipment furnished by Supplier hereunder for commercial service
experiences Equipment non-performance period(s) due to malfunction of Equipment
as specified below, the credits contained in this Article 3, Section 12, shall
apply to SWCO's I-IMP monthly maintenance charge. If the Equipment is operating
at less than fifty percent (50%) call processing capacity, (as measured by
traffic usage over the previous thirty (30) day period) (i) for any eight (8)
consecutive hour period or (ii) for a more than twenty-four (24) total hours in
any thirty (30) day period, then Supplier shall grant SWCO a credit against the
HMP monthly maintenance charge for each such hour in the amount of one-half
(1/2) of one percent (1%) of the monthly maintenance charge for such defective
Equipment. An Equipment non-performance period shall begin upon SWCO's
notification to Supplier and shall end when the Equipment has achieved ninety
percent (90%) call processing capacity. SWCO shall issue a debit memorandum and
associated documentation to Supplier reflecting the amount of such credit. The
Equipment non-operational periods shall be for periods of time directly caused
by the non-performance of the Equipment. Any non-performance caused by third
party equipment, force majeure or other events outside the control of Supplier
shall not be counted toward non-operational periods. If SWCO receives a credit
under this Article III, Section 12, for a particular non-performance -period,
then SWCO shall not be eligible to receive a credit under Article IV, Section
12.7. If the non-performance is caused by both Equipment nonperformance and
Software nonperformance, SWCO shall receive the higher credit.
13. REMEDIES FOR EQUIPMENT FOR FAILURE TO MEET OPERATIONAL LEVEL
If any Equipment maintained hereunder fails to perform at an operational
level of as defined in Article III, Section 12, during two (2) consecutive
calendar months, SWCO may, at its option, require Supplier to within thirty (30)
days after notification to Supplier, replace such Equipment at no additional
cost to SWCO. Any Equipment that cannot be restored to good working order and
operating condition shall be removed at Supplier's expense.
14. WARRANTY
14.1 In lieu of the warranty period specified in Section 13 of Article I
(Warranties), the warranty period for spare parts under this Article III shall
be for ninety (90) days from the date shipment to SWCO.
14.2 Supplier's responsibility under this warranty shall be to either
replace or repair the defective spare part.
15. ESCALATION GUIDELINES
Supplier shall endeavor to initiate support within the specified response
time. If the trouble has not been corrected within twenty-four (24) hours after
the request for support, the trouble shall be escalated to Supplier's
engineering laboratories. No charge will be made for any escalation.
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16. PROCEDURES FOR SUPPLIER'S HMP
16.1 Metawave's Customer Support
Customer Support can be reached by call the following numbers:
Domestic phone:....... 888-642-2455
International phone:.. 425-702-6550
16.2 Return Material Authorization (RMA)
SWCO must contact Customer Support via telephone, e-mail or fax to obtain a
Return Material Authorization (RMA) number. Supplier may return shipments
without a RMA number to the SWCO unrepaired and at SWCO's expense. The RMA
number must be clearly written on the outside of the package. A RMA number will
not be issued until an Order is provided for the repair price for those items
not covered under warranty.
16.3 Return Address
All Field Replaceable Units (FRUs) must be shipped to:
Metawave Communications Corporation
10735 Willows Road N.E.
Redmond, WA 98073-9769 USA
c/o SWCO Returns
16.4 Packing Instructions
SWCO must pack all returned equipment in a manner no less protective to
such Equipment than the manner in which Supplier packages similar equipment.
16.5 Repair Purchase Orders
Repair purchase orders are required in the following instances:
When SWCO returns out of warranty FRUs for repair; or
When Supplier sends pre-exchange FRU to SWCO prior to the defective FRU
being received by Supplier, and if defective FRU is not received within five (5)
days of shipment of replacement FRU.
Under these circumstances, a facsimile copy of the purchase order may be
transmitted to Supplier and followed up by a confirming hard copy in the mail.
16.6 Expedite Service
In an emergency situation that requires an expedited shipment, Supplier
offers Expedite Services upon SWCO's request at no additional charge except that
SWCO shall pay for additional expedite freight charges, if any. If the HMP has
expired, such expedite service will carry an additional fee of $300 plus freight
charges (plus the price of FRU if out of warranty) per FRU.
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16.7 Invoices and Payment
Invoices are payable in accordance with the terms of the Agreement between
Supplier and SWCO. In the event pre-exchanged FRU's are not returned by SWCO to
Supplier within five (5) days then Supplier shall invoice SWCO for the amount of
the exchanged FRU's.
16.8 Duties and Taxes
All duties, customs clearance fees and any and all taxes will be the
responsibility of the Customer.
16.9 Non-compliance
Failure to comply with any of the procedures may result in delay or non-
delivery of the FRUs.
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ARTICLE IV
TERMS AND CONDITIONS APPLICABLE TO
ANY PURCHASE THAT INCLUDES LICENSED SOFTWARE
AND/OR SOFTWARE MAINTENANCE SERVICE
1. SCOPE
Supplier shall provide to SWCO Supplier's Software and Related Services as
described in Orders SWCO may from time to time place hereunder.
2. DEFINITIONS
Terms which are capitalized have the meanings set forth below or, absent
definition herein, as contained in the Agreement.
2.1 "Feature" refers to an innovation or performance improvement to
Software that is made available to all users of the current Software release.
Features are licensed to SWCO individually and may be at additional cost.
2.2 "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.
2.3 "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.
2.4 "Software Patch" refers to software that corrects or removes a
reproducible anomaly or "bug" in an existing Major Release.
3. FORM OF ORDER
Each Order for Software and Related Services shall contain the following:
(1) Date of Order and Order Number,
(2) The incorporation by reference of this Agreement;
(3) The incorporation by reference of additional specifications;
(4) If, applicable, a detailed list of the Software or Related Services
that are required. Such list is to include quantities, descriptions,
specifications, prices, charges, and discounts;
(5) The billing and delivery addresses;
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ARTICLE IV
TERMS AND CONDITIONS APPLICABLE TO
ANY PURCHASE THAT INCLUDES LICENSED SOFTWARE
AND/OR SOFTWARE MAINTENANCE SERVICE
1. SCOPE
Supplier shall provide to SWCO Supplier's Software and Related Services as
described in Orders SWCO may from time to time place hereunder.
2. DEFINITIONS
Terms which are capitalized have the meanings set forth below or, absent
definition herein, as contained in the Agreement.
2.1 "Feature" refers to an innovation or performance improvement to
Software that is made available to all users of the current Software release.
Features are licensed to SWCO individually and may be at additional cost.
2.2 "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.
2.3 "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.
2.4 "Software Patch" refers to software that corrects or removes a
reproducible anomaly or "bug" in an existing Major Release.
3. FORM OF ORDER
Each Order for Software and Related Services shall contain the following:
(1) Date of Order and Order Number,
(2) The incorporation by reference of this Agreement;
(3) The incorporation by reference of additional specifications;
(4) If, applicable, a detailed list of the Software or Related Services
that are required. Such list is to include quantities, descriptions,
specifications, prices, charges, and discounts;
(5) The billing and delivery addresses;
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(6) The required dates for delivery and installation of the Software,
commencement dates for licenses or Related Services, and the length of
term for licenses or Related Services;
(7) The name and telephone number of the SWCO person to contact regarding
the coordination of activities; and
(8) Any other special terms and conditions that are not provided for
elsewhere in the Order or this Agreement.
4. LICENSE
4.1 Supplier grants to SWCO a non-exclusive, nontransferable license,
except as otherwise provided herein, for the use including remote access usage
of Supplier's Software ordered hereunder, to routinely operate and monitor the
Equipment with which the Software was delivered. During the warranty period, all
purchased future releases, patches, fixes, corrections, enhancements,
improvements and updates relating to such Software are included. Thereafter, all
such fixes and enhancements shall be made available to SWCO under Supplier's
Software -Maintenance Program as described herein. Remote access functionality
requires the purchase of the Remote LampLighter(TM) Software option.
4.2 With each license of Software ordered hereunder, Supplier shall
provide SWCO documentation which either is provided by Supplier to any of its
other customers for the Software or is reasonably necessary to enable SWCO to
adequately use such Software. Documentation shall comply with commonly accepted
industry standards with respect to content, size, legibility and
reproducibility.
4.3 SWCO shall have the right to reproduce all documentation including all
machine-readable documentation for the Software, provided that such reproduction
is made solely for SWCO's permitted use hereunder. Any such reproductions shall
include any copyright or similar proprietary notices contained on the items
being reproduced.
4.4 Supplier warrants that it has the sole and exclusive right to grant
the licenses ordered thereunder.
4.5 No title or ownership rights to the Software or any of its parts,
including documentation, except as provided herein, is transferred to SWCO.
4.6 SWCO acknowledges that it is the responsibility of SWCO to take
reasonable measures to safeguard Software and to prevent its unauthorized use,
distribution, or duplication.
4.7 SWCO shall not reverse engineer, decompile, disassemble, or modify the
Software or any portion thereof.
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5. LICENSE TERM
5.1 The license term for Software shall commence on the date of acceptance
for the Initial Order and upon shipment for all other Orders of the Equipment
and Software and shall continue perpetually or until canceled or terminated as
provided herein.
5.2 SWCO may terminate the license term of any Software by giving Supplier
thirty (30) days prior written notice. Termination of such license term shall
also automatically terminate any maintenance Related Services for such Software.
5.3 Supplier may terminate the license granted hereunder if SWCO is in
material default of any of the terms and conditions of this License Agreement
and such termination shall be effective if SWCO fails to correct such default
within sixty (60) days after written notice thereof by Supplier.
5.4 In the event that SWCO is required to return the Software, pursuant to
the Agreement or in the event that SWCO returns the Equipment, this license
shall terminate immediately upon such return of the Software or Equipment to
Supplier.
5.5 Within one (1) month after termination of the license granted
hereunder, SWCO shall furnish to Supplier 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 Supplier or destroyed.
6. LICENSE FEE
6.1 The Software licensing fees for the most current versions of the
Embedded System Software and LampLighter Software (available at the time of
purchase of Equipment) are included in the purchase price of the Equipment.
Software Updates are available under the Software Maintenance Program described
herein for additional licensing fees.
6.2 If the license term is not perpetual, the license fee set forth in the
Order is not subject to increase during the first year. Thereafter, the license
fee may be changed by Supplier following the end of the initial license term
upon ninety (90) days prior written notice to SWCO; provided, however, that such
license fee shall not be increased more than once in any twelve (12) month
period and in no event shall any increase exceed [***] of the license fee
applicable to the preceding year.
7. SOFTWARE DELIVERY
7.1 Supplier shall deliver the Software complete and in accordance with
SWCO's instructions, if any, with transportation charges paid by Supplier.
Supplier shall deliver the Software in sufficient time to meet the required
delivery date. SWCO may delay the delivery of the Software by giving the
Supplier notice prior to shipment. SWCO shall arrange and pay for transportation
for Software required to be returned to Supplier under this Agreement.
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7.2 If Supplier fails to complete such delivery of Software ordered by
SWCO on or before the ordered delivery date, SWCO may either cancel the Order or
extend such ordered installation date to a subsequent date. If SWCO elects to
extend the ordered installation date, the Parties agree that SWCO will be
damaged in an amount difficult to determine with certainty. Therefore, Supplier
agrees to pay SWCO as a late delivery charge, and not as a penalty, an amount
equal to [*] of the purchase price for that Software Feature for each week, or
part thereof, of delay occurring after the ordered delivery date originally
specified. Such late delivery charge shall not accrue beyond twelve (12) weeks
of delay and shall take the form of a credit against the purchase price of the
Software or any future Software in favor of SWCO.
8. RISK OF LOSS
8.1 Supplier shall bear the risk of loss of or damage to the Software
during shipment. Supplier shall promptly replace such Software when lost or
damaged at no additional charge.
8.2 SWCO shall bear the risk of loss or damage to the Software media or
documentation in its possession. Supplier shall promptly replace the Software,
Software media or documentation when lost or damaged at the charge for the media
or documentation. No -additional license fee will be charged for replacement of
the Software.
9. INSTALLATION
Supplier shall install the embedded Software on the Equipment specified on
the Order, perform its standard test procedures and prepare the Software
required for Commissioning. With respect to the Initial Order, when Supplier
certifies that the Software has passed all of Supplier's acceptance testing, the
Software shall be certified as ready for SWCO's acceptance testing, in
accordance with Article V.
10. STANDARD OF PERFORMANCE FOR ACCEPTANCE
For the Initial Order, Software acceptance shall be performed in
conjunction with the Equipment it was Ordered with and as specified in Article
V, Performance Acceptance Procedure. For all other Orders acceptance shall
occur upon Commissioning of the Equipment.
11. NEW RELEASES
11.1 During the warranty period and if SWCO elects to purchase Software
Maintenance, new versions of any Software to be provided as a generic release
common to all licensees of such Software, shall be supplied at the prices
specified in Schedule A or at Supplier's then current published rates.
11.2 Supplier shall support the current Major Release and associated Point
Releases and Features for a minimum period of two (2) years after the issuance
of such Software. However, any support provided for Software older than two (2)
years from the issue date may be on a time and material basis. An Order is
required to render such service.
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12. SOFTWARE MAINTENANCE
During the warranty period and if SWCO elects to purchase Software
Maintenance the following shall apply:
12.1 Supplier shall provide maintenance described herein including error
corrections, upgrades and modifications to keep the Software in good working
order and operating condition or to restore such Software to good working order
and operation condition.
12.2 SWCO will be responsible for problem identification of reproducible
Software malfunctions. In the event of any such Software malfunction, SWCO shall
notify Supplier promptly of the failure through calling Supplier's Customer
Support.
12.3 Supplier shall provide a telephone contact point to which SWCO can
notify Supplier of the need for maintenance Related Services twenty-four (24)
hours per day, seven days (7) per week. Within one (1) hour of notification, a
trained, knowledgeable, technically qualified Supplier representative will
respond. Such response will serve to acknowledge receipt of notification and to
obtain a verbal description of the nature of the need for maintenance Related
Services.
12.4 Supplier shall correct any and all errors in the Software in
accordance with this Section 12. For major errors substantially effecting
Equipment performance, Supplier shall continue error correction activity on a
twenty-four (24) hour basis until a permanent correction is made. If Supplier
determines that such errors cannot be corrected within twenty-four (24) hours,
Supplier shall immediately initiate an escalation procedure to:
(1) Immediately assign sufficient skilled personnel to correct the
error; and
(2) Immediately notify Supplier management personnel that such error
has not been corrected and that the escalation procedure has
been activated; and
(3) Supplier will provide verbal status reports on errors at
intervals of not less that twice per day to SWCO on the status
of each error correction.
12.5 SWCO shall provide Supplier, at the time of the notification, data
required by Supplier to properly analyze the error condition and to provide the
proper resolution.
12.6 Supplier shall give notice, on each error reported, to all SWCO
locations of Software upon receipt by Supplier and error corrections will be
transmitted to all such locations.
12.7 If any Equipment furnished by Supplier hereunder experiences non-
performance periods due to malfunction of the Software, as specified below, the
credits contained herein shall apply to SWCO's Software monthly maintenance
charge. If the Equipment is operating at less than fifty percent (50%) call
processing capacity (as measured by traffic usage over the previous thirty (30)
day period), (i) for any eight (8) consecutive hour period or (ii) for a period
more than twenty-four (24) hours in any thirty (30) day period, then Supplier
shall grant SWCO a credit
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against the Software monthly maintenance charge for each such hour in an amount
of one-half (1/2) of one percent (1%) of the monthly Software maintenance charge
for such defective Equipment. A non-performance period shall begin upon SWCO's
notification to Supplier and shall end when the Equipment has achieved ninety
percent (90%) call processing capacity. SWCO shall issue a debit memorandum and
associated documentation to Supplier reflecting the amount of such credit. The
Equipment non-operational periods shall be for periods of time directly caused
by the non-performance of the Software on the Equipment. Any non-performance
caused by third-party equipment or software, force majeure or other events
outside the control of Supplier shall not be counted toward non-performance
periods. If SWCO receives a credit under this section, for a particular non-
performance period, then SWCO is not able to receive a credit under Article HI,
Section 12.
12.8 Unless requested by SWCO or necessary to correct performance failures
or degradation, Supplier shall introduce maintenance releases no more than once
per calendar quarter. Such maintenance releases shall include program code
changes and revised documentation necessitated by correction of such error
condition. Maintenance releases shall include improvements and updates relating
to the Software which are developed by Supplier. Supplier shall notify SWCO the
expected date of release and the error corrections or -improvements to be
included.
13. SOFTWARE MAINTENANCE CHARGE
13.1 The annual charge for Software Maintenance is specified in the Price
List attached hereto as Schedule A. Supplier's Software Maintenance is included
in the purchase Price of each piece of Equipment purchased by SWCO and shall
extend throughout the duration of the Warranty Period, as set forth in the
Warranty section of the Agreement. Thereafter, Software Maintenance is provided
by Supplier to SWCO pursuant to the terms herein and is included in the Software
Maintenance charges set forth in Schedule A for a period of 12 months. Any
Software provided to SWCO during the term of the Software Maintenance will be
provided pursuant to this Software License Agreement.
13.2 The Software maintenance charge is not subject to increase during the
first twelve months following the commencement of such charge. The Software
maintenance charge is subject to change by Supplier following the end of such
twelve (12) month period upon ninety (90) days prior written notice; provided,
however, that such Software maintenance charge shall not be increased more than
once in any twelve (12) month period and in no event shall any increase exceed
five percent (5%) of the Software maintenance charge applicable to the preceding
year, for like volumes of Equipment. The total increase for Software
Maintenance charges shall not exceed ten percent (10%) for the term plus any
subsequent renewal term for like volumes not to exceed fifty-five thousand, one
hundred, twenty five dollars ($55,125.00) per market system per year as defined
in Schedule A.
13.3 During the term of Software Maintenance, all Major Releases, Point
Releases, Software Patches and standard Features made generally available by
Supplier shall be available to SWCO at no additional charge. SWCO shall promptly
install such Software.
13.4 Optional Features and certain significant enhancements shall be made
available to SWCO at an additional charge and are not include in the price of
Software Maintenance.
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13.5 Certain optional Features shall be sold on a per-unit basis and may
have price levels that reflect unit capacity.
14. TERMINATION OF MAINTENANCE
14.1 SWCO may terminate maintenance for Software by giving Supplier thirty
(30) days prior written notice.
14.2 Supplier may terminate maintenance for Software by providing one (1)
year prior notice of its intent to terminate. In such event, Supplier shall
furnish the latest version of Software object code, operating and design
documentation, training material and any other necessary information to enable
SWCO to maintain and enhance such Software or to contract with others for such
work.
15. OBJECT CODE AND TECHNICAL DOCUMENTATION
In the event Supplier becomes insolvent, ceases to carry on business on a
regular basis or fails to perform its maintenance obligations herein, Supplier
shall furnish the latest version of Software object code, operating and design
documentation, training material and any other necessary information to enable
SWCO to maintain and enhance such Software or to contract with others for such
work.
16. RELOCATION OF SOFTWARE
SWCO may redesignate the location at which the Software will be used, and
shall notify Supplier of the new location and the effective date of the
relocation. Concurrent operation of the Software at a second location for a
period not to exceed ninety (90) days to achieve uninterrupted operation and
orderly cut over shall not require an additional license.
17. ENHANCEMENT OF SERVICES
17.1 SWCO may request Supplier to make changes to the Software. Such
requests will describe in detail the changes to the Software desired by SWCO.
17.2 Supplier will respond within sixty (60) days of receipt of such
request, and if the response indicates a development cost to SWCO, such response
shall provide estimates of time and costs to develop the change described in the
request.
17.3 SWCO, at its option, may provide Supplier authorization to proceed
with the work described in Supplier's response by placing an Order.
18. SOFTWARE EVALUATION
18.1 Supplier, at no charge, will provide new Software features and
functionality on a trial basis to allow SWCO to evaluate the applicability of
such Software to its business needs and purposes.
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(1) SWCO shall issue an Order to Supplier in accordance with this
Agreement.
(2) The term of the evaluation shall be thirty (30) days unless
otherwise stated in the Order.
(3) SWCO shall use the Software provided under this Section 18 for
the sole purpose of evaluation. Use of the Software for
evaluation shall not obligate SWCO to license Software for
future use.
18.2 SWCO shall promptly return the Software and accompanying
documentation to Supplier upon completion of the evaluation period or shall
notify Supplier of its intent to license the Software. If SWCO intends to
license such Software, SWCO shall issue an Order.
18.3 SWCO shall not duplicate the Software, any portion thereof, or any
associated documentation, unless necessary for the evaluation.
19. SOFTWARE VIRUS PROTECTION
19.1 Supplier represents and warrants to SWCO that the Software provided
to SWCO by Supplier does not contain or will not contain any Self-Help Code or
any Unauthorized Code (defined below).
19.2 As used in this Agreement, "Self-Help Code" means any back door,
"time bomb", drop dead device, or other software routine designed to disable a
computer program automatically with the passage of time or under the positive
control of a person other than a licensee of the program. Self-Help Code does
not include software routines in a computer program, if any, designed to permit
the licenser of the computer program (or other person acting by authority of the
licensor) to obtain access to a licensee's computer system(s) (e.g., remote
access via modem) for purposes of maintenance or technical support.
19.3 As used in this Agreement, "Unauthorized Code" means any virus,
Trojan horse, worm, or any other software routines or hardware components
designed to permit unauthorized access to disable, erase, or otherwise harm
software, hardware, or data or to perform any other such actions. The term
Unauthorized Code does not include Self-Help Code.
19.4 Supplier shall remove promptly any such Self-Help Code or
Unauthorized Code in the Software of which it is notified or may discover.
19.5 Supplier shall indemnify SWCO against any loss or expense arising out
of any breach of this warranty.
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ARTICLE V
TERMS AND CONDITIONS APPLICABLE TO THE PERFORMANCE ACCEPTANCE
PROCEDURE FOR INITIAL ORDER
1. INTRODUCTION
The Performance Acceptance Procedure consists of a comparison of test
results from a baseline period prior to commercial operation of Products
(Baseline Performance Collection Phase) with results from a period of time in
which the Products are installed and have been optimized in the SWCO's network
(Performance Collection, Evaluation and Acceptance Phase) The Performance
Acceptance Procedure consists of separate tests for Analog and CDMA. The
Performance Acceptance Procede will consist of:
(1) Product Configuration Planning Phase
(2) Measurement Process
(3) Baseline Performance Collection Phase
(4) Installation and Commissioning Phase
(5) Product Optimization Phase
(6) Performance Collection; Evaluation and Acceptance Phase.
2. PRODUCT CONFIGURATION PLANNING PHASE
2.1. Entrance Criteria
In order for SWCO and Supplier to configure the Product, SWCO must provide
the following specific cell site information for all sites in the Phoenix area.
The following information is required for all sites [***] in the list below,
which indicates that the information is required only for Sites where Product is
to be installed.
2.1.1. [***]
2.1.2. [***]
2.1.3. [***]
2.1.4. [***]
2.1.5. [***]
2.1.6. [***]
2.1.7. [***]
2.1.8. [***]
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2.1.9. [***]
2.1.10. [***]
2.1.11. [***]
2.1.12. [***]
2.2. Tasks
Supplier and SWCO must generate Product configurations for the
implementation of both [***] using the Products. The [***] plan will
include recommended Product configurations [***] at each Site. The
[***] portion will include suggested Product configurations to
achieve [***] improvements, such configurations to be implemented in
the future by [***] following the Performance Acceptance Procedure.
Supplier and SWCO shall mutually agree upon and document the items in
2.3 below.
2.3. Exit Criteria
2.3.1. [***]
2.3.2. [***]
2.3.3. [***]
2.3.4. [***]
2.3.5. [***]
2.3.6. [***]
3. MEASUREMENT PROCESS
This collection and measurement process will be followed during the
Baseline Performance Collection Phase and the Performance, Collection,
Evaluation and Acceptance Phase.
3.1. [***] Performance Measurements
The [***] portion of the performance measurements consists of the
following:
3.1.1. [***]
[***]
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[***]
3.1.2. Adjacent Cells [***] Lost Calls Percentage
In addition, the Parties agree to monitor adjacent non-
Product cell sites for [***] Lost Calls Percentage. [***]
However, if performance in adjacent sites is [***] the
Parties agree to [***].
3.1.3. [***]
An [***] comparison will be made using the Product. This will
be measured on the up-link path. A comparison for defined
drive test routes will be run between the Product collecting
[***]
The Product will collect signal strength measurements of
[***]. The [***] will be calculated as follows: the Product
will repetitively measure the [***]. The Product will also
repetitively measure the [***]. The value of [***] will then
be calculated and the result will be converted to dB. These
data points will represent the [***]. [***]
For post-Product [***] the Product will repetitively measure
the [***]. The resulting [***].
3.1.4 SINAD Testing
[***]
[***]
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[***] The driving of the routes, both with and without Product
in operation, will be conducted on five (5) separate occasions
during busy hours, matching the time of day and day of week for
both sequence of drives.
3.2. [***] Performance Measurements
The [***] portion of the Performance Acceptance Criteria
measurements consists of the following:
3.2.1. [***] Dropped Calls Percentage
[***] dropped calls as percentage of channel element
assignments.
3.2.2. [***] Load Balancing/Blocking Reduction
A comparison will be made of traffic imbalance before
and after Product is in operation. [***]
To demonstrate capacity improvement, [***]
3.3. Data Integrity
If upon analyzing switch statistics or other collected data, it
becomes evident that certain data represents outlying data [***]
Supplier will [***]
4. BASELINE PERFORMANCE COLLECTION PHASE
4.1. Entrance Criteria
Successful completion of Section 2.
4.2. Tasks
Collection of measurement data for determining [***] Lost Calls
Percentage, Adjacent Calls [***] Lost Calls Percentage, [***] Dropped
Calls Percentage and [***] Load Balancing. Supplier will perform
drive tests to determine the current
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performance characteristics of the existing [***] networks, such as
coverage and handoff performance.
4.3. Switch Statistics Collection
4.3.1. In order to collect the information necessary for the
evaluation, [***]
4.3.2. [***]
4.3.3. The duration of the baseline sampling time period shall be
mutually agreed upon. Switch statistics will include both
daily summaries (excluding maintenance windows) and system
busy hour summaries.
4.3.4. SWCO must collect the switch statistics and provide them to
Supplier on [***]
4.4. Exit Criteria
Supplier and SWCO will agree in writing to the validity of baseline
switch statistic data and drive test data.
INSTALLATION AND COMMISSIONING PHASE
5.1. Entrance Criteria
5.1.1. Completion of Section 4.
5.1.2. Sign-off on Scope of Work for Product installations.
5.2. Tasks
Supplier personnel will install and perform Commissioning for all the
Products.
5.3. Exit Criteria
Completion of Commissioning for all the Products.
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6. PRODUCT OPTIMIZATION PHASE
6.1. Entrance Criteria
6.1.1. Completion of Section 5. In order for Supplier to optimize
the Product, SWCO must provide the following information:
6.1.1.1. [***]
6.1.1.2. [***]
6.1.1.3. [***]
6.1.1.4. [***]
6.2. Tasks
Network optimization will be completed by adjusting any necessary
parameters in the Product, switch or cell site parameters. Drive
testing data and switch statistics will be used to monitor the
performance of the system.
6.3. Exit Criteria
Supplier determines that the Product has been properly optimized.
7. PERFORMANCE COLLECTION, EVALUATION AND ACCEPTANCE PHASE
7.1. Entrance Criteria
Completion of Section 6.
7.2. Tasks
SWCO and Supplier shall collect data for the [***] Lost Calls
Percentage, Adjacent Cells [***] Lost Calls Percentage, [***].
7.3. Switch Statistic Collection
Switch statistics will be collected and analyzed using the same
method as defined in Section 3 and the collection sampling time shall
be mutually agreed upon. The resulting period shall constitute the
Performance Evaluation Period.
7.4. [***] Drive Comparison
[***] will be completed on a mutually agreed upon cell.
7.5. Exit Criteria
The Performance Criteria is as follows:
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7.5.1. [***]
[***]
7.5.2. [***]
The post-Product average up-link [***] than the pre-Product
average [***].
7.5.3. [***]
The percentage of baseline data points that represent [***]
in the data points collected for the same drive route with
Product in use.
7.5.4. [***]
For similar traffic-carrying volumes at the Site, the median
Dropped Call Percentage with Product will be equal to or
better than the median Dropped Call Percentage without
Product.
7.5.5. [***]
For the Product Site, [***] will reduce traffic imbalance to
[***] This [***] will be calculated using Walsh Code Erlangs.
An example of the [***] is shown below.
[***]
This criterion applies to Sites whose sector antennas [***]
The measure for [***] will be as follows:
The available Walsh codes will be reduced during baseline
measurements and further reduced during data collection with
the Product. Under these conditions, the [***].
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7.5.6. The execution of the Certificate of Performance Acceptance as
set forth herein.
8. RESPONSIBILITIES
8.1. Supplier Responsibilities
During the Performance Acceptance Procedure, Supplier agrees to
furnish sufficient resources to perform the tests and activities as
outlined in this Article and in the time frames established between
SWCO and Supplier.
8.2. SWCO Responsibilities
8.2.1. During the Performance Acceptance Procedure, SWCO shall
attempt to [***] Changes can impact data collected during the
Baseline Performance Collection or during the Performance
Collection, Evaluation and Acceptance. SWCO shall immediately
inform Supplier of any such changes.
8.2.2. SWCO will provide sufficient network resources [***] so that
system performance will [***]
8.2.3. During the Performance Acceptance Procedure the SWCO shall
perform standard maintenance on all network equipment for the
cells in the Phoenix network. [***] These logs should contain
any performance affecting [***]
8.2.4. SWCO will provide sufficient human resources as detailed by
the Scope of Work
8.2.5. SWCO agrees to the other responsibilities as specified in
Sections 2, 4, 5, 6 and 7
8.2.6. During [***] Baseline Performance Collection and the
Performance Collection drive tests, all adjacent channel
interferers and co-channel interferers to the [***].
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Certificate of Performance Acceptance (for the Products in the Initial Spectrum
Clearing Order)
IN WITNESS WHEREOF, Metawave Communications Corporation and Southwestco certify
that the following tests have been performed with the indicated results.
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Test Performed Passed Failed See Comments
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[***] [ ] [ ] [ ]
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[***] [ ] [ ] [ ]
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[***] [ ] [ ] [ ]
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[***] [ ] [ ] [ ]
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[***] [ ] [ ] [ ]
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IN WITNESS WHEREOF, Metawave Communications Corporation and SWCO certify that
the products and services have been accepted at the following cell sites on the
following dates in accordance with the terms and conditions set forth in the
Products and Services Purchase Agreement ("Agreement") dated __________ between
Metawave and SWCO, and that the services have been performed and products
perform as specified in the Agreement.
Market Name & Number: __________________ Date: ______________________________
Metawave Communications Corporation Southwestco Wireless, L.P.
by Southwestco Wireless, Inc.
its managing general partner
By: ____________________________________ By: ________________________________
(Signature) (Signature)
Name: __________________________________ Name: ______________________________
(Please Print) (Please Print)
Title: _________________________________ Title: _____________________________
(Please Print) (Please Print)
Date: __________________________________ Date: ______________________________
(Please Print) (Please Print)
Comments
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
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ENTIRE AGREEMENT
1. ENTIRE AGREEMENT ENTIRE AGREEMENT
1.1 This Agreement, together with all Orders, Articles, and subordinate
documents incorporated by reference and all descriptions, drawings,
specifications, and other literature published by Supplier in
connection with or in contemplation of any Order or of this Agreement
shall constitute the entire agreement between the Parties with respect
to the subject matter.
1.2 This Agreement may not be modified except by an instrument in writing
signed by a duly authorized representative of each of the Parties.
2. SIGNATURES
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives.
<TABLE>
<CAPTION>
Metawave Communications Corporation Southwestco Wireless, L.P.
by Southwestco Wireless, Inc.
its managing general partner
<S> <C>
By: /s/ W. David McCarley By: /s/ Robert Hunsberger
------------------------------------- ------------------------------------
(Signature) (Signature)
Name: W. David McCarley Name: Robert Hunsberger
------------------------------------ ----------------------------------
(Please Print) (Please Print)
Title: VP-Network Title: President & CEO
----------------------------------- ----------------------------------
(Please Print) (Please Print)
Date: 2/18/99 Date: Feb. 17, 1999
------------------------------------ -----------------------------------
(Please Print) (Please Print)
</TABLE>
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<PAGE>
SCHEDULE A
PRODUCTS AND RELATED SERVICES
DESCRIPTION AND PRICE LIST
For the purposes of uniformity and brevity, references to Agreement, Articles or
Schedules shall refer to the Agreement to which this document is Schedule A and
to the other Articles and Schedules to that Agreement. All definitions set forth
in the Agreement shall apply hereto unless otherwise expressly defined herein.
The prices included herein are for equipment installed and services performed in
the U.S.A.
1. PRICING SUMMARY
[***]
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5. GENERAL CONDITIONS FOR ORDER
5.1. SWCO shall provide air time with local phone numbers at no charge and
test mobiles at no charge, if required by Supplier.
5.2. If Supplier's Services are delayed for reasons beyond the control of
Supplier, or if additional Related Services are required by SWCO, the
Related Services shown herein shall be adjusted accordingly.
5.3. Towers and transmission lines to the towers, or any costs associated
with the preparation of towers and the Site including adequate
electrical power, are not included in the prices shown herein and are
the responsibility of SWCO.
5.4. SpotLight multibeam antenna panels are included in the SpotLight
system pricing given in Section 3 above. The mounting and physical
and electrical connection of these antennas is the responsibility of
the SWCO. The installation and connection of - these antennas to the
transmission lines is not included in the system price in Section 3
above, nor is it included in the Engineering Related Services pricing
contained in Section 3 above.
5.5. Performance of the Services set forth herein is dependent upon SWCO
and/or Supplier obtaining any and all necessary licenses, permits and
governmental approvals required to perform the Related Services set
forth herein. Supplier shall not be held liable for any non-
performance due to delays in obtaining any of the above documentation
and or approvals.
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<PAGE>
SCHEDULE B
NONDISCLOSURE AGREEMENT
SOUTHWESTCO WIRELESS MUTUAL
NON-DISCLOSURE AGREEMENT
------------------------
THIS AGREEMENT is entered into this 24th day of February, 1999 between
Southwestco Wireless Limited Partnership, a Delaware limited partnership, doing
business as Cellular One, (hereinafter "Cellular One"), having an office at
11333 North Scottsdale Road, #200, Scottsdale, Arizona 85254 and Metawave
Communications Corporation a Washington corporation, having an office at 10735
Willows Road NE, Redmond, Washington 98073.
WHEREAS, the above parties contemplate discussions and analyses concerning
the Agreement; and
WHEREAS, in order to facilitate such discussions and analyses, certain
confidential and proprietary, technical, financial or business information may
be disclosed between the parties;
NOW, THEREFORE, the parties agree to the following:
1. The term "Information," as used in this Agreement, includes all
specifications, drawings, sketches, models, samples, reports, forecasts, current
or historical data, computer programs or documentation and all other technical,
financial or business data.
2. "Proprietary Information" is defined as Information which is in the
possession of the disclosing party, is not generally available to the public,
and which the disclosing party desires to protect against unrestricted
disclosure or competitive use.
3. All Information which is disclosed by one Party to the other Party and
which is to be protected hereunder as Proprietary Information of the disclosing
Party shall:
(a) if in writing or other tangible form, be conspicuously labeled as
Proprietary, Confidential or the like at the time of delivery; and
(b) if oral, be identified as Proprietary prior to disclosure and be
reduced to a writing labeled as indicated in (a) above within fifteen (15)
business days after its disclosure.
Either Party shall have the right to correct any inadvertent failure to
designate information as Proprietary Information by written notification as soon
as practical (but in no event later than three (3) business days) after such
error is determined. The Party receiving said notification shall, from that time
forward treat such information as Proprietary.
4. Subject to the provisions of paragraph 6 with respect to any
Proprietary Information, provided hereunder, the receiving Party shall, for a
period of [*] from the date of disclosure, use the same care and discretion to
limit disclosure of such Proprietary Information as it uses with similar
Proprietary Information of its own which it does not desire to disclose or
disseminate including taking steps to:
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<PAGE>
(a) restrict disclosure of Proprietary Information solely to its
employees, agents, advisors, consultants, contractors and/or subcontractors with
a need to know and not disclose such Proprietary Information to any other
parties; and
(b) advise all receiving Party employees with access to the
Proprietary Information of the obligation to protect Proprietary Information
provided hereunder and obtain the agent's, advisor's, contractor's and/or
consultant's agreement to be so bound as evidenced by their signature on the
form attached hereto as Exhibit B; and
(c) use the Proprietary Information provided hereunder only for
purposes directly related to the Agreement and for no other purposes.
5. The obligations imposed upon either Party herein shall not apply to
Information whether or not designated as Proprietary:
(a) already known by the receiving Party without an obligation of
confidentiality;
(b) publicly known or becomes publicly known through no unauthorized
act of the receiving Party;
(c) rightfully received from a third party without restriction and
without breach of this Agreement;
(d) independently developed by the receiving Party without use of the
other Party's Proprietary Information and so documented;
(e) disclosed without similar restrictions to a third party by the
Party owning the Proprietary Information;
(f) approved in writing by the disclosing Party for disclosure;
(g) which the receiving Party is required to disclose pursuant to a
valid order of a court or other governmental body or any political subdivision
thereof; provided, however, that the recipient of the Proprietary Information
shall first have given notice to the disclosing Party and made a reasonable
effort to obtain a protective order requiring that the Proprietary Information
and/or documents so disclosed be used only for the purposes for which the order
was issued.
6. Nothing contained in this Agreement shall be construed as granting or
conferring any rights by license or otherwise in any Proprietary Information
disclosed to the receiving Party. All Proprietary Information shall remain the
property of the disclosing Party and shall be returned by the receiving Party to
the disclosing Party upon written request. If the Parties hereto decide to enter
into any licensing arrangement regarding any Proprietary Information or present
or future patent claims disclosed hereunder, it shall only be done on the basis
of a separate written agreement between them. No disclosure of any Proprietary
Information hereunder shall be construed to be a public disclosure of such
Proprietary Information by either Party for any purpose whatsoever.
7. The furnishing of Proprietary Information hereunder shall not obligate
either -Party to enter into any further agreement or negotiation with the other
or to refrain from entering into an agreement or negotiation with any other
Party.
8. In the event either Party discloses, disseminates or releases any
Proprietary Information received from the other Party, except as provided above,
such disclosure, dissemination or release will be deemed a material breach of
this Agreement and the other Party may demand prompt return of all Proprietary
Information previously provided to such Party. The provisions of this paragraph
are in addition to any other legal right or remedies the Party whose Proprietary
Information has been disclosed, disseminated or released may have under federal
or state law.
9. Each Party acknowledges that the unauthorized use or disclosure of a
disclosing Party's Proprietary Information would cause irreparable harm and
significant injury, the degree
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<PAGE>
of which may be difficult to ascertain. Accordingly, each Party agrees that the
disclosing Party will have the right to obtain an immediate injunction enjoining
any breach, or threatened breach, of this Agreement, as well as the right to
pursue any and all other rights at law or equity for such a breach.
10. This Agreement constitutes the entire agreement between the Parties
and supersedes any prior or contemporaneous oral or written representation with
regard to the subject matter hereof. This Agreement may not be modified except
by a writing signed by both Parties.
11. This Agreement shall be governed by the law of the State of New York
without reference to its conflict of law rules. All actions under this Agreement
shall be brought in a court of competent subject matter jurisdiction in New York
and both Parties agree to accept the personal jurisdiction of such court.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives as of the date on the first page.
<TABLE>
<CAPTION>
Metawave Communications Corporation Southwestco Wireless, L.P.
by Southwestco Wireless, Inc.
its managing general partner
<S> <C>
By: /s/ W. David McCarley By: /s/ Robert H. Hunsberger
----------------------------------------- ----------------------------------------
(Signature) (Signature)
Name: W. David McCarley Name: Robert H. Hunsberger
--------------------------------------- --------------------------------------
(Please Print) (Please Print)
Title: VP-Network Title: President & CEO
-------------------------------------- -------------------------------------
(Please Print) (Please Print)
Date: 2/18/99 Date: Feb. 17, 1999
--------------------------------------- --------------------------------------
(Please Print) (Please Print)
</TABLE>
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<PAGE>
EXHIBIT A
---------
ACKNOWLEDGMENT OF NON-DISCLOSURE OBLIGATIONS
--------------------------------------------
I have read the Non-Disclosure Agreement
dated _____________________________
between __________________________
and _______________________________
and agree to be bound by the terms and conditions therein.
___________________________________
Signature
___________________________________
Name
___________________________________
Title
___________________________________
Company
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<PAGE>
SCHEDULE C
NON-DISCRIMINATION COMPLIANCE AGREEMENT
To the extent that this contract is subject to them, Contractor shall
comply with the applicable provisions of the following Exec. Order No. 11246,
Exec. Order No. 11625, Exec. Order No. 12138, Exec. Order No. 11701, Exec. Order
No. 11758, Section 503 of the Rehabilitation Act of 1973, Section 402 of the
Vietnam Era Veterans' Readjustment Assistance Act of 1974 and the rules,
regulation and relevant Orders of the Secretary of Labor pertaining to the
Executive Orders and Statutes listed above. The following table describes the
clauses which are included in the contract.
<TABLE>
<CAPTION>
ANNUAL CONTRACT VALUE CLAUSES
<S> <C>
Under $2,500...... 5*
$2,500-$10,000.... 5*8
$10,000-$50,000... 1,2,5*,6,7,8,9
$50,000-$500,000.. 1,2,3**,4**,5,6,7,8,9
Over $500,000..... l,2,3**,4**,5,6,7,8,9***
</TABLE>
1. Equal Employment Opportunity Provisions
In accordance with executive Order 11246, dated September 24, 1965, and
Subpart 22.8 of Subchapter D of Chapter 1 of Title 48 of the Code of Federal
Regulations as may be amended from time to time, the Parties incorporate herein
by this reference the regulations and contract clauses required by those
provisions to be made a pan of government contracts and subcontracts.
2. Certification of Non-Segregated Facilities
The Contractor certifies that it does not and will not maintain any
facilities it provides for its employees in a segregated manner; or permit its
employees to perform their services at any location under its control where
segregated facilities are maintained and that it will obtain a similar
certification prior to the award of any nonexempt subcontract.
3. Certification of Affirmative Action Program
The Contractor affirms that it has developed and is maintaining an
Affirmative Action Plan as required by Subpart 22.8 of Subchapter D of Chapter I
of Title 48 of the Code of Federal Regulations.
4. Certification of Filing of Employer Information Reports
The Contractor agrees to file annually on or before the 31st day of March
complete and accurate reports on Standard Form 100 (EEO-l) or such forms as may
be promulgated in its place.
5. Utilization of Small Business Concerns and Small Disadvantaged Business
Concerns
(a) it is the policy of the United States that small business concerns and
small business concerns owned and controlled by socially and economically
disadvantaged individuals shall have the maximum practicable opportunity to
participate in performing contracts let by any Federal agency.
(b) The Contractor hereby agrees to carry out this policy in the awarding
of subcontracts to the fullest extent consistent with efficient contract
performance. The Contractor further agrees to cooperate in studies or surveys as
may be conducted by the United States Small Business Administration or the
awarding agency of the United States as may be necessary to determine the extent
of the Contractor's compliance with this clause.
(c) As used in this contract, the term "small business concern" shall mean
a small business as defined pursuant to section 3 of the Small Business Act and
relevant regulations promulgated pursuant thereto. The term "small business
concern owned and controlled by socially and economically disadvantaged
individuals" shall mean a small business concern.
(1) Which is at least 51 percent owned by one or more socially and
economically disadvantaged individuals; or, in the case of any publicly
owned business, at least 51 percent of the stock of which is owned by one
or more socially and economically disadvantaged individuals; and
(2) Whose management and daily business operations are controlled by
one or more of such individuals.
The Contractor shall presume that socially and economically disadvantaged
individuals include Black Americans, Hispanic Americans, Native Americans,
Asian-Pacific Americans, Asian-Indian Americans and other minorities, or any
other individual found to be disadvantaged by the Administration pursuant to
section 8(a) of the Small Business Act.
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(d) Contractors acting in good faith may rely on written representations
by their subcontractors regarding their status as either a small business
concern or a small business concern owned and controlled by socially and
economically disadvantaged individuals.
6. Utilization of Women-Owned Small Businesses
(a) "Women-owned small business," as used in this clause, means businesses
that are at least 51 percent owned by women who are United States citizens and
who also control and operate the business.
"Control," as used in this clause, means exercising the power to make
policy decisions.
"Operate," as used in this clause, means being actively involved in the
day-to-day management of the business.
(b) it is the policy of the United States that women-owned small
businesses shall have the maximum practicable opportunity to participate in
performing contracts awarded by any Federal agency.
(c) The Contractor agrees to use its best efforts to give women-owned
small businesses the maximum practicable opportunity to participate in the
subcontracts it awards to the fullest extent consistent with the efficient
performance of its contract.
7. Affirmative Action for Special Disabled Veterans and Veterans of the
Vietnam Era
In accordance with Exec. Order 11701, dated January 24, 1973, and Subpart
22.13 of Subchapter D of Chapter 1 of Title 48 of the Code of Federal
Regulations, as may be amended from time to time, the Parties incorporate herein
by this reference the regulations and contract clauses required by those
provisions to be made a part of Government contracts and subcontracts.
8. Affirmative Action for Handicapped Workers
In accordance with Exec. Order 11758, dated January 15, 1974, and Subpart
22.14 of Subchapter D of Chapter I of Title 48 of the Code of Federal
Regulations, as may be amended from time to time, the Parties incorporate herein
by this reference the regulations and contract clauses required by those
provisions to be made a part of Government contracts and subcontracts.
9. Employment Reports on Special Disabled Veterans and Veterans of the Vietnam
Era
(a) The contractor agrees to report at least annually, as required by the
Secretary of Labor, on:
(1) The number of special disable veterans and the number of veterans
of the Vietnam era in the workforce of the contractor by job category and
hiring location; and
(2) The total number of new employees hired during the period covered
by the report, and of that total, the number of special disabled veterans,
and the number of veterans of the Vietnam era.
(b) The above items shall be reported by completing the form entitled
"Federal Contractor Veterans' Employment Report VETS-100."
(c) Reports shall be submitted no later than March31 of each year
beginning March 31, 1988.
(d) The employment activity report required by paragraph (a) (2) of this
section shall reflect total hues during the most recent 12-month period as of
the ending date selected for the employment profile report required by paragraph
(a) (1) of this section. Contractors may select an ending date: (1) as of the
end of any pay period during the period January through March 1st of the year
the report is due, or (2) as of December 31, if the contractor has previous
written approval from the Equal Employment Opportunity Commission to do so for
purposes of submitting the Employer Information Report EEO-1 (Standard Form
100).
(e) The count of veterans reported according to paragraph (a) above shall
be based on voluntary disclosure. Each contractor subject to the reporting
requirements at 38 U.S.C. 2012(d) shall invite all special disabled veterans and
veterans of the Vietnam era who wish to benefit under the affirmative action
program at 38 U.S.C. 2012 to identify themselves to the contractor. The
invitation shall state that the information is voluntarily provided, that the
information will be kept confidential, that disclosure or refusal to provide the
information will not subject the applicant or employee to any adverse treatment,
and that the information will be used only in accordance with the regulations
promulgated under 38 U.S.C. 2012. Nothing in this paragraph (e) shall preclude
an employee from informing a contractor at a future time of his or her desire to
benefit from this program. Nothing in this paragraph (e) shall relieve a
contractor from liability for discrimination under 38 U.S.C. 2012.
* Applies only if contract has further subcontracting opportunities.
** Applies only to businesses with 50 or more employees.
*** Contractor must also adopt and comply with a small business and small
disadvantaged business subcontracting plan pursuant to Title 48 of the Code of
Federal Regulations.
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EXHIBIT 10.17
------------
GENERAL EQUIPMENT - MASTER PURCHASE AGREEMENT
This Master Purchase Agreement (the "Agreement") is entered into
as of this 1st day of January, 2000 ("Effective Date"),
by and among
Metawave Communications
a Delaware Corporation with its principal place of business at
10735 Willows Road NE
Redmond, WA 98073-9769
("Supplier")
AND
"Customer," Airtouch Support Services, Inc., a Delaware corporation
and wholly-owned subsidiary of Airtouch Communications, Inc.,
on behalf of itself and any Affiliates, with a place of business at
255 Parkshore Drive, Folsom, California 95630
FOR
Spotlight 2000 Smart Antenna Products, Accessories & Supporting Equipment
PROPRIETARY INFORMATION
Not for use or disclosure outside
Customer and Supplier Except
under written agreement.
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
[***] 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 OF CONTENTS
<TABLE>
<S> <C>
A. DEFINITIONS..................................................................................... 1
B. PURCHASE PROVISIONS............................................................................. 3
B.1 SCOPE OF AGREEMENT.............................................................................. 3
B.2 TERM OF AGREEMENT............................................................................... 3
B.3 ORDER OF PRECEDENCE............................................................................. 4
B.4 PRICES AND TERMS................................................................................ 4
B.5 ORDERING LEAD TIMES............................................................................. 5
B.6 DELIVERY, TRANSPORTATION AND SHIPPING........................................................... 5
B.7 WARRANTIES...................................................................................... 6
B.8 SPARE PARTS..................................................................................... 8
B.9 SOFTWARE SUPPORT SERVICES....................................................................... 9
B.10 DOCUMENTATION................................................................................... 9
B.11 PRODUCT SUPPORT................................................................................. 10
B.12 SPECIAL PROVISIONS.............................................................................. 11
B.13 DISASTER AVAILABILITY........................................................................... 11
C. GENERAL PROVISIONS.............................................................................. 11
C.1 DISPUTE RESOLUTION.............................................................................. 11
C.2 TAXES AND OTHER CHARGES......................................................................... 14
C.3 CHANGES REQUIRED TO MEET CODES, LAWS OR REGULATIONS............................................. 14
C.4 NOTICES......................................................................................... 14
C.5 YEAR 2000 DATE CHANGE WARRANTY.................................................................. 15
C.6 ENTIRE AGREEMENT................................................................................ 15
C.7 EXCEPTIONS...................................................................................... 16
C.8 COUNTERPARTS.................................................................................... 17
EXHIBIT A-- DOMESTIC PRODUCT AND PRICE LIST......................................................... 18
EXHIBIT B-- DISCOUNT SCHEDULE AND ORDER CONFIGURATION............................................... 19
EXHIBIT C-- SPECIFICATIONS.......................................................................... 20
EXHIBIT D-- WARRANTY................................................................................ 21
EXHIBIT E-- SOFTWARE LICENSE........................................................................ 22
EXHIBIT F-- VENDOR MONTHLY REPORT REQUIREMENTS......................................................
EXHIBIT G-- AFFILIATE AND SUBSIDIARY LIST........................................................... 24
EXHIBIT H-- MUTUAL NONDISCLOSURE.................................................................... 25
Exhibit I-- PRODUCT MAINTENANCE PROGRAM............................................................. 28
EXHIBIT J-- COMMISSIONING CERTIFICATE............................................................... 29
EXHIBIT K-- DIVISION OF RESPONSIBILITY.............................................................. 30
EXHIBIT XX-- TERMS AND CONDITIONS.................................................................... 31
EXHIBIT Y2K--COMPLIANCE CRITERIA... ................................................................. 32
</TABLE>
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
i
<PAGE>
GENERAL EQUIPMENT - MASTER PURCHASE AGREEMENT
THIS AGREEMENT No. CSR010400 ("Agreement"), effective January 1st, 2000, is
between Metawave Communications, a Delaware corporation ("Supplier"), AND
"Customer," comprised of AirTouch Support Services, Inc., a Delaware corporation
and wholly-owned subsidiary of AirTouch Communications, Inc., on behalf of
itself and its Affiliates, with a place of business at 255 Parkshore Drive,
Folsom, California 95630.
Whereas, Supplier has offered to sell to AirTouch Support Services, Inc.,
Spotlight 2000 antenna products, accessories, and supporting equipment described
herein for installation and use in the United States at the discounts and prices
specified herein based upon the volume purchases during this term of this
Agreement that are committed by AirTouch Cellular;
Whereas, AirTouch Support Services, Inc., wishes to take advantage of the
discounts and prices on Products and related services offered by Supplier;
Now Therefore, in consideration of the mutual promises contained herein,
the parties hereto agree as follows:
A. DEFINITIONS
For the purposes of this Agreement, the following terms and all other terms
defined in this Agreement shall have the meanings so defined unless the context
clearly indicates otherwise. A term defined in the singular shall include the
plural and vice versa when the context so indicates.
"Actual Contract Volume" means the total number of Products purchased or
deemed to be purchased during the term of the Agreement by Customer and its
Affiliates hereunder.
"Affiliate" means any parent, U.S subsidiary or successor of AirTouch
Support Services, Inc., or any partnership, corporation or other entity
operating in the United States in which AirTouch Support Services, Inc., or a
parent, subsidiary or successor of Customer, directly or indirectly, owns at
least ten percent (10%) equity interest, or has at least ten percent (10%)
voting control.
"Anniversary" means the annual occurrence of the Effective Date of this
Agreement.
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need to know.
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<PAGE>
"Commercial" refers to any Product intended for sale to wireless service
providers, produced with production tooling, regardless of production volume
levels.
"Commitment" means the agreed upon quantity of Products (i.e., CDMA
SpotLight Smart Antenna systems) to be ordered by Customer and installed by
Supplier during the period of time commencing on or before the Effective Date of
this Agreement and ending on or before June 30th, 2000.
"Customer" means AirTouch Support Services, Inc., acting in its individual
capacity and as a representative for its respective Affiliates and their
assigns, in accordance with the section titled "ASSIGNMENT."
"Effective Date" means the date of this Agreement as specified on the cover
sheet of this Contract.
"Information" means specifications, drawings, sketches, models, samples,
tools, computer programs, technical information, and other confidential business
information of, Supplier or Customer or personnel information or data, whether
written, oral or otherwise.
"Products" means equipment, components, devices, and accessories thereof
including documentation as well as it may include Services and a license to use
Software, as described in this Agreement, provided by Supplier hereunder to
Customer as described in Exhibit A, as the same may be modified, added or
discontinued upon written mutual agreement of the parties during the term of
this Agreement.
"Purchase Order" means each written order executed hereunder ordering
Products and Services which shall be deemed to incorporate (1) the provisions of
this Agreement (including the exhibits attached hereto), as it may from time to
time be amended, (2) the Specifications applicable to such Purchase Order, and
(3) any subordinate documents attached to or referenced in this Agreement or
such Purchase Order or Specifications, if agreed to in writing by both parties.
Each such Purchase Order shall be deemed to be a separate and independent
agreement between the parties with respect to the subject matter thereof.
"Required Delivery Date" means the date on which all Products on a Purchase
Order are to arrive at the location or locations specified on such Purchase
Order, if agreed to by Supplier.
"Services" means all services described in the applicable Purchase Order
and provided by Supplier hereunder to Customer including, but not limited to,
technical product support and repair services relating to the warranty
provisions set forth herein.
"Software" (if applicable for this agreement) shall mean all computer
programs, excluding source codes, consisting of a series of logical instructions
and tables of
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
2
<PAGE>
information which guide the functioning of a processor, contained in the
Products. Such programs may be contained in any medium whatsoever, including
Hardware containing a pattern of bits representing such program, but the term
Software does not mean or include such medium.
"Specifications" means (1) Supplier's published specifications, (2) the
equipment manufacturer's specifications (if Supplier is not the equipment
manufacturer), and (3) any other specifications for Products and Services agreed
to by the parties which are attached to or referenced in and made a part of the
applicable Purchase Order.
"Warranty" means the Products warranty provided pursuant to Section B.8.
"Warranty Period" means the period during which a Product is covered by
Supplier's warranties under the section entitled "WARRANTIES."
B. PURCHASE PROVISIONS
B.1 SCOPE OF AGREEMENT
This Agreement establishes the general terms and conditions under which
Customer may purchase Products from Supplier. The products, which means the
equipment, components, devices, accessories thereof including documentation as
well as it may include Services and a license to use Software as indicated in
the Agreement, all of which are manufactured, produced or performed by Seller or
procured by Seller from sub-sellers or sub-contractors. Exhibits A and B to this
Agreement contains the unit prices and discount schedules for the purchase
Commitment of [***] CDMA SpotLight systems to be supplied under this Agreement.
Customer may elect to purchase additional Products beyond the Commitment of
[***] systems and may purchase other Products from Supplier.
B.2 TERM OF AGREEMENT
Unless sooner terminated in accordance with the provisions of this
Agreement or extended by amendment, the initial term of this Agreement shall
commence on January 1, 1999, ("Effective Date"), and extend through December 31,
2000 unless amended by both parties in writing. Except as set forth in this
Agreement, the Termination of this Agreement shall not affect the obligations of
any party pursuant to any purchase commitments or any Purchase Orders previously
executed hereunder, and the terms and conditions of this Agreement shall
continue to apply to such Purchase Orders as if this Agreement had not been
Terminated. Customer shall pay Supplier for all work performed prior to the
effective date of Termination.
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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<PAGE>
B.3 ORDER OF PRECEDENCE
This Agreement supersedes all agreements, correspondence or statements,
whether oral or written, in whatever form made by either Party prior to the
effective date of the Agreement, except to the extent such documents are
incorporated into this Agreement in an Exhibit. In case of any discrepancies
between individual documents governing the relationship between the Parties, the
following order of precedence shall apply:
Highest priority to lowest priority:
. The Agreement
. Exhibits to the Agreement
. Change Orders
. Purchase Orders
. Exhibits to Purchase Orders
. Written correspondence between the Parties
B.4 PRICES AND TERMS
a. Price Increases. The list prices for Products which are set forth in
----------------
Exhibit A [***] are valid from the effective date of the Agreement through
December 31, 2000, subject to adjustment in accordance with the section entitled
"PRICE PROTECTION."
b. Volume Commitment. During the period of time commencing on or before
------------------
the Effective Date of this Agreement and ending on or before June 30, 2000,
Customer agrees to order from Supplier [***] CDMA SpotLight Smart Antenna
systems, as more fully described in Exhibit A, and Supplier hereby agrees to
provide and install such systems ordered by Customer within the above described
period of time. Provided that [***] no further action is required. In the event
that [***] Supplier and Customer agree to [***]. In the event that actual volume
of Customer's orders falls short of the [***] CDMA SpotLight Smart Antenna
systems, Customer will [***]
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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<PAGE>
B.5 ORDERING LEAD TIMES
CDMA Spotlight 2000 Smart Antenna systems ordered under the Contract
Volume Commitment of [***] systems will have a lead time of [***] days from
Supplier's acceptance of purchase order, unless otherwise confirmed by Supplier.
B.6 DELIVERY, TRANSPORTATION AND SHIPPING
a. All products shall be delivered F.O.B. destination. Subject to the
provisions of this section entitled "DELIVERY, TRANSPORTATION AND SHIPPING,"
Customer shall bear the transportation charges for each Product from Supplier's
United States location to Customer's designated location as set forth in the
Purchase Order, which may include, but not be limited to, Customer's or
Affiliate's warehouse. Supplier shall ship Products in accordance with
instructions, if any, from Customer with transportation charges prepaid by
Supplier. Supplier shall invoice Customer for any such transportation charges
required to be paid by Customer hereunder. Such prepaid charges shall be at
actual cost and added to and stated separately on the invoice for such Product.
If requested by Customer, Supplier shall provide legible copies of prepaid
freight bills, express receipts, or bills of lading supporting the invoice
amounts. Customer will have the option to arrange and pay for its own shipping.
b. Customer may request that Products purchased under a single Purchase
Order be shipped to [***] provided that Customer submits instructions regarding
multiple delivery in the Purchase Order or other written notice at least ten
(10) business days prior to the requested Shipment Date.
c. Supplier shall use the [***]. All containers shipped by Supplier shall
utilize the specifications, [***]. This standard addresses the transaction
label, which provides information for receiving shipments using bar code
technology. The transaction label should be affixed on final shipping
containers, boxes, cartons, pallets, cases, barrels, etc.. Customer requires bar
code labels to be on each product as well as shipping containers for inventory
management. Information on the bar codes shall be specified by Customer at a
later date.
d. Supplier shall, at its own expense, properly pack each Product in
accordance with Supplier's standard domestic packing practices, in connection
with the shipment of such Product to Customer's site. Payment for such
additional packing expenses shall be upon mutual agreement of the parties. If
such Product is returned to Supplier because of rejection in accordance with the
Exhibit XX section entitled "ACCEPTANCE" or cancellation pursuant to the
provisions of this Agreement, Supplier shall bear all
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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<PAGE>
transportation charges relating to the return of such Products. If Customer has
already paid Supplier for such charges, Supplier shall refund such payment to
Customer.
e. Unless Customer specifies the carrier, Supplier shall be responsible
for dealing with carriers to coordinate delivery of shipments, locating missing
or late shipments, resolving billing disputes for transportation charges, and
submitting and resolving all insurance claims arising from loss of or damage to
such shipments. If Customer chooses the carrier, Supplier's sole responsibility
shall be assisting Customer with any claims or issues against such carrier.
f. If Customer gives Supplier no fewer than [***] days advance
written notice of shipping delay, no storage charges shall apply for Customer
requested changes to delivery shipment dates up to [***] days requested
delay. This applies only to orders that Customer delays prior to shipment from
Supplier's location.
B.7 WARRANTIES
Seller represents and warrants that the following statements are true on
the date of execution of this Agreement and at all times during the term hereof,
except as may be expressly provided otherwise:
a. General Warranty of Quality. In addition to all other Warranties set
---------------------------
forth herein, Supplier warrants to Customer, for a period of [***] months,
commencing on either; (i) date of receipt by Customer (where Customer shall
perform the installation) or, (ii) completion by Supplier of installation and
commissioning and Product acceptance by Customer at Customer's site as defined
in Exhibit J, of a Product to Customer, that all Products purchased under this
Agreement will be safe for their intended purpose and will be free from defects
in design, material and workmanship and will conform to and perform in
accordance with Supplier's Specifications and other provisions under this
Agreement set forth in Exhibit C ("Specifications") and Supplier warranty set
forth in Exhibit D. All products shall be of the latest design for that
particular product or model as then currently produced and made generally
commercially available to customer by Supplier or its suppliers, unless
identified as otherwise. The Software provided by Supplier, if applicable for
this Agreement, shall perform the functions described in Exhibit E. Where
Supplier performs Installation Services, the workmanship shall conform with good
engineering practices and shall be accomplished in a workmanlike fashion.
Supplier shall be responsible for removing debris, packing material, waste,
etc., resulting from its work and shall leave the premises in a neat and orderly
fashion. Supplier warrants to Customer that all Services provided hereunder
shall be performed in a workmanlike manner and in accordance with applicable
Specifications. All warranties shall survive inspection, acceptance and payment.
In the event that a Customer purchases linear power amplifiers (LPA's)
directly from a third party supplier, and not from Metawave, such LPA's shall be
subject to the
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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warranty given by the third party supplier. However, this separate warranty
shall not affect Supplier's warranty set forth above with respect to the
Products or to provide technical support for the Products as outlined in Section
B.11 of this Agreement.
b. Repair and Replacement by Supplier. For Products that fail to comply
----------------------------------
with the Initial Warranty, when the failure occurs prior to installation,
Supplier may, at Supplier's option, repair, replace or refund the full price at
no cost to Customer. For Products that fail to comply with the Initial
Warranty, when the failure occurs after installation of Product, in addition to
the remedy immediately set forth above, Supplier shall remove Product in breach
and replace or repair it. Supplier shall have the right to inspect suspected
defective Product prior to removal from site location to determine reason for
failure. Where replacement of Product not meeting the warranties is made
thereunder, replacement shall include, at Customer's option, expedited
deliveries at a mutually agreed charge to Customer. Supplier shall not be
responsible for defects in material or workmanship that would not have occurred
but for Customer's improper use of Product. Any warranty provided hereunder
does not extend to any Product or Service which has been misused, modified,
repaired, improperly installed or otherwise abused.
c. If Product does not comply with the foregoing warranty and Supplier has
not remedied or attempted to remedy such noncompliance as set forth in B.7 (a)
within a reasonable time (not to exceed [***] calendar days from Customer's
notice to Supplier of the nonconformity) or if [***] Customer can, at its
option, Terminate this Agreement and Commitments, or its Forecasts, and/or any
outstanding Purchase Orders for any other Products affected by such breach.
d. If a breach of warranty is determined to result from a manufacturing
problem that effects Product not yet in nonconformance with the warranty, the
parties shall negotiate in good faith to develop a replacement plan ("recall").
Supplier shall pay all of Customer's out-of-pocket costs, including but not
limited to, removal and installation costs for all Products still under warranty
associated with such recall if such recall is classified an "A" or "AC" change
as defined per BELLCORE document GR-209-CORE "GENERIC REQUIREMENTS FOR PRODUCT
CHANGE NOTICES."
e. Repair or Replacement by Customer. In the event that Supplier is
---------------------------------
unable to fulfill its undertakings under this Section B.7, Customer may, after
expiration of the notice periods as outlined under paragraph "c" of this Section
B.7, at the expense of Supplier, undertake the corrective measures itself. In
this event, Customer shall be entitled to either be reimbursed for the direct
costs related thereof, or to set off an amount corresponding to Customer's costs
for the corrective measures against any sums due to Supplier under this
Agreement. Customer will give Supplier [***] advance notice of its intention to
undertake corrective measures itself. In situations where time is of the essence
due to the nature of the fault, Customer will give Supplier [***] advance notice
of its intention to undertake corrective measures itself.
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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f. Supplier represents and warrants that it has good title to Products and
the right to sell them to Customer free of any of the proprietary rights listed
in Exhibit XX section entitled "INTELLECTUAL PROPERTY INDEMNIFICATION," and upon
payment in full by Customer, such Products shall not be encumbered with any
security interest, lien or any other encumbrance whatever.
g. At the request of Customer, prior to the purchase of Products, Supplier
may provide Customer with optional extended warranty coverage for Products in
[***] as set forth in Exhibit I, at additional costs or discounts, as
applicable, from the full invoice price, as mutually agreed upon by Customer and
Supplier and set forth in attached Exhibit A.
h. Supplier's warranty shall remain in effect if Product is moved and
reinstalled by Customer or Customer's subcontractor during the Warranty Period,
unless damage to Product is inflicted by Customer or Customer's subcontractor
during move or reinstallation.
i. All items that are reasonably suspected of being not in conformance
with the warranty will be returned to Supplier by Customer, unless Supplier
waives this requirement based on individual incidents. Supplier will determine
if Product is in fact defective due to Supplier's fault and will report the
results of these findings to Customer. If Product is not defective, Customer
will bear the cost of shipping the item to Supplier. In addition, if Supplier
has sent out emergency replacements, and upon subsequent review finds that the
failure was not due to Suppliers Product, Customer agrees to pay for the
replacement in addition to the original item.
j. Service Warranty. If applicable, Services shall be performed
----------------
promptly, diligently, and in a competent and professional manner, in accordance
with the descriptions of such Services in the applicable Purchase Order and to
Customer's satisfaction.
k. Disclaimer of Implied Warranties: Sole Remedy. Except As Provided In
---------------------------------------------
This Section, Supplier Makes No Other Warranty, Express Or Implied. All
Warranties Of Merchantability And Fitness For A Particular Purpose Are Hereby
Expressly Disclaimed. This Warranty Contains Customer's Sole And Exclusive
Remedies And Is Expressly In Lieu Of All Other Remedies Based In Law Or Equity.
B.8 SPARE PARTS
For a period of [***] after the sale of a Product or discontinuance of a
Product, whichever is later, Supplier shall make spare parts available, or in
the event of a Product discontinuance, a good faith effort to make spare parts
available, to Customer and its Affiliates. The price for spare parts [***] If
Supplier discontinues the supply of spare parts at any time thereafter, and such
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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spares are not available from another Supplier, then Supplier shall use its best
efforts to obtain, engage, license or otherwise provide for a third party to
manufacture and supply to Customer or its Affiliates such spares. If Supplier is
unable to secure such third-party manufacturer then Supplier shall provide at no
charge to Customer all technical information and any other rights required so
Customer can manufacture (if permitted by law to do so), have manufactured, or
obtain such parts from other sources. Any information provided by Supplier to
Customer pursuant to this Agreement shall be used solely by Customer for this
purpose and shall remain confidential upon termination or expiration of this
Agreement.
B.9 SOFTWARE SUPPORT SERVICES
If applicable for the products designated in this Agreement, for a period
of [***] from the date of this Agreement, and on the condition that Customer
continues to license the newest Software releases (or additional features or
functionality in existing Software releases) from Supplier no later than [***]
from the date they are first made available by Supplier and [***], Supplier
shall provide support services for the Software licensed to Customer under this
Agreement on terms and conditions (including pricing) which are no less
favorable than Supplier's offerings of support services for the same or similar
software to Supplier's other customers, taking into account local costs, and
other local conditions.
In the event that Supplier ceases to make new Software releases (or
additional features or functionality in existing Software releases) available to
Customer, then Supplier shall for a period of [***] from the date of
the Supplier's last Software release to Customer, continue to provide support
services for the last Software release licensed to Customer under this Agreement
on terms and conditions (including pricing) which are no less favorable than
Supplier's offerings of support services for the same or similar software to
Supplier's other customers in U.S., taking into account local costs, other local
conditions.
B.10 DOCUMENTATION
Supplier shall provide Customer as required, complete sets of standard
documentation, including product specifications as part of Exhibit C, one (1)
set for AirTouch Corporate operations, and one (1) set for each AirTouch
regional headquarters were Product is being or has been deployed. Supplier shall
include one complete set of product and installation documentation with each
CDMA SpotLight system shipped to Customer. Documentation shall be in a format
acceptable to Customer (i.e., printed, CD ROM, HTML, or PDF file format).
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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B.11 PRODUCT SUPPORT
a. Technical Support and Training. At the reasonable request of the
------------------------------
Customer, Supplier shall promptly make available at the installation site a
field engineer to render installation assistance as required by Customer. The
foregoing will be provided at the charges set forth in Exhibit A to Customer,
not withstanding the foregoing, within the first 60 days of the warranty period
following installation, as set forth in Section B.7. a, [***] assistance. After
the first sixty (60) of the warranty period following installation, this field
installation assistance shall be paid for by the [***].
b. Supplier shall provide on-going 24-hour technical telephone support,
including field service and assistance during out of service conditions.
Supplier shall maintain an 8:00 a.m. to 5:00 p.m. PST technical product support
telephone hot line (1-(888) 642-2455 and 1-(425) 702-5975 FAX) Monday through
Friday. Supplier shall provide Customers with an emergency reach telephone
number to obtain support for out of service conditions during hours in which the
telephone hot line is not manned or operational. Customer, by calling this
number, shall have the ability to receive detailed technical Product support and
answers to technical questions involving Product operation, fault diagnosis,
interoperability and other technical aspects of Products.
Such telephone technical support shall be provided [***] Customer shall pay
Supplier's reasonable costs and expenses incurred by Supplier in providing any
on-site technical support, including, without limitation, air fare, lodging,
ground transportation, and labor expenses, when these services are identified
and ordered by a Purchase Order or service authorization letter.
c. If requested by Customer, Supplier shall; [***]
Classes shall be available prior to the commercial deployment of Product
and shall be conducted at reasonable intervals at locations agreed upon by
Supplier and Customer, or (ii) at the option of Customer, Supplier shall provide
to Customer training modules or manuals and any necessary assistance, covering
those areas of interest outlined above, in detail, format, and quantity to allow
Customer to develop and conduct a training program.
The foregoing will be provided at the charges set forth in Exhibit A to
Customer, unless otherwise specified in advance by Supplier.
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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d. The availability or performance of this technical support and training
service shall not be construed as altering or affecting Supplier's warranties or
any other obligation of Supplier under this Agreement.
B.12 SPECIAL PROVISIONS
a. Invoices. Customer shall receive an [***]
B.1 DISASTER AVAILABILITY
If any Standard Products are rendered inoperative as a result of a natural
or other disaster or emergency, Supplier will make all reasonable efforts to
supply or help locate backup or replacement Products for Customer's use and at
Customer's cost. Supplier must support out of service conditions as a priority
by either maintaining pre-determined inventory or an expedited manufacturing
priority process. Either process selected should typically result in shipment
of product within twenty four (24) hours of out of service notification.
Customer shall pay to Supplier (if required by special circumstance) mutually
agreed expedite charges as needed.
C. GENERAL PROVISIONS
C.1 DISPUTE RESOLUTION
a. In the event that a dispute arises over the interpretation or
application of any provision of this Agreement or the grounds for termination
hereof, any party may request that the parties meet within [***] of such request
and seek to resolve the dispute by negotiation [***]. Such meetings shall be
attended by individuals with decision-making authority, to attempt in good faith
to negotiate a resolution of the dispute prior to pursuing other available
remedies. If, [***] after the first such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, a party may request that:
[***]
11
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[***]
b. If the attempts to resolve a dispute described in subsections a. [***]
of this section fail, then the dispute will be mediated by [***] after written
notice by either party demanding mediation. [***]
c. [***]
[***]
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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[***]
d. [***]
Nothing in this section will prevent any party from seeking injunctive
relief in a judicial proceeding if interim relief from a court is necessary to
preserve the status quo pending resolution or to prevent serious and irreparable
injury to that party or others.
e. The parties shall continue to perform all obligations under the
Agreement pending the above-described dispute resolution proceedings, subject to
full reservation of rights at law or under this Agreement.
C.2 TAXES AND OTHER CHARGES
a. Supplier's prices are exclusive of charges for freight and insurance.
Supplier shall bear the cost of all taxes, import and export duties, and other
governmental fees of whatever nature, except sales and use taxes levied by
states, municipalities or governmental authorities which shall be added to the
prices as applicable and stated as separate items on the invoice applicable to
each Purchase Order.
b. Supplier agrees to pay, and to hold Customer harmless from and against,
any penalty, interest, additional tax or other charge that may be levied or
assessed as a result of the delay or failure of Supplier for any reason to pay
any tax or file any return or information required by law, rule or regulation or
by this Agreement to be paid or filed by Supplier.
c. Upon Customer's request, the parties shall consult with respect to the
basis and rates upon which Supplier shall pay any taxes for which Customer is
obligated to reimburse Supplier under this Agreement. If Customer determines
that, in its opinion, any such taxes are not payable or should be paid on a
basis less than the full price or at rates less than the full tax rate, Supplier
shall comply with such determinations. If collection is sought by the taxing
authority for a greater amount of taxes than that so determined by Customer,
Supplier shall promptly notify Customer. If Customer desires to contest such
collection, Customer shall promptly notify Supplier. Although Supplier shall
cooperate with and provide reasonable assistance to Customer, Customer shall
direct the conduct of any proceedings, hearings or litigation involved in any
contest with respect to taxes for which Customer is obligated to reimburse
Supplier under this Agreement. Customer shall reimburse Supplier for any taxes,
interest or penalties which Supplier may be required to pay as a result of
Supplier's complying with Customer's determinations with respect to the payment
or contesting of any such taxes.
d. If any taxing authority advises Supplier that it intends to audit
Supplier with respect to any taxes for which Customer is obligated to reimburse
Supplier under this
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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Agreement, Supplier shall (i) promptly so notify Customer, (ii) afford Customer
an opportunity to participate on an equal basis with Supplier in such audit with
respect to such taxes, and (iii) keep Customer fully informed as to the progress
of such audit. Each party shall bear its own expenses with respect to any such
audit, and the responsibility for any additional tax, penalty or interest
resulting from such audit, shall be determined in accordance with the applicable
provisions of this section.
C.3 CHANGES REQUIRED TO MEET CODES, LAWS OR REGULATIONS
During the Warranty period at no additional cost to Customer, provided
Customer promptly notifies Supplier of any pending Legislation that the Customer
is aware of that could impact the Products at the time a relevant Purchase Order
is issued to the Supplier or subsequently thereafter as the Customer becomes
aware of such Legislation, Supplier shall make any changes to the Products or
will provide mutually agreed replacements which are required by United States
laws (i) in effect on the Delivery Date of such Equipment, or (ii) enacted
within seven (7) years of such Delivery Date, provided that the enactment of
such law requires retroactive compliance and the enactment of such law was or
could reasonably have been anticipated by Supplier at the time of the original
Delivery Date. Customer agrees to negotiate with Supplier an equitable
adjustment in prices as required by this provision if the Products are out of
Warranty or extraordinary circumstances occur during the Warranty period that
impact the Supplier's ability to anticipate the required changes.
This provision shall not apply to Products, Affiliates or foreign laws to
which Products are or become subject unless and until Customer or Affiliate
affected by any such law has informed Supplier of any applicable Products laws
that are or shall be enacted in the jurisdictions in which Products are intended
to be shipped or used.
C.4 NOTICES
Except as otherwise provided in this Agreement, all notices or other
communications hereunder shall be deemed to have been duly given; (i) when made
in writing and mailed by certified mail, return receipt requested; (ii) upon
transmission when made by facsimile; or (iii) upon confirmation of receipt, when
made by overnight courier or hand delivery to the parties at the addresses set
forth below or at such other addresses as may be designated by the parties in
writing:
Supplier shall send notices to Customer at the following addresses:
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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<TABLE>
<S> <C>
AirTouch Support Services, Inc. With a copy to:
255 Parkshore Drive
Folsom, California 95630 AirTouch Communications
Attn: Director, Strategic Supplier Relations 2999 Oak Road, MS 1025
Infrastructure Procurement Walnut Creek, CA 94596
Phone: (916) 357-3806 Attention: Legal Department
Fax: (916) 357- 3807 Fax: 925-210-3599
Customer shall send notices to Supplier at the following addresses:
Metawave Communications Corp. With a copy to:
10735 Willows Road N.E Metawave Communications Corp.
Redmond, WA 98052 10735 Willows Road N.E
Attn.: Richard Henderson Redmond, WA 98052
Title: VP, Sales & Marketing Attention: Legal Department
Phone: (425) 702-6515 Phone: (425) 702-5648
Fax: (425) 702-5976 Fax: (425)702-5978
</TABLE>
The address to which notices or communications may be given by either party
may be changed by written notice given by such party to the other pursuant to
this section entitled "NOTICES".
C.5 YEAR 2000 DATE CHANGE WARRANTY
Supplier warrants by the year 1998, that the software, which is licensed to
Customer hereunder and used by Customer prior to, during or after the calendar
year 2000, includes, at no added cost to Customer, design and performance
according to Customer's "Year 2000 Compliance Standard" as shown in the attached
Exhibit I. This is to ensure Customer shall not experience software abnormally
ending and/or invalid and/or incorrect results from the software in the
operation of the business of Customer. The software design to ensure year 2000
compatibility shall include, but not be limited to, date data century
recognition, calculations that accommodate same century and multicentury
formulas and date values, and date data interface values that reflect the
century.
C.6 ENTIRE AGREEMENT
This Agreement including Exhibits A, B, C, D, E, F, G, H, I, J, K, Exhibit
XX and Exhibit Y2K and each Purchase Order and Acknowledgment issued hereunder
constitutes the entire agreement between the parties with respect to the subject
matter thereof. All prior agreements, representations, statements,
negotiations, understandings and undertakings are superseded hereby.
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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C.7 EXCEPTIONS
The following modifications to Exhibit XX entitled "Terms and Conditions"
have been accepted and supersede the corresponding section printed within
Exhibit XX:
Section 1:2: Add the following sentence: "Supplier shall have the right to
-----------
refuse to do business and reject Purchase Orders from Affiliates for valid
business reasons."
Section 1.4 paragraph c: third paragraph: Change [***]
-----------------------
Section 1.4 paragraph g: second sentence: Change "dollars" to "numbers of
-----------------------
"Products".
Section 1.5: Replace the term "prices" throughout the section with the
------------
words "aggregate prices, terms, warranties and benefits"
Section 1.6 paragraph d: Delete the entire paragraph and replace with the
------------------------
following: [***]
Section 1.7 paragraph c: Add at the end of the sentence the words "in
-------------------------
Exhibit G".
Section 1.9: Delete the first sentence and replace with the following
-------------
words: "Customer shall inspect all Products shipped and, unless rejected at
the time of delivery, such product shall deemed accepted by the Customer".
Section 1.10 paragraph a: Change [***]
-------------------------
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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Section 1.11: Delete the rest of the sentence following the word "Customer"
-------------
in the second line.C.8 COUNTERPARTS
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives.
AirTouch Support Services, Inc.
- ----------------------------------
- ----------------------------------
By: /s/ Richard Henderson By: /s/ Richard Henderson
------------------------------- -----------------------------
Name: Richard Henderson Name: Gary Schindler
----------------------------- ---------------------------
Title: V.P. of Sales and Marketing Title: Executive Vice President,
---------------------------- --------------------------
Shared Services
Confidential--Disclose and distribute solely to those individuals who have a
need to know.
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EXHIBIT 10.18
Metawave Communications Corporation/
GRUPO IUSACELL S.A. DE C.V.
Supply Agreement
Document Number # ______
Metawave Communications Corporation
10735 Willows Road N.E.
Redmond, WA 98052 USA
Tel. 425.702.5600
Fax 425.702.5970
http://www.metawave.com
CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- --------- ----------------------------------------- ----
<C> <S> <C>
1. AGREEMENT................................ 1
2. DEFINITIONS.............................. 1
3. PURCHASE ORDERS / CANCELLATIONS.......... 3
4. SHIPPING / TITLE / RISK OF LOSS.......... 4
5. INSTALLATION / TRAINING / DOCUMENTATION.. 5
6. INVOICES AND PAYMENT..................... 5
7. WARRANTY................................. 6
8. INFRINGEMENT INDEMNITY................... 7
9. INDEMNIFICATION.......................... 8
10. TERM AND TERMINATION..................... 9
11. ASSIGNMENT/LIMITATIONS ON TRANSFERS...... 9
12. NOTICES.................................. 9
13. INSURANCE................................ 10
14. COMPLIANCE WITH LAWS..................... 10
15. FORCE MAJEURE............................ 12
16. GOVERNING LAW / DISPUTE RESOLUTION....... 12
17. CONFIDENTIALITY.......................... 12
18. INTELLECTUAL PROPERTY.................... 12
19. GENERAL PROVISIONS....................... 13
</TABLE>
Exhibit A - Products and Services Price List
Exhibit B - Commissioning Certificate
Exhibit C - Product Maintenance Program
Exhibit D - Software License
-i-
CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Exhibit E - Engineering and Optimization Services Certificate
-ii-
CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
METAWAVE COMMUNICATIONS CORPORATION
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "Agreement") is made as of this 17th day of
December, 1999 (the "Effective Date") between Metawave Communications
Corporation, a Delaware corporation ("Seller"), and Grupo IUSACELL S.A. de C.V.,
a Mexican 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 by
submitting a Purchase Order(s) to Seller, the Products and Services
identified on Exhibit A to this Agreement in accordance with the terms and
conditions hereof and at the Purchase Prices set forth in Exhibit A. Except
for the Initial Order Commitment contained in Exhibit A, it is expressly
understood and agreed that this Agreement is intended solely to establish
uniform and consistent terms and conditions for any Purchase Orders
Customer may choose to place with Seller and that Customer is not obligated
to place any Purchase Orders with Seller.
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:
"Change Order" shall mean any subsequent change to a Purchase Order
initiated by either party and mutually agreed to by both parties in
writing, including but not limited to, changes due to Site configuration
and Products and Services needed at the Site.
"Commissioning" shall mean the procedures described in Seller's Product
system manual to place the Product into commercial service at a particular
Site. The completion of Commissioning is documented by Customer's signature
on the Commissioning Certificate attached hereto as Exhibit B. Both parties
agree to fulfill their respective
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obligations defined in this Agreement to complete Commissioning at each
Site when Seller installs such Products.
"Engineering and Optimization Services" shall mean the engineering and
optimization services provided by Seller to optimize the Product at a Site
as described in Exhibit A. The completion of Engineering and Optimization
Services is documented by Customer's signature on the Engineering and
Optimization Services Certificate attached hereto as Exhibit E which shall
be signed by Customer no later than two weeks following completion of the
Engineering and Optimization Services.
"Initial Order Commitment" means Customer's order [***] as set forth in
Exhibit A, [***] on or before [***], The Initial Order Commitment of [***]
is based on a mutually agreed order quantity between Seller and Customer.
Seller agrees [***] or any subsequent period of time after that.
"Product" or "Products" shall mean the SpotLight(R) 2000 spectrum
management system(s) or component(s) consisting of hardware and Software as
listed in Exhibit A or any additional product(s) 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 submit to
Seller for the purchase of the Products or Services which shall be subject
to 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. All prices shown herein are in U.S. dollars.
"Services" shall mean installation, optimization, engineering or other
additional services set forth in Exhibit A or 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 that Seller's
Products are installed.
"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 Products.
"Software" shall mean the (i) object-code computer programs embedded in the
Products which control and monitor the operation of the Products ("Embedded
System Software"), and (ii) the PC-based graphical user interface computer
program for the Products, and all
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Features, Major Releases, Point Releases, and Software Patches (as such
terms are defined in "Product Maintenance Program" attached hereto as
Exhibit C), other updates and modifications to such Software (the "Software
Updates") and any documentation in support thereof.
"Software License" shall mean the licensing of the Software set forth in
Exhibit D, the terms of which shall apply to any Software purchased by
Customer from Seller pursuant to this Agreement.
3. PURCHASE ORDERS / CANCELLATIONS
a. Customer shall order Products and Services pursuant to this Agreement
by submitting a Purchase Order that provides the information specific
to the order, including but not limited to the quantity of Products
and Services to be ordered, delivery destination, the name and address
of the Customer's representative to whom the Products are to be
shipped at the delivery destination, the price of each Product and
Service per Exhibit A, the desired delivery date(s) and whether
partial shipments are acceptable. Purchase orders should be submitted
by Customer to Seller at least [***] prior to date of delivery of
Products or the rendering of Services.
b. Upon receipt of the Purchase Order, Seller shall have [***] business
days to accept or reject the Purchase Order in writing. Any
acceptances further subject to completion of Site Survey.
c. If following the completion of the Site Survey, Seller determines that
Product configurations or the Services set forth in the Purchase Order
must be changed, Seller shall notify Customer with a written proposal
for changes to the Purchase Order. Upon receipt, Customer shall have
[***] 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 written proposal for changes Customer may cancel
the Purchase Order subject to Section 3(e) below.
d. At its sole option, Seller may decline to fulfill an Order 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 Products would
contravene Section 14(e) (export restrictions) of this Agreement; or
(iii) Seller's personnel may be exposed to unsafe conditions.
e. Customer may cancel or delay delivery of Products contained in any
Purchase Order or Change Order prior to Seller's shipment of the
Products subject to the terms herein. Any such cancellation or delay
must be made by written notification to Seller. Customer may delay the
delivery date for any Products on any purchase Order or Change Order
once, and such delay shall not exceed [***] days. If Customer directs
such cancellation or delay with less than
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Order or Change Order, Customer shall pay to Seller reasonable and
documented nonrecurring costs, if any, associated with such
cancellation or delay provide however, that any such costs shall not
exceed in the [***] of the Purchase Price of each canceled or delayed
Products.
f. During the period of time commencing on or before the effective date
of this Agreement and [***], Customer agrees to order from Seller
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4. SHIPPING / TITLE / RISK OF LOSS
a. Subject to Section 3, Seller shall ship in accordance with Seller's
standard shipping practices all Products to Customer's designated
representative at the designated delivery destination on or before the
delivery date(s) specified in a Purchase Order. [***]
b. Seller shall arrange, on behalf of Customer the following items: [***]
Customer shall reimburse Seller at cost for [***] Seller shall
separately invoice Customer for such charges in accordance with
Section 6 herein.
c. Products shall be packed by Seller 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, except as noted in paragraph 4(a), above.
d. Title to and risk of loss or damage to Products sold by Seller to
Customer hereunder shall pass to Customer upon delivery to Customer's
representative at the delivery destination specified on the Purchase
Order. Title to Software shall remain with Seller in all cases
pursuant to the terms of the Software License attached as Exhibit D
hereto.
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5. INSTALLATION / TRAINING / DOCUMENTATION
a. Seller shall install and commission each Product in accordance with a
mutually agreed upon deployment schedule. Customer agrees to furnish
reasonable access to the cell sites and the necessary resources to
assist Seller during installation and optimization. Such deployment
schedule shall be agreed to in writing by Seller and Customer.
b. If Seller fails to complete installation and commissioning of a
Product within the specified deadline (or any extension agreed to in
writing by the parties), and such failure is due to delays or causes
within the reasonable control of Seller, then Seller will not charge
Customer for the installation and commissioning of that Product at the
designated site. In the event of any delay beyond the reasonable
control of Seller, the date(s) of installation and commissioning shall
be extended for as many days as are reasonably required due to the
delay.
c. Product training courses will be offered at Seller's offices in
Redmond, WA or on site in Mexico by mutual agreement the prices listed
in Exhibit A. If Seller conducts training on site in Mexico, [***]
The course schedule and availability will be coordinated with Seller's
training organization. Seller will provide at no cost to Customer one
set of manuals and documentation with each Product.
6. INVOICES AND PAYMENT
a. For Product to be installed by Seller, Seller shall render invoices to
Customer as follows: [***]
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b. All invoices shall be computed on the basis of the prices set forth in
Exhibit A [***] and shall separately identify categories of charges,
including but not limited o quantities of Products, type of Services,
total amounts for each item, shipping charges, applicable sales or use
taxes and total amount due in U.S. dollars. Customer shall promptly
pay Seller the amount due within thirty (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.
c. The prices specified in Exhibit A do not include any taxes. Customer
shall pay all local and government sales, excise, or any other taxes,
fees, duties, tariffs, or other governmental charges or customs
processing fees which may be levied upon the use, sale, transfer of
ownership, or installation of Product or Services purchased hereunder
or the import, movement, delivery, possession of Products, including
the replacement and repair of Products, excluding, however, any taxes
on the income, business or licenses of Seller. Any such taxes or fees
required to be paid or collected by Seller shall be added to the
invoice as separate charges and paid by Customer to Seller unless
Customer provides Seller with proof of exemption acceptable to the
appropriate authority.
d. Payment shall be made by wire transfer in U.S. dollars to the
following account:
Imperial Bank
2015 Manhattan Beach Blvd.
Redondo Beach, CA 90278
Attn: Merchant Banking Group
ABA: 122201444
Swift: 1MPUS66
Account Number: 36-001348
Account Name: Metawave Communications Corporation
7. WARRANTY
a. Seller warrants the Products for a period of [***] ("Warranty
Period"). During the Warranty Period, Seller warrants that (i) all
Products furnished hereunder will be free from defects in materials,
workmanship and title; (ii) all Products as delivered and properly
installed and operated will function substantially as described in the
user documentation and specifications provided by Seller; and (iii)
the media on which the Software is contained will be free from defects
in material and workmanship under normal use. THE WARRANTIES IN THIS
AGREEMENT ARE GIVEN IN LIEU OF
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ALL OTHER WARRANTIES EXPRESS OR IMPLIED WHICH ARE
SPECIFICALLY EXCLUDED, INCLUDING, WITHOUT LIMITATION,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
b. Customer and Seller shall handle all warranty claims in accordance
with the procedures set forth in Exhibit C, the Product Maintenance
Program. The actions taken by Seller under the Product Maintenance
Program procedures shall be the full extent of Seller's liability and
Customer's exclusive remedy with respect to a claim under this Section
7. The supplied Products provided hereunder by Seller to Customer (i)
shall perform on and after January 1, 2000 in as good a manner as
before such date, and (ii) shall at all times manage, manipulate and
report data involving dates (including the year 2000, dates before and
after the year 2000, and single-century and multi-century formulas)
without generating incorrect values or dates or causing an abnormally-
ending scenario within an application.
c. 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, 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's 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.
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 section 9(b) of this
Agreement,
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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 Product specifications, and, if neither of the
foregoing alternatives is available on terms that 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 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.
9. INDEMNIFICATION
a. 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
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 is given (i) prompt
notice of any such claim or suit and (ii) full opportunity to assume
control of the defense or settlement.
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b. In no event will either party or their respective suppliers be liable
under this Agreement for (i) the cost. of substitute procurement,
special, indirect, incidental, or consequential damages, or (ii) any
damages resulting from the loss of use or profits arising out of or in
connection with this Agreement, the furnishing of Services, or the use
or performance of Products even if informed of the possibility of such
damages. Except for damages resulting from bodily injury or death to
persons, in no event will Seller's total liability for (i) any damages
in any action based on or arising out of or in connection with this
Agreement exceed the total amount paid to Seller for such Products
under this Agreement, or (ii) claims based upon Seller's obligations
for Services exceed the total amount paid to Seller for such Services.
10. TERM AND TERMINATION
The term of this Agreement shall be three (3) years from the Effective
Date. Either party may terminate this Agreement at any time with thirty
(30) days' notice in which case Customer shall have the right to place
Purchase Orders up until the effective date of the termination and such
termination shall not affect any purchase order outstanding as of the
effective date of the termination. 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 terminate this Agreement. In addition,
a party may terminate this Agreement if a petition in bankruptcy or a
petition 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 notice of termination under this section 10 shall be in writing.
11. ASSIGNMENT/LIMITATIONS ON TRANSFERS
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 parent company, subsidiary or 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. Customer shall not purchase a Product solely for the purpose of
reselling or distributing it to another party.
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.
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
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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 Grupo Iusacell S.A. de C.V.
10735 Willows Road NE Avenida Prolongacion, Paseo de la
Redmond, WA 98052 Reforma Colonia Sante Fe 05348
Mexico D.F.
Attn: Richard Henderson, VP, Sales Attn: Thomas A. Burgos
Fax: 425 702 5976 Fax: 52-5-109-5407
Copy to: Kathy Surace-Smith Copy to: Ruben Perlmutter
General Counsel General Counsel
Fax: 425-702-5978 Fax: 52-5-109-5791
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 11.
13. INSURANCE
Seller agrees at its expense to maintain adequate insurance coverage to
protect against its liabilities under this Agreement. Insurance coverage
will include (a) worker's compensation insurance; (b) comprehensive general
liability insurance, including coverage for product liability, bodily
injury and property damage; and (c) automobile liability insurance.
14. COMPLIANCE WITH LAWS
a. Each party shall comply with all applicable federal, state and local
laws, regulations and codes, including the procurement of permits and
licenses relating to the purchase or sale of Product and Services
pursuant to this Agreement.
b. Seller agrees to obtain all necessary Mexican telecommunication
authorizations, certifications, permits or licenses as required for
the installation and operation of the Products and for which Seller is
responsible for under Mexican. law or regulations(the "Licenses").
Customer shall provide consultation or upon request from Seller,
reasonable assistance in the form of personnel, expertise and contacts
to Seller (other than financial assistance) in obtaining the Licenses,
customs clearances (subject to section 4(c)), visas, permits, work
permits, temporary import/export permits for tools and test equipment,
and any other required documentation required for the importation,
installation and operation of the Products in Mexico.
c. When Customer imports the Products into Mexico, Customer shall comply
with all importation formalities and obtain any customs or regulatory
permits required to import the Products into Mexico, including but not
limited to, NOM certificates
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issued by NYCE relating to compliance with electrical safety standards
(the "NYCE Certificate"). Seller agrees to 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 issuance of the NYCE Certificate to, and the holding or
maintenance of the NYCE Certificate by, Customer except where such
loss, damage, claim, or liability arises from the 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 is given (i) prompt notice of any
such claim or suit and (ii) full opportunity to assume control of the
defense or settlement.
In addition, Seller shall be responsible for maintaining the Products'
compliance with applicable NOM standards and for conducting additional
testing if needed `to maintain the NYCE Certificate. Customer and
Seller agree that the NYCE certificate shall only be used by Customer
as the importer of Products for its own use, and that Seller shall not
rely on the NYCE certificate issued to Customer for importation on
behalf of Seller or any other purchaser of the Products in Mexico.
d. Customer agrees that Seller may conduct testing for purposes of
obtaining any Licenses for the Products at the Sites where they are
installed and will allow Seller access to the Sites at times
acceptable to Customer for such purposes during installation and
afterwards if requested by Seller.
e. The parties agree to comply with all applicable U.S. and Mexican
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 Mexico.
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15. 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) 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's personnel. 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 forty-five (45) days, either party may terminate the
Purchase Order affected by the event by providing written notice.
16. 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. The terms and conditions of
the United Nations Convention CISG are excluded from application under
this Agreement.
b. Any dispute, controversy, or claim arising out of or relating to this
Agreement shall first be settled by non-binding mediation to be
conducted in English by a mutually agreed non-affiliated neutral
party. In the event mediation is unsuccessful, the matter shall be
settled by binding arbitration in New York, New York, under the rules
of the International Chamber of Commerce in effect at the time of the
arbitration to be conducted in English. The arbitration decision shall
be final and binding upon the parties and judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Notwithstanding the above, regarding
intellectual property claims, Metawave reserves the right to initiate
and conduct litigation proceedings in any court it deems appropriate.
17. CONFIDENTIALITY
All information, data and materials provided by either party pursuant to
this Supply Agreement will be subject to the terms and conditions of the
Non-disclosure Agreement between Metawave and IUSACELL, dated May 19, 1999.
18. INTELLECTUAL PROPERTY
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All concepts, designs, ideas, techniques, software programs, inventions,
discoveries, data, business processes, business procedures and any other
intellectual property developed by Seller in connection with this
Agreement, or arising out of its performance of this Agreement, shall be
the exclusive property of Seller. The performance by Seller of its
obligations under this Agreement shall not be deemed work-for-hire but
shall instead be subject to this section.
19. GENERAL PROVISIONS
a. Seller and Customer may agree to 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, such
approval 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 of 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. Except the Non-Disclosure Agreement dated May 19, 1999 which shall
remain in full force and effect, this Agreement, including all
Exhibits that 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. Upon certification by Customer of
performance acceptance of the Products purchased pursuant to the
Letter Agreement between Seller and Customer dated June 29, 1999 (the
"Initial Order"), such Letter Agreement shall be terminated and the
terms and conditions of this Agreement shall apply to the Initial
Order as if the Initial Order were a Purchase Order under this
Agreement. In addition, all outstanding Purchase Orders from Customer
and all Products sold to Customer by Seller as of the Effective Date
of this Agreement shall be subject to this Agreement, which shall
supersede and replace any additional or different terms of those
Purchase Orders or other order documentation.
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.
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f. This Agreement applies only to sales of Products and Services to be
installed at Customer Sites in Mexico.'
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives.
Metawave Communications Corporation Grupo IUSACELL S.A. de C.V.
By: /s/: Richard Henderson By: /s/: Thomas Burgos
------------------------ ------------------
Name: Richard Henderson Name: Thomas Burgos
------------------------ ------------------
Title: VP Sales and Marketing Title: VP Network
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Exhibit A
1. Product Pricing Summary
All Product prices shown are list prices and unless other wise indicated do
not include Services, taxes, shipping and duties. Services prices shown are
for Product installed and services performed in the Mexico.
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2. Optional Software Pricing Summary
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3. Services Pricing Summary
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4. Maintenance Pricing
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5. Training
Supplier offers SpotLight training courses designed for the cellular
technician. The content of the courses shall include but not be limited to
site preparation, installation, remedial maintenance, failure
recovery/backup, failure repair techniques, operation of test equipment and
diagnostic software use. The content of said courses may be changed by
Supplier when, in its judgement, such change is warranted, the current
course offered is three (3) days in length. The courses assume no prior
knowledge of SpotLight systems but do require a proficient level of
understanding of cellular system operation, installation and optimization.
Supplier shall provide sufficient personnel to conduct each course and
shall furnish instructional aids including manuals.
The training courses will be conducted at Supplier's offices located in
Redmond, Washington [***]. The price for attending the training course is
[***]. Course schedules and availability will vary and shall be coordinated
through Supplier's training organization.
6. General Conditions for Order
6.1 Towers and transmission lines to the towers, or any costs associated
with the preparation of towers and the cell site including adequate
electrical power and HVAC are not included in the prices shown herein
and are the responsibility of Customer.
6.2 The mounting, physical and electrical connection of the SpotLight
panel antennas is not included in the prices shown herein and is the
responsibility of Customer.
6.3 Customer shall provide air time with local phone numbers at no charge
and/or a reasonable number of test mobiles at no charge if required by
Supplier for completion of services including Installation,
Commissioning and Optimization of the Product.
6.4 Site surveys must be completed to determine the final Product
configurations and to complete the scope of work. If upon completion
of the site survey and scope of work, it is determined that the
Product requirements have changed, Supplier shall notify Customer with
a written proposal for changes to the Purchase Order.
6.5 Customer shall provide safe and secure access to the sites for
Supplier's employees during the performance of Services. Customer
shall make each site available to Supplier during a mutually agreed
upon period of time.
6.6 Customer is responsible for maintaining proper site environmental
conditions and proper grounding of Supplier's equipment including
proper lightening protection.
6.7 Customer shall provide, at Supplier's reasonable request, cell site
data necessary for the performance of Services including database
information, baseline network statistics, call traffic and performance
levels and revisions levels of cell site infrastructure hardware and
software. All such information provided by Customer shall be treated
as confidential Information in accordance with this Agreement.
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6.8 If performance of Services by Supplier is delayed for reasons beyond
the control of Supplier, or if additional Services are required by
Customer, the prices for Services shown herein may be adjusted
accordingly.
6.9 Performance of the Services set forth herein is dependent on Customer
and/or Supplier obtaining any and all necessary licenses, permits and
governmental approvals required to perform the Service. Supplier shall
not be held liable for any non-performance due to delays in obtaining
any of the above documentation and/or approvals.
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7. [***]
The prices shown in this Exhibit A are given in consideration of Customer's
[*] set forth in this Section 7.
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Region #9
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Exhibit B
Commissioning Certificate
================================================================================
Commissioning Certificate
IN WITNESS WHEROF, Metawave Communications Corporation and Customer certify that
the following tests have been performed with the indicated results.
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Not See
Tests Performed Passed Failed Applicable Comments
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IN WITNESS WHEREOF, Metawave Communications Corporation and Customer certify
that the Products and Services have been accepted at the following cell Site(s)
on the following date in accordance with the terms and conditions set forth in
the Purchase Agreement dated _________________ between Metawave and Customer.
Cell Site Name & Identification Date:
------------------------ -----------------
Purchase Order:
-----------------
Metawave Communications Corporation Grupo IUSACELL S.A. de C.V.
By: By:
---------------------------------- -------------------------------------
Name: Name:
--------------------------------- -----------------------------------
Title: Title:
-------------------------------- ----------------------------------
Date: Date:
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Comments
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Exhibit C
Product Maintenance Program
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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). In
this Exhibit C, 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
21.1. 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 defective FRUs repaired or replaced with refurbished
FRUs at Seller's then current repair rates.
2.2. Seller shall:
2.2.1. If 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. At the request of Customer and if an emergency situation
exists and requires an expedited shipment, Seller shall ship a
replacement FRU in advance of Customer returning the defective
FRU to Seller.
2.2.4. In a non-emergency situation, Seller shall ship a repaired or
replacement FRU to Customer within [***] days of receipt of a
defective FRU from Customer. Equipment not manufactured by
Seller will be repaired or replaced as promptly as
arrangements with the manufacturers or vendors thereof permit.
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2.2.5. Issue a Return Material Authorization ("RMA") number to
Customer prior to Customer's return of the defective FRU.
2.2.6. Pay all transportation charges for the return of the repaired
or replacement FRU to Customer.
2.2.7. 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, as a result of an
emergency situation that required an expedited shipment,
Customer agrees to 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 prior to
dispatch of service personnel.
2.5. Service Limitations
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2.5.1. Seller shall have no responsibility to repair or replace FRUs
which have been repaired or altered in an unauthorized manner
or which have had the bar code, 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.
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
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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 through calling Seller's Customer Support.
3.3.5 Seller shall provide, at a Seller authorized repair depot,
such service as is necessary to correct Software defects. Such
service will be provided by Seller as soon as is possible and
on a priority basis according to the severity of the problem.
3.3.6. 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.
3.3.8. Seller shall have no obligation to support any Software that
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.
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Annex A: Procedures for Metawave's Hardware Maintenance Program
A. Metawave's Customer Support Customer Support
Customer Support can be reached by call the following numbers:
Domestic phone: 888-642-2455
International phone: 425-702-6550
Fax: 425 702 5975
Email: [email protected]
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
expense.
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
10735 Willows Road N.E.
Redmond, WA 98073-9769 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 returns out of warranty FRUs for repair.
2. When Seller sends pre-exchange FRU to Customer prior to the defective
FRU being received by Seller, and if defective FRU is not received
within five (5) days of shipment of replacement FRU.
Under these circumstances, a facsimile copy of the purchase order may be
transmitted to Seller and followed-up by a confirming hard copy in the
mail.
F. Expedited Service
In an emergency situation that requires an expedited shipment, Seller
offers Expedite Services upon Customer's request at no additional charge
except that Customer shall pay for additional expedited freight charges, if
any. If the HMP
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has expired, such expedite service will carry an additional fee of $300
plus freight charges (plus the price of FRU if out of warranty) per FRU.
G. Invoices and Payment
Invoices are payable in accordance with the terms of the Agreement. If
pre-exchanged FRU's are not returned by Customer to Seller within five (5)
days then Seller shall invoice Customer for the amount of the exchanged
FRU's.
H. Freight
FRUs covered under 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.
FRUs out of Warranty:
Customer shall ship the FRU to Seller on a prepaid basis and Seller will
utilize the freight carrier number furnished by 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.
J. Non-compliance
Failure to comply with any of the procedures may result in delay or non-delivery
of the FRUs.
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Exhibit D
Software License
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1. DEFINITIONS
For the purposes of uniformity and brevity, references to Agreement or to
an Exhibit shall refer to the Agreement that this document is attached as
Exhibit D and to the other Exhibits to that Agreement. All definitions set
forth in the Agreement shall apply hereto unless otherwise expressly
defined herein.
2. SCOPE
Pursuant to the Agreement, Software will be delivered by Seller to Customer
for use with a Product 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 Product with which the
Software was delivered.
3.2. The Software licensing fees for the most current versions of the
Software including the Embedded System Software and LampLighter
Software (available at the time of purchase of a Product) are included
in the Purchase Price of a Product. Software Updates are available
under the Software Maintenance Program described in Exhibit C 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 Product delivered to
Customer under the terms of the Agreement.
4.2. The license granted to Customer in Section 3 may not be transferred to
another Product or Site or another entity without the written consent
of Seller.
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 to 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).
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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 and
disaster recovery 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 (other than copies electronically resident in Products) shall
be in existence at any one time `Without the prior written consent of
Seller.
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 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 License Agreement
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.
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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 Software
License 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 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 licenser(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 Software License, 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 D are
intended to inure to the benefit of Seller and its licensors and their
respective successors in interest.
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Customer acknowledges that Seller or its licensers have the right to
enforce these provisions against Customer, whether in Seller's or its
licenser's name.
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10. LIMITATIONS ON SOFTWARE
Customer understands that errors occur in Software and Seller makes no
warranty that the Software will perform without error. Customer accepts the
Software "as is" subject to the warranty set forth in Section 7 of the
Agreement.
11. YEAR 2000 WARRANTY
In addition to the warranties contained in Section 7 of the Agreement,
Seller warrants, covenants and agrees that the Software will perform,
operate and function when used in accordance with its associated
documentation, and will be capable upon Commissioning to accurately
process, provide and/or receive date data from, into and between the
twentieth and twenty-first centuries, including the years 1999 and 2000,
and leap year calculations, provided that all other products (e.g.
hardware, software and firmware) used in combination with the Products(s)
properly exchanges date data with it.
12. ENTIRE UNDERSTANDING
12.1. This Exhibit D 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 the Products specifications and
this Exhibit D set forth the entire understanding and obligations
regarding use of Software, implied or expressed.
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Exhibit E
Engineering and Optimization
Procedure
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Introduction
This exhibit establishes the Performance Criteria and Procedure to be used for
the Engineering and Optimization for the Products ("Product" shall mean Seller's
SpotLight 2000 product). The Engineering and Optimization Procedure consists of
[***]. The Engineering and Optimization Procedure consists of separate
activities for analog and CDMA consisting of:
. Product Configuration Planning
. Measurement Process
. Baseline Performance Collection
. Product Optimization
. Performance Collection and
Evaluation
Completion of the Engineering and Optimization of a SpotLight shall be indicated
by [***] found at the end of this Exhibit E.
Product Configuration Planning
In order for Customer and Seller to configure the Product, Customer must provide
the following specific cell site information for all current and planned sites
in the area of Customer's network where Product is to be installed. The
information is required for all sites regardless of whether the SpotLight
Product is to be installed in that particular site, unless specifically
designated as "Required for Product sites only" in the list below, which
indicates that the information is required only for sites where Product is to be
installed.
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Measurement Process
The collection and measurement process described in this section will be
followed during both the Baseline Performance Collection and the Performance
Collection and Evaluation. Drive test route(s), drive test equipment, data to
be collected during drive tests, number of runs per drive test route and
frequency of data sampling all must be agreed to by Customer and Seller prior to
beginning the Measurement Process.
Information discovered in the drive tests and information that must be provided
by customer and included in both the Baseline Performance Collection and the
Performance Collection and Evaluation include but are not limited to:
[***]
In addition to collecting the above information, switch statistics from the
previous year must be analyzed to determine if adjustments due to seasonal
variation between the baseline data collection phase and the Product data
collection phase need to be made. Customer must provide either the actual
switch statistics or summaries of seasonal statistical traffic trends.
Customer must provide a log of all system changes during both the Baseline
Performance Collection phase and the Performance Collection and Evaluation
phase, recording the occurrences of such events as cell site additions,
frequency re-tunes, outages, etc. Customer must collect the switch statistics
and provide them to Metawave on a daily basis.
The calculation for Lost Calls Percentage and Ineffective Attempts Percentage
will be calculated using the following equations unless otherwise agreed to by
Seller and Customer:
[***]
[***]
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CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Baseline Performance Collection
Using the procedure set forth in the Measurement Process section of this
exhibit, Customer and Seller will perform drive tests to determine the current
performance characteristics of the existing CDMA and analog networks. Customer
and Seller must agree in writing as to the validity of baseline switch statistic
data and drive test data.
The duration of the baseline sampling time period shall be mutually agreed upon.
[***]. Switch statistics collected during the baseline sampling time period
will include both daily summaries (excluding maintenance windows) and system
busy hour summaries.
Product Optimization
Optimization consists of adjusting any necessary parameters in the Product,
switch or cell site parameters. Drive testing data and switch statistics
will be used to monitor the performance of the system. Product optimization
will be performed by Seller with assistance as required by Customer.
Optimization may include up to three iterations of CDMA Sector Synthesis,
the number of which will be determined by evaluating cell site performance
statistics. Seller and Customer will jointly determine when the Product has
been properly optimized including cell site footprint and any modifications
to the footprint agreed to by Customer and Seller.
Performance Collection and Evaluation
Switch Statistic Collection
Switch statistics will be collected and analyzed using the method defined
in Measurement Process phase. The duration of the Performance Collection
and Evaluation sampling time period shall be at [***] and shall not exceed
[***] and shall constitute the Performance Evaluation Period. The
Performance Collection and Evaluation shall occur immediately after
completing Product Optimization. Customer agrees to collect the switch
statistics and provide them to Metawave on a daily basis.
Performance Criteria
The Performance Criteria is as follows:
. [***]
. [***]
. [***]
. [***]
In addition to the above paragraph, the Product [***].
Adjacent Cell Impacts
The parties agree to monitor adjacent non-Product cell sites when
collecting data for the Lost Call Percentage. Such data will be considered
in Performance of the Products. [***]
Effects from Increased Traffic
Significant traffic level increases from baseline to Performance Evaluation
may affect Lost Call Percentages [***]
Anomalous Data
[***]
Seller Responsibilities
During the Performance Collection and Evaluation, Seller agrees to furnish
sufficient resources to perform the tests and activities as outlined in
this exhibit and in the time frames established between Customer and
Seller. The results of the Performance Collection and Evaluation will be
recorded by Seller and presented to Customer in a written format prior to
Customer signing the Engineering and Optimization certificate.
Customer Responsibilities
During the Baseline Performance Collection, Product Optimization and
Performance Collection and Evaluation, [***]
Customer will provide sufficient network resources [***] so that system
performance will not degrade due [***]
During the Baseline Performance Collection, Product Optimization and
Performance Collection and Evaluation, Customer shall perform standard
maintenance on all network equipment for the cells in Customer's network
where Product is to be installed. [***] These logs should contain any
performance affecting [***]
Seller will provide sufficient human resources for the deployment of the
Product and to complete Engineering and Optimization Certificate.
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CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Engineering and Optimization Certificate
================================================================================
Engineering and Optimization Certificate
IN WITNESS WHEROF, Metawave Communications Corporation and Customer certify that
the following activities have been performed and completed.
- --------------------------------------------------------------------------------
Tests Performed Passed Failed Complete See Comments
- --------------------------------------------------------------------------------
[***] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
[***] [_] [_] [_]
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, Metawave Communications Corporation and Customer certify
that the Engineering and Optimization activities listed above have been
completed passed testing for the Products and Services at the following cell
Site(s) on the following date in accordance with the terms and conditions set
forth in the Purchase Agreement dated ____________________ between Metawave and
Customer.
Cell Site Name & Identification Date:
------------------ -----------------------
Purchase Order:
------------------
Metawave Communications Corporation Grupo IUSACELL S.A. de C.V.
By: By:
----------------------------------- ------------------------------------
Name: Name:
--------------------------------- ----------------------------------
Title: Title:
-------------------------------- ---------------------------------
Date: Date:
--------------------------------- ----------------------------------
Comments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-6-
CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated February 11, 2000, except for Note 14 as to which
the date is April 20, 2000, in the Registration Statement (Form S-1 No. 333-
30568) and related Prospectus of Metawave Communications Corporation.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Seattle, Washington
April 25, 2000
